INTERNATIONAL INTERNATIONAL LOGISTICSLOGISTICS

Source: International Business (1998). Fifth Edition. Source: International Business (1998). Fifth Edition. Zinkota, M., Ronkainen, I., and Moffett, M. Fort Worth: Zinkota, M., Ronkainen, I., and Moffett, M. Fort Worth: The Dryden PressThe Dryden Press

I - INTRODUCTIONI - INTRODUCTION• For the international firm, customer locations For the international firm, customer locations

and sourcing opportunities are widely and sourcing opportunities are widely dispersed. The firm can attain a strategically dispersed. The firm can attain a strategically advantageous position only if it is able to advantageous position only if it is able to successfully manage complex networks, successfully manage complex networks, consisting of its vendors, suppliers, other third consisting of its vendors, suppliers, other third parties, and its customers. parties, and its customers.

• Logistics costs comprise between 10% and 30% Logistics costs comprise between 10% and 30% of the total landed costs of an international of the total landed costs of an international order. Thus, international logistics is a order. Thus, international logistics is a competitive tool. competitive tool.

• Effective international logistics and supply-Effective international logistics and supply-chain management can produce higher chain management can produce higher earnings and greater corporate efficiency.earnings and greater corporate efficiency.

II - DEFINITIONII - DEFINITIONInternational Logistics is design and management International Logistics is design and management of a system that controls the flow of materials into, of a system that controls the flow of materials into, through, and out of the international corporation. through, and out of the international corporation.

By taking a systems approach, the firm explicitly By taking a systems approach, the firm explicitly recognizes the linkages among the traditionally recognizes the linkages among the traditionally separate logistics components within and outside separate logistics components within and outside the corporationthe corporation

A – Materials Management: timely movement of raw materials Parts, and supplies into and through the firm; and

B - Physical Distribution: movements of the firm’s finished products to its customers.

Basic goal of logistics: effective coordination of:Basic goal of logistics: effective coordination of:

III - SUPPLY MANAGEMENTIII - SUPPLY MANAGEMENT

Supply-Chain Management: a series of value-Supply-Chain Management: a series of value-adding activities connect a company’s supply side adding activities connect a company’s supply side with its demand side. with its demand side.

This approach views the supply chain of the entire This approach views the supply chain of the entire extended enterprise, beginning with the extended enterprise, beginning with the supplier’s suppliers and ending with consumers or supplier’s suppliers and ending with consumers or end users.end users.

Close collaboration with suppliers is required to Close collaboration with suppliers is required to develop a just-in-time inventory system, which in develop a just-in-time inventory system, which in turn may be crucial to maintaining manufacturing turn may be crucial to maintaining manufacturing costs at globally competitive levels. costs at globally competitive levels.

In the U.S. 40% of shipments are under a just-in-In the U.S. 40% of shipments are under a just-in-time/quick response regime. time/quick response regime.

¤ DistanceDistance¤ Currency variationCurrency variation¤ Border-Crossing Process (additional intermediaries)Border-Crossing Process (additional intermediaries)¤ Transportation modesTransportation modes¤ Packaging and Labeling requirementsPackaging and Labeling requirements¤ InfrastructureInfrastructure

A – Differences between Domestic and A – Differences between Domestic and International LogisticsInternational Logistics

B – International Transportation IssuesB – International Transportation Issues

¤ Some countries may have excellent inbound and Some countries may have excellent inbound and outbound transportation systems but weak outbound transportation systems but weak internal transportation links. internal transportation links.

¤ New routs of commerce have opened upNew routs of commerce have opened up

¤ Extreme variations also exist in the frequency of Extreme variations also exist in the frequency of transportation services. transportation services.

C – Availability of ModesC – Availability of Modes

¤ Ocean Shipping: liner service (regularly Ocean Shipping: liner service (regularly scheduled passage); tramp service (available for scheduled passage); tramp service (available for irregular routes and scheduled on demand)irregular routes and scheduled on demand)

¤ Container ships, Roll-on-Roll-off (RORO)Container ships, Roll-on-Roll-off (RORO)

¤ Air ShippingAir Shipping

D – Choice of Modes D – Choice of Modes

¤ Predictability: trackingPredictability: tracking

¤ Transit TimeTransit Time

¤ Noneconomic FactorsNoneconomic Factors

IV - EXPORT DOCUMENTATION IV - EXPORT DOCUMENTATION AND TERMSAND TERMS

A – A – Bill of LadingBill of Lading: contract between the exporter : contract between the exporter and the carrier indicating that the carrier has and the carrier indicating that the carrier has accepted responsibility for the goods and will accepted responsibility for the goods and will provide transportation in return for payment.provide transportation in return for payment.

B – B – Commercial InvoiceCommercial Invoice: is a bill for the goods : is a bill for the goods stating basic information about the transaction, stating basic information about the transaction, including a description of the merchandise, total including a description of the merchandise, total cost, address of the shipper and seller, and cost, address of the shipper and seller, and delivery and payment termsdelivery and payment terms

V - INCOTERMS V - INCOTERMS

The responsibilities of the buyer and the seller The responsibilities of the buyer and the seller should be spelled out as they relate to what is and should be spelled out as they relate to what is and what is not included in the price quotation and what is not included in the price quotation and when ownership of goods passes from seller to when ownership of goods passes from seller to buyer. buyer.

Incoterms: are the internationally accepted Incoterms: are the internationally accepted standard definition for terms of sale by the standard definition for terms of sale by the International Chamber of Commerce.International Chamber of Commerce.

A – A – Ex-works(EXW)Ex-works(EXW) : apply only at the point of : apply only at the point of originorigin

B B – Free Carrier (FCA)– Free Carrier (FCA): applies only at a designated : applies only at a designated inland shipping pointinland shipping point

C C – Free Alongside Ship (FAS)– Free Alongside Ship (FAS): exporter quotes a : exporter quotes a price for the goods, including charges for delivery price for the goods, including charges for delivery of the goods alongside a vessel at the port.of the goods alongside a vessel at the port.

D – D – Free on Board (FOB)Free on Board (FOB): applies only to vessel : applies only to vessel shipments. The seller quotes a price covering all shipments. The seller quotes a price covering all expenses up to and including delivery of goods. expenses up to and including delivery of goods.

E – E – Cost and Freight (CFR)Cost and Freight (CFR): seller quotes a price : seller quotes a price for the goods, including the cost of transportation for the goods, including the cost of transportation to the named port of debarkation.to the named port of debarkation.

F – F – Cost, Insurance, and Freight (CIF)Cost, Insurance, and Freight (CIF): price : price includes insurance, all transportation, and port includes insurance, all transportation, and port charges, documentation charges, freight charges, documentation charges, freight fowarder fees, and other insurance charges.fowarder fees, and other insurance charges.

G – G – Delivery Duty Paid (DDD)Delivery Duty Paid (DDD): the seller delivers : the seller delivers the goods, with import duties paid, including the goods, with import duties paid, including inland transportation from import point to the inland transportation from import point to the buyers premisesbuyers premises

VI – INTERNATIONAL VI – INTERNATIONAL PACKAGING ISSUESPACKAGING ISSUES

Packaging is of particular importance in Packaging is of particular importance in international logistics because it is instrumental international logistics because it is instrumental in getting the merchandise to the ultimate in getting the merchandise to the ultimate destination in a: destination in a:

a) Safea) Safe

b) Maintainable, andb) Maintainable, and

c) Presentable conditionc) Presentable condition

The responsibility for appropriate packaging rests The responsibility for appropriate packaging rests with the shipper of goods!!with the shipper of goods!!

Packaging decisions must take into account: Packaging decisions must take into account:

a) climatea) climate

b) weight of packagingb) weight of packaging

c) packaging materialc) packaging material

Stresses in Intermodal Movement: Stresses in Intermodal Movement:

a) Acceleration, vibrationsa) Acceleration, vibrations

b) Dropping Impactb) Dropping Impact

c) Rolling, Swayingc) Rolling, Swaying