logistics and supply chain management chapter 16 copyright © 2011 john wiley & sons visit for...

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

CHAPTER 16

Copyright © 2011 John Wiley & Sons

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Chapter 16

Learning Objectives

1. Understand the escalating importance of logistics and supply-chain management

2. Learn about materials management and physical distribution

3. Learn why international logistics is more complex than domestic logistics

4. See how the transportation infrastructure in host countries often dictates a manager’s options

5. Learn why international inventory management is crucial for success

6. Learn about interactions between different logistics components

7. Decide who should be in charge of logistics

8. Appreciate how information and data exchange are pivotal for supply-chain management

9. Understand the vulnerability and support of logistics

10. See and consider the linkages between logistics and sustainability

2 Czinkota: International Business, 8eChapter 16

Chapter 16

International Logistics – The design and management of a system that controls the forward and reverse flow of materials, services, and information into, through, and out of the international corporation

3 Czinkota: International Business, 8e

International Logistics

Chapter 16

Materials Management – The timely movement of raw materials, parts, and supplies into and through the firm

Physical Distribution – The movement of the firm’s finished product to its customers

Supply Chain Concepts:


International Logistics

Trade-off Concept

Systems Concept

Total Cost Concept

Supply Chain Management

Chapter 16

A series of value-adding activities connects a company’s supply side with its demand side Extended enterprise occurs when companies consider

the entire supply chain to be a single organization

The Impact of International Logistics Make up 10 to 30 percent of the total landed cost of

an international order Advances in technology and communication can

improve logistics systems The fundamentals of a country’s logistics system

remain the best predictor of cost and efficiency5 Czinkota: International Business, 8e

Transportation Infrastructure

Chapter 16

Around the globe, major infrastructure variations are often encountered

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

New routes of commerce have opened upLogistics platform is determined by a location’s

ease and convenience of market reach under favorable circumstances

The logistics managers must learn about existing and planned infrastructure

Extreme variations exist in the frequency of transportation services


Global Transport Knowledge Partnership

Chapter 16

Global Transport Knowledge Partnership (GTKP) is an innovative partnership of global organizations, local policy makers, experts, and interested users working to make effective use of international transport knowledge.

gTKP's mission is to support sustainable and efficient transport in developing and transition countries by providing free access to information, expertise, and free technical advice. gTKP currently offers access to sector experts and best practice knowledge in 8 themes in road transport. Themes include environment and climate change, finance and economics, governance, road safety, rural transport, social development, trade and transport, and urban mobility.

Source: http://www.gtkp.com/


“Winners” of the Roberts Express “Shipments from Hell” contest describe shipments that were lost, broken, or even burned. The contest is judged by representatives from Industry Week and Transportation and Distribution. The stories behind the “Shipments from Hell” illustrate that a host of bizarre circumstances can turn an ordinary shipment into a comedy of errors.

Focus on Entrepreneurship: Late, Lost, and Damaged Goods

8Chapter 16 Czinkota: International Business, 8e

Ocean Shipping

Chapter 16

Types of service vessels Liner service offers regularly scheduled passage on

established routes Bulk service provides contractual services for individual

voyages or for prolonged periods of time Tramp service is available for irregular routes and is

scheduled only on demandType of cargo a vessel can carry

Conventional (break bulk) vessels – For oversized/unusual cargo Container ships – Standardized containers Roll-on-roll-off (RORO) ships – Oceangoing ferries Lighter Aboard Ship (LASH) – Barges stored on the ship and

lowered at the point of destination to operate on inland waterways

Limited by what the port can accommodate


Air Shipping

Chapter 16

Airfreight is available to and from most countries It is often a matter of national prestige to operate a

national airline About 20 percent of the worlds manufactured exports

by weight travel by air

Items tend to be high value or high weight to volume ratio (density)

Airlines continue to make major efforts to increase the volume of air freight


Selecting a Mode of Transport

Chapter 16

Period between departure and arrival of carrier is longer for ocean than for air

Perishable products require shorter transit times

Significant reliability issues Vagarities of nature may impose delays Tracking becomes important

Priced on the basis of both cost and value The manager must decide when the

higher cost of airfreight can be justified

Preferential policies by government International quota systems of

transportation


Transit Time

Predictability

Cost of Transportatio

n

Noneconomic Factors

Transportation service providers have realized that for their corporate clients, a greater sense of control translates into calculations of predictability, reliability, and competitiveness. In a case of business innovation spilling over into the policy world, governments and regulatory agencies have started to take notice of developments in product tracking technology.

Focus on E-Business:Product Tracking


Export Documentation

Chapter 16

Export declaration – A shipping document detailing the type, destination, shipping, timing, and value of an export shipment

Bill of Lading – A contract between the exporter and the carrier indicating that the carrier has accepted responsibility for the goods in return for payment Straight bill of lading – Nonnegotiable, used in prepaid

transactions Shipper’s order bill of lading – Negotiable, can be bought,

sold, or traded while goods are in transit, and is used for letter of credit transactions

Commercial Invoice – A bill for the goods staging basic information

Freight forwarders specialize in handling documentation


Chapter 16 14 Czinkota: International Business, 8e

Other Export Documents

Certificates of Origin

Inspection Certificate

s

Export Licenses

Dock/ Warehouse Receipts

Consular Invoices

Insurance Certificates

Certificates of Origin

Destination Control

Statements

Export Declaration

sExport

Packaging Lists

Terms of Shipment and Sale

Chapter 16

Incoterms – Internationally accepted standard definitions for the terms of sale set by the International Chamber of Commerce in 1936 EXW (ex-works) – Prices apply only at the point of origin FCA (free carrier) – Seller is responsible for loading goods into the

means of transportation and buyer is responsible for all subsequent expenses

FAS (free alongside ship) – The exporter quotes a price including delivery of goods alongside a vessel at the port

FOB (free on board) – Applies only to vessel shipments, where price covers all expenses up to delivery of goods

CFR (cost and freight) – Price includes cost of transportation to named port

CIF (cost, insurance, and freight) – Price includes all charges to point of debarkation

CPT (carriage paid to) – The price quoted for shipments not involving waterway transport

DDP (delivered duty paid) – Prices includes import duties and inland transportation to buyer’s premises

DDU (delivered duty unpaid) – Only customs duty and taxes paid by buyer


International Inventory Issues

Chapter 16

General Inventory Issues Inventory – Materials on hand for use in the production or

finished goods Inventory carrying costs – The expense of maintaining inventories Just-in-time Inventory – Materials scheduled to arrive when

needed

Order Cycle Time – The amount of time between the placement of an order and receipt of merchandise Length of the total order cycle

EDI – Electronic data interchange can streamline processing and administration as well as reduce costs

Order filling time can increase due to lack of familiarity Transportation time is longer due to distances involved

Consistency – Delivery times may vary more internationally


International Inventory Issues

Chapter 16

Customer Service Levels The responsiveness that inventory policies permit for

any given situation The international service level should be based on

expectations encountered in each market Strategically placed depots can boost responsiveness

Inventory as a Strategic Tool Can help deal with currency valuation changes Can be a hedge against inflation


International Packaging Issues

Chapter 16

Packaging that is adequate for domestic shipping may be inadequate for international transportation

Responsibility of the shipperEnvironmental conditions such as climate must

also be consideredWeight of packaging affects cost of shippingCustomer instructions must also be followedMay have to use double packaging if promotional

value of packaging is to be maintainedIntermodal containers help resolve many

packaging issues


International Storage Issues

Chapter 16

Storage Facilities Location decision – How many distribution centers to

have and where to locate them Warehouse decisions must be carefully analyzed The logistician should analyze international product

sales and then rank order products according to warehousing needs

Special Trade Zones:


Special Economic

Zones

Foreign Trade Zones

Export Processing

Zones

Management of International Logistics

Chapter 16

Centralized Logistics Management – Headquarters staff retains decision-making power over logistics

Decentralized Logistics Management – Makes local managers responsive but decreases global coordination

Outsourcing Logistics Services Collaborating with transportation firms, private

warehouse, and other specialists One-stop logistics allows shippers to buy all the

transportation modes and functional services from a single carrier


The Supply Chain and the Internet

Chapter 16

Can now conduct more global comparisons among suppliers

Can learn more about the structure of the supplier network

Establishing e-commerce means the company should be prepared for 24-hour service

Some companies build their own international distribution network using the company web site


Logistics and Security

Chapter 16

Due to terrorism and security concerns everything takes longer

Modern transportation systems have proved to be critical to terrorist activities

Logistics systems can be the targets of attacks

New safeguards for international shipments affect the ability of firms to efficiently plan their international shipments


Wallenius Wilhelmsen Logistics Security

Chapter 16

In response to the increased threat of terrorism throughout the world, Wallenius Wilhelmsen Logistics has implemented protective security measures to create a secure work environment, to safeguard customers' cargo, and to protect owners' investments.

Wallenius Wilhelmsen Logistics' security policy is based on the following overriding principles: •Awareness•Prevention•Response•Consequence Management

Source: http://www.2wglobal.com/www/aboutUs/Security/index.jsp


The Department of Homeland Security (DHS) is designed to coordinate U.S. efforts in the war against terror. Some of the DHS agencies affect international shippers, including the Customs Service, Coast Guard, and Transportation Security Administration. For international importers and exporters it means that more documentation and notification time are added to the process.

Focus on Politics: Logistics and National Security


Logistics and the Environment

Chapter 16

Must consider environmental laws, expectations, and self-imposed goals while planning logistics

Reverse distribution systems – Ensures that the firm can retrieve a product from the market for subsequent use, recycling, or disposal

Managers are often faced with the trade-offs between environmental concerns and logistical efficiency

Environmental practices are those that bring about fewer shipments, less handling, and more direct movement


Reverse logistics concerns the handling and disposition of returned products and use of related materials and information. This costs U.S. companies more than $35 billion annually. With the rising costs of oil and other commodities, companies are beginning to see used products less as trash and more as the sum of their raw materials, energy, and labor.

Focus on Business: Reverse Logistics, or Turning “Trash into Cash”


Reverse Logistics during the Holidays

Chapter 16

According to a survey commissioned by eBay, nearly 60 percent of Americans receive unwanted gifts during the holidays. More and more companies acknowledge that reverse logistics is a critical part of the supply chain. Without a comprehensive return system, retailers can lose millions in revenue.

Two recent studies show returned merchandise costs the consumer electronics industry $10 billion annually, while personal computer returns amount to $1.5 billion per year.

Many companies are seeking new ways to develop or enhance their return systems. For example, companies such as Eastman Kodak and Hewlett-Packard have implemented successful reuse and recycling programs of returned items.

Source: http://www.rlmagazine.com/edition01p14.php
