Chap 013
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CHAPTER 13 Global Logistics
Comparison of Domestic and International Logistics Domestic
International
About 10% of U.S. GDP today Cost Transport mode Mainly truck and rail
Inventories
Lower levels, reflecting short-order, leadtime requirements and improved transport capabilities
Agents
Modest usage, mostly in rail
Financial risk
Low
Cargo risk
Low
Government agencies
Primarily for hazardous materials, weight, safety laws, and some tariff requirements
Administration
Minimal documentation involved (e.g., purchase order, bill of lading, invoice)
Communication
Voice, paper-based systems adequate, with growing usage of electronic data interchange and Internet Relative homogeneity requires little product modification
Cultural differences McGraw-Hill/Irwin
13-2
Estimated at 16% of world GDP today Mainly ocean and air, with significant intermodal activity Higher levels, reflecting longer lead times and greater demand and transit uncertainty Heavy reliance on forwarders, consolidators, and customs brokers High, owing to differences in currencies, inflation, levels and little recourse for default High, owing to longer and more difficult transit, frequent cargo handling, and varying levels of infrastructure development Many agencies involved (e.g., customs, commerce, agriculture, transportation Significant paperwork; the U.S. Department of Commerce estimates that paperwork cost for an average shipment is $250 Voice and paper costly and often ineffective; movement toward electronic interchange but variations in standards hinder widespread usage Cultural differences require significant market and product adaptation
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
International Market Entry Strategies • Exporting • Licensing • Joint ventures
McGraw-Hill/Irwin
13-3
• Ownership • Importing • Countertrade
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Major Participants in an International Logistics Transaction Domestic bank
Domestic seller
Domestic government agencies
Export facilitators Inland transportation carrier Domestic port or terminal of exit International carrier (air, water) Foreign port or terminal of entry
Product movement Information flow
McGraw-Hill/Irwin
13-4
Foreign government agencies
Foreign inland transportation carrier
Foreign bank
Foreign buyer Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How Duty Drawbacks Work 1) U.S. car manufacturer issues purchase order to German parts manufacturer.
3) German parts shipped via ocean enter U.S. port; importer pays duty at port of entry to U.S. Customs. 4) U.S. manufacturer produces cars using U.S.-made and German parts.
5) U.S. manufacturer ships cars to port of export; files documentary proof of original import and subsequent manufacture to collect refund.
McGraw-Hill/Irwin
13-5
2) German manufacturer receives purchase order; manufactures parts.
6) Export cars containing U.S.-made and German parts to Australia; provide proof of export to U.S. Customs.
Source: Adapted from Lisa H. Harrington, “How to Take Advantage of Duty Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Drawback,” Traffic Management 28, no. 6 (June 1989), p. 121A.
The Global Logistics Environment
al itic
an
eg dl
al
Ec on
om ic
Customer service Other activities
Inventory Logistics executive
Warehousing
and storage
Packaging
Competition
Social and cultural
l Po
13-6
Transportation Ge og
ra
McGraw-Hill/Irwin
ph
gy
y
ch Te
lo no
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Responding to Competition with Logistics
13-7
• Increasing the number of cross-national partnerships, alliances, mergers, and/or acquisitions. • Expansion of many previously domestic-based organizations into international markets. • Development of global communications networks operating 24 hours a day. • Establishment of country and regional warehouses in major world markets. • Identifying and developing relationships with logistics service providers that offer transportation, storage, materials handling, and other services on a global basis. McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Exporting Companies • • • • •
13-8
Export distributor Customshouse broker International freight forwarder Trading company Non-vessel-operating common carrier (NVOCC)
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
13-9 a
How NVOCCs Work LCL shipper
LCL shipper
LCL shipper
LCL shipper LCL shipper
NVOCC
Less than container load (LCL) shipments McGraw-Hill/Irwin
Full container
Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How NVOCCs Work (cont.)
13-10 13-9 b
NVOCC
Consignee
Consignee
Less than container load (LCL) shipments McGraw-Hill/Irwin
Consignee
Consignee
Full container
Consignee Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Comparison of Domestic and International Logistics Domestic
International
About 10% of U.S. GDP today Cost Transport mode Mainly truck and rail
Inventories
Lower levels, reflecting short-order, leadtime requirements and improved transport capabilities
Agents
Modest usage, mostly in rail
Financial risk
Low
Cargo risk
Low
Government agencies
Primarily for hazardous materials, weight, safety laws, and some tariff requirements
Administration
Minimal documentation involved (e.g., purchase order, bill of lading, invoice)
Communication
Voice, paper-based systems adequate, with growing usage of electronic data interchange and Internet Relative homogeneity requires little product modification
Cultural differences McGraw-Hill/Irwin
13-2
Estimated at 16% of world GDP today Mainly ocean and air, with significant intermodal activity Higher levels, reflecting longer lead times and greater demand and transit uncertainty Heavy reliance on forwarders, consolidators, and customs brokers High, owing to differences in currencies, inflation, levels and little recourse for default High, owing to longer and more difficult transit, frequent cargo handling, and varying levels of infrastructure development Many agencies involved (e.g., customs, commerce, agriculture, transportation Significant paperwork; the U.S. Department of Commerce estimates that paperwork cost for an average shipment is $250 Voice and paper costly and often ineffective; movement toward electronic interchange but variations in standards hinder widespread usage Cultural differences require significant market and product adaptation
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
International Market Entry Strategies • Exporting • Licensing • Joint ventures
McGraw-Hill/Irwin
13-3
• Ownership • Importing • Countertrade
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Major Participants in an International Logistics Transaction Domestic bank
Domestic seller
Domestic government agencies
Export facilitators Inland transportation carrier Domestic port or terminal of exit International carrier (air, water) Foreign port or terminal of entry
Product movement Information flow
McGraw-Hill/Irwin
13-4
Foreign government agencies
Foreign inland transportation carrier
Foreign bank
Foreign buyer Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How Duty Drawbacks Work 1) U.S. car manufacturer issues purchase order to German parts manufacturer.
3) German parts shipped via ocean enter U.S. port; importer pays duty at port of entry to U.S. Customs. 4) U.S. manufacturer produces cars using U.S.-made and German parts.
5) U.S. manufacturer ships cars to port of export; files documentary proof of original import and subsequent manufacture to collect refund.
McGraw-Hill/Irwin
13-5
2) German manufacturer receives purchase order; manufactures parts.
6) Export cars containing U.S.-made and German parts to Australia; provide proof of export to U.S. Customs.
Source: Adapted from Lisa H. Harrington, “How to Take Advantage of Duty Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Drawback,” Traffic Management 28, no. 6 (June 1989), p. 121A.
The Global Logistics Environment
al itic
an
eg dl
al
Ec on
om ic
Customer service Other activities
Inventory Logistics executive
Warehousing
and storage
Packaging
Competition
Social and cultural
l Po
13-6
Transportation Ge og
ra
McGraw-Hill/Irwin
ph
gy
y
ch Te
lo no
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Responding to Competition with Logistics
13-7
• Increasing the number of cross-national partnerships, alliances, mergers, and/or acquisitions. • Expansion of many previously domestic-based organizations into international markets. • Development of global communications networks operating 24 hours a day. • Establishment of country and regional warehouses in major world markets. • Identifying and developing relationships with logistics service providers that offer transportation, storage, materials handling, and other services on a global basis. McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Exporting Companies • • • • •
13-8
Export distributor Customshouse broker International freight forwarder Trading company Non-vessel-operating common carrier (NVOCC)
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
13-9 a
How NVOCCs Work LCL shipper
LCL shipper
LCL shipper
LCL shipper LCL shipper
NVOCC
Less than container load (LCL) shipments McGraw-Hill/Irwin
Full container
Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How NVOCCs Work (cont.)
13-10 13-9 b
NVOCC
Consignee
Consignee
Less than container load (LCL) shipments McGraw-Hill/Irwin
Consignee
Consignee
Full container
Consignee Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
