International Logistics

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

INTERNATIONAL LOGISTICS

I - INTRODUCTION • For the international firm, customer locations and sourcing opportunities are widely dispersed. The firm can attain a strategically advantageous position only if it is able to successfully manage complex networks, consisting of its vendors, suppliers, other third parties, and its customers. • Logistics costs comprise between 10% and 30% of the total landed costs of an international order. Thus, international logistics is a competitive tool. • Effective international logistics and supplychain management can produce higher earnings and greater corporate efficiency.

II - DEFINITION International Logistics is design and management of a system that controls the flow of materials into, through, and out of the international corporation. By taking a systems approach, the firm explicitly recognizes the linkages among the traditionally separate logistics components within and outside the corporation

Basic goal of logistics: effective coordination of: 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.

III - SUPPLY MANAGEMENT Supply-Chain Management: a series of valueadding activities connect a company’s supply side with its demand side. This approach views the supply chain of the entire extended enterprise, beginning with the supplier’s suppliers and ending with consumers or end users. Close collaboration with suppliers is required to develop a just-in-time inventory system, which in turn may be crucial to maintaining manufacturing costs at globally competitive levels. In the U.S. 40% of shipments are under a just-intime/quick response regime.

A – Differences between International Logistics

Domestic

and

¤ Distance ¤ Currency variation ¤ Border-Crossing Process (additional intermediaries) ¤ Transportation modes ¤ Packaging and Labeling requirements ¤ Infrastructure

B – International Transportation Issues ¤ Some countries may have excellent inbound and outbound transportation systems but weak internal transportation links. ¤ New routs of commerce have opened up ¤ Extreme variations also exist in the frequency of transportation services.

C – Availability of Modes ¤ Ocean Shipping: liner service (regularly scheduled passage); tramp service (available for irregular routes and scheduled on demand) ¤ Container ships, Roll-on-Roll-off (RORO) ¤ Air Shipping

D – Choice of Modes ¤ Predictability: tracking ¤ Transit Time ¤ Noneconomic Factors

IV - EXPORT DOCUMENTATION AND TERMS

A – Bill of Lading: contract between the exporter and the carrier indicating that the carrier has accepted responsibility for the goods and will provide transportation in return for payment. B – Commercial Invoice: is a bill for the goods stating basic information about the transaction, including a description of the merchandise, total cost, address of the shipper and seller, and delivery and payment terms

V - INCOTERMS The responsibilities of the buyer and the seller should be spelled out as they relate to what is and what is not included in the price quotation and when ownership of goods passes from seller to buyer. Incoterms: are the internationally accepted standard definition for terms of sale by the International Chamber of Commerce. A – Ex-works(EXW) : apply only at the point of origin B – Free Carrier (FCA): applies only at a designated inland shipping point C – Free Alongside Ship (FAS): exporter quotes a price for the goods, including charges for delivery of the goods alongside a vessel at the port.

D – Free on Board (FOB): applies only to vessel shipments. The seller quotes a price covering all expenses up to and including delivery of goods. E – Cost and Freight (CFR): seller quotes a price for the goods, including the cost of transportation to the named port of debarkation. F – Cost, Insurance, and Freight (CIF): price includes insurance, all transportation, and port charges, documentation charges, freight fowarder fees, and other insurance charges. G – Delivery Duty Paid (DDD): the seller delivers the goods, with import duties paid, including inland transportation from import point to the buyers premises

VI – INTERNATIONAL PACKAGING ISSUES Packaging is of particular importance in international logistics because it is instrumental in getting the merchandise to the ultimate destination in a: a) Safe b) Maintainable, and c) Presentable condition The responsibility for appropriate packaging rests with the shipper of goods!!

Packaging decisions must take into account: a) climate b) weight of packaging c) packaging material

Stresses in Intermodal Movement: a) Acceleration, vibrations b) Dropping Impact c) Rolling, Swaying