Chapter 8: LOGISTICS Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc. - - - - - - - - - - - - - - - - - -

Chapter 8: LOGISTICS

Fundamentals of International BusinessCopyright © 2010 Thompson Educational Publishing, Inc.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CHAPTER 8:

Logistics



Key Terms

logistics production logistics business logistics supply chain vertical integration horizontal integration point-of-sale terminal just-in-time (JIT) inventory

systems letter of credit supplier management outsourcing nearsourcing

insourcing offshoring inshoring inbound distribution outbound distribution receiving process Ex Works (EXW) carrier bill of lading freight consolidation containerization



Chapter Objectives

By the time you finish this chapter, you should be able to:

Compare the logistics of delivering a product to a local, national, or international market

Describe the key factors that influence the ways in which a company may deliver its product to an international market

Compare the advantages and disadvantages of different modes of transportation for distributing a product to different world markets

Identify, drawing on a variety of sources information to facilitate the import/export process

Explain the role of the Canada Border Services Agency



Logistics Defined

LogisticsThe management of the flow of goods and services both into and out of an organization, from the point of origin to the point of consumption. It consists of transportation, inventory management, warehousing and storage, and packaging.

Three types of logistics:1. Military2. Production3. Business



Logistics Defined

Production logistics

Logistic processes within a company, usually a manufacturing business, that ensure that each machine and workstation in a plant has the right material in the right quantity and quality at the right point in time.



Logistics Defined

Business logistics

A process that ensures a steady flow of needed materials and information to all parts of a business through a network of computer terminals, transportation links, and storage facilities.

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Logistics Defined



Supply Chain

Supply chain

The sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, and moving the semi-processed or finished goods out of the organization toward the end-consumer.



Supply Chain

Vertical integrationA form of business organization in which a company owns the whole supply chain, or significant portions of it, from acquisition of raw materials to retailing.

Example of vertical integration in a company that sells canned fish.



Supply Chain

Horizontal integrationA method of expanding a company by acquiring its competitors.



Supply Chain

The main links in the supply chain are: Inventory management Storage Cash flow Supplier co-ordination Information processing Physical distribution



Supply Chain

Inventory management For retailers, this requires a system that records sales Usually a point-of-sale terminal, a system that tracks

retail sales by recording the code or stock number of each stock-keeping unit (SKU)

In larger companies, this becomes more complex, particularly if they design and manufacture the products they sell

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Supply Chain

Storage

Four possible locations for the storage of goods: Place where the goods are made Warehouse Distribution centre Place that receives the goods

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Supply Chain

Companies are reluctant to be responsible for storage of goods because it takes up valuable space and increases the possibility that they will have to deal with damage or theft.

Each link in the supply chain tries to pass goods on as quickly as possible.

Just-in-time (JIT) inventory systems are used to eliminate storage altogether. JIT requires suppliers to make and ship the materials that factory or retailer needs quickly enough that the goods and materials arrive at the workstation, factory floor, or retail store just as they are needed.



Supply Chain

Cash-flow managementInvolves negotiating payment terms, setting up the method of payment, and arranging exchange of funds across the supply chain.

Letter of creditA financial guarantee, issued by a buyer’s bank, that they have sufficient collateral on deposit to pay for a shipment. Letters of credit are often used for international transactions.



Supply Chain

Supplier management Often referred to as sourcing or procurement, the practice of finding reliable sources for the products and services that a business needs.



Supply Chain

OutsourcingThe strategic use of outside resources to perform activities that were previously handled internally by the company itself.

NearsourcingSourcing particular business functions or services, such as telemarketing, to a company in a foreign country that is relatively close in distance.

InsourcingA company’s establishment of a specific division within the business, such as an advertising department or customer call centre, to handle a function that is normally outsourced.



Supply Chain

OffshoringThe transfer of certain business functions by a company to a branch of the company that is located in another country, usually to save on labour costs.

InshoringA company’s contracting out of a function to other businesses within its own country, for example to another state or province where labour is cheaper or facilities are better.

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Supply Chain

Information managementAs the complexity and speed of business around the world increases, information technology is necessary for effective supply chain management.

Each member of the supply chain requires instant access information, and all members need to be networked to the same information source.



Supply Chain - Physical Distribution

Inbound distributionThe process of receiving goods that are sent to a company.

Receiving processThe established system that a receiving manager uses to monitor and track goods arriving at a business. This process normally includes: inspecting containers for obvious physical damage, making sure that all of the containers have arrived, assigning stock numbers (SKUs) to new items, and recording the location of each item (for example, warehouse, selling floor).



Supply Chain – Physical Distribution

Outbound distributionThe process of arranging the shipment of goods from a company to its customers. Normally, the seller is responsible for for arranging the shipment of goods to the buyer.

Ex Works (EXW)Term of sale that indicates that the buyer is responsible for carrier selection, customs documents, and all charges.



Supply Chain – Physical Distribution

CarrierA company hired to transport goods.

Bill of ladingThe official document that indicates that a transportation company accepts goods for shipment. It describes the items being shipped, lists their quantity and weight, gives the value of the shipment, and provides the name, billing address, and shipping address of the buyer.



Methods of Physical Distribution in the Supply Chain

The selection of a carrier depends on several different factors:

What is being shipped Weight of the shipment Speed of delivery required Cost of the carrier Destination of the shipment




Motorized carriers—trucks, vans, motorcycles The cost of shipping a full truckload (FTL) is lower

than shipping a less-than-truckload (LTL). Many motorized carriers offer freight consolidation,

where goods from different sellers (shippers) are stored in a warehouse until there is an FTL of goods bound for a particular destination.

Used under license from Shutterstock, Inc




Rail Trains are slower than truck transport and have a

more limited range Ideal for long distances and much cheaper than

truck transport Can carry materials from ports to inland cities

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Ocean freight Used by importers and exporters that deal with

businesses on other continents Inexpensive but slow, and must be used with at least

one other carrier, as ships cannot go door to door

Air freight Very fast, but very expensive Weight restrictions limit size of air shipments




Containerization

The use of standard-sized reusable metal boxes, designed to fit on top of each other, to store and ship freight.

Intermodal shipping is the process of using more than one mode of transportation to ship containers.

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Issues in the Supply Chain

Issues in the supply chain include: Reliability of sources Oil prices Unstable political climate Piracy Optimization



Getting Help with the Supply Chain

Sources of help for Canadian businesses: Department of Foreign Affairs and International

Trade The Canadian Trade Index Frasers Customs brokers Industry Canada Canada Border Services Agency



Foreign Marketing and Canadian Shopping Habits

Canadian businesses must stock goods from around the world to compete with online retailers.

Retailers must guarantee a unique selection of products by visiting international trade shows or accessing online distributors.

Increase in foreign ownership of Canadian manufacturers means it is more difficult to buy Canadian-made goods.

Canadian businesses must remind shoppers that they sell and produce Canadian goods.

Documents

Chapter 8: LOGISTICS Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc. - - - - - - - - - - - - - - - - - -