International Business Techniques

International logistics and supply

chain
C O U RS E 7
Logistics
= the management of goods/ information flows from the
manufacturing company to the final consumer.
It involves the integration of the following activities:

Logistics

Handling Security
Packing
Storage
Management
Transport Information
International freight logistics

Logistics operations include:  Customs clearance (export and import);

◦ Packing of goods;
 Main (international) transport;
◦ Loading goods into the container, truck, car at the
warehouse;  Insurance of goods for international transport;
◦ Internal transport (moving goods to the departure  Ensuring post-transport;
port or airport);  Unloading goods.
The logistics solution

I. The options regarding the transport (mode of

transport, etc.) and associated operations in the
delivery of the goods from the exporter to the buyer.

II. The consequences of the transport solution that

was used on the partners (cost, duration, risks,
responsibilities).
 Carrier’s responsibilities and
characteristics
Documentation will need to accompany the freight so as to ensure that anyone who comes into
contact with the freight will know where it comes from, what it comprises, where it is going, and
how it is going to get there.
◦
The document that typically contains all of this requisite information is known as a bill of lading.
Choosing which mode(s) to use for freight transportation will usually be a function of:
◦
the volume, weight and value of the freight
◦
the distance to be travelled
◦
the availability of different services
◦
freight rates to be charged, etc.
 Characteristics of the different transport
modes
Maritime transport is the dominant mode of transport for international transport movements. Some six
billion tones of freight moves by maritime transport each year and is estimated to comprise 45% liquid bulks,
23% dry bulks and 32% general cargo.
Road transport is the dominant mode of transport for inland transport, due mainly to flexibility, directness
and speed that the movement of freight by road offers. It is also the most environmental damaging mode of
transport.
Intermodal transport is where freight moves within a loading unit (ITU), which may move on a number of
different transport modes, but the freight remains within the unit at all times.
Types of ITUs:
 Standard sized containers (20, 40 feet in length)
“Igloo” containers used in air freight

Macro volumes of freight are usually measured in freight tone kilometers (FTKs), that is volume of freight
measured in tones multiplied by the distance the freight travels measured in kilometers.
Options regarding transport
Transport on own account – with vehicles belonging to the manufacturer.

Exclusive shipping: a direct contract concluded between the sender of the goods and
the transport company.

Groupage: an intermediary provides services in order to group several companies

to transport their goods together with the aim of reducing costs.

Chartering: the lease of a maritime vessel for the cargo transportation, for a single
journey or for a period of time. It is used in international shipping.
Logistics service providers

A dynamic and profitable new sector of activity has emerged in recent decades, and we
can use the generic label of logistics service providers (LSPs) to describe companies
that operate in this sector.
Examples of companies operating in this sector:
●
Hauliers or trucking companies
Freight forwarders
●

Non-vessel-owning common carrier

●

Couriers
●

Integrators
●
 Third party logistics companies
As freight companies provide a broader and more integrated range of services, may have come to be
known as third party logistics companies (3PLs).

Different services provided by 3PLs:

Transportation Customs clearance
Trade financing Warehousing
Managing reverse logistics Pick and pack
Critical parts distribution Light manufacturing
Inventory management Critical parts distribution
Vendor management inventory Inventory management
Selecting logistics service providers and
services
When selecting LSPs one should consider the following:

●
Services to be provided
●
Costs and costing approach
●
Insurance
●
Speed/ transit time
●
Performance metrics and service levels, reliability
●
Information systems
●
Core vs value-adding services required
●
Reverse logistics issues
●
Implementation
●
Details on the logistics service provider's history, client references.
Freight forwarder

= a person or company that organizes shipments for corporations to get

goods from the manufacturer or producer to a market, customer or final
point of distribution.
He organizes operations related to sending goods to the buyer:
◦ packaging, handling, transport, insurance, customs clearance, procurement of the delivery
documents.

!! Compared to the forwarder, the carrier only transports goods.

Freight forwarder
=> the forwarder is an intermediary between:
◦ The one who provides the goods and the carrier;
◦ The carrier and the recipient;
◦ The supply and the demand for transport.

Services offered by forwarders:

◦ Tracking inland transportation;
◦ Preparation of shipping and export documents;
◦ Warehousing;
◦ Booking cargo space;
◦ Negotiating freight charges;
◦ Freight consolidation;
◦ Cargo insurance and filing of insurance claims
 Types of forwarders
Groupage freight forwarder: consolidates goods from different consignors into full
loads for road transport;
Consolidator: a firm which groups together orders from different companies into
one shipment;
Organizer of multimodal transport;
Air or sea freight forwarder:
 books space on an air carrier’s plane and solicits freight from numerous shippers to fill the
booked space.
 offers the shipper of small shipments a rate savings resulting from the advanced purchase of
space
Customs broker.
What is supply chain
management?
The supply chain encompasses all organizations and
activities associated with the flow and the
transformations of goods from the raw materials stage,
through to the and user, as well as the associated
information's flow. Supply chain management is the
integration and management of supply chain
organizations and activities through cooperative
organizational relationships, effective business
processes, and high level of information sharing to
create high-performing value system that provide
member organizations a sustainable competitive
The management of upstream and downstream with
advantage.
suppliers and customers to deliver superior customer
value at less cost to the supply chain as whole.
Handfield and Nicholas, 2002
Cristopher, 2005

The supply chain management is the systemic, strategic coordination of the traditional
business functions within a particular company and across business with supply chain for the
purposes of improving the long-term performance of the individual company and the supply
chain as whole.
Supply chain activities
 Supply chain - definition
Material and informational interchanges in the logistical process stretching from acquisition of raw
materials to delivery of finished products to the end user.
All vendors, service providers and customers are links in the supply chain.
Top five supply chain challenges

• Gain visibility

• Meet customer demands

• Control costs

• Manage risk

• Globalization

Cheaper – Faster – Better

Pillars of future supply chain management
development
I. Regulation sets the scene for investment and growth
New trade corridors will re-chart global supply chains : Asia - Africa, Asia – South, America, Asia
Trade volumes will shift towards emerging markets
The importance of barter trade will be diminished

II. Changing regulation will have a major impact

Switch from state-owned enterprises to private companies (encouraged by IMF and MB)
Governments regulations on process assurance
The establishment of free trade zones

III. Flexibility needed to adapt new trends

The courier, express and parcel (CEP) market
One of the strongest growing sectors of the T&L
Influenced by changes in demographics and consumer behaviors
A model of supply chain management
 Outsourcing and off shoring in supply chain
management

Outsourcing can be defined as the transfer to a third party of the management and
delivery of a process previously performed by the company itself.

Reasons for outsourcing:

◦ Costs reasons
◦ Increased flexibility
◦ Core competences
◦ Advances in technology
 Issues Reasons for outsourcing and/or offshoring
●
How to go about selecting an outsource ●
Reduce direct and indirect costs
partner ●
Reduce capital costs
●
Reduce taxes
●
Which activites to outsource and which ●
Reduce logistics costs
activities to do itself, the classic ' do ●
Overcome tariff barriers
versus buy decision'
●
Provide better customer service
●
Spread foreign exchange risk
●
How to manage multiple suppliers
●
Share risk
●
Build alternative supply sources
●
Pre-empt potential competitors
●
Keep in mind that outsourcing ●
Learn from local suppliers, foreign
arrangements do not always run customers or competitors
smoothly ●
Gain access to world-class
capabilities or attract talent globally
Evaluating and selecting outsourcees

• Reliability of delivery on time

• Quality certifications
• Conformance to agreed specifications
• Delivery lead time
Order qualifiers • Financial capability
• Performance track record
criteria • Price or cost reduction
• Senior management attitude
• Responsiveness to demand uncertainty
• Record of corporate social responsibility
 Offshoring
Offshoring can be defined as the transfer of specific processes to lower cost locations
in other countries.

Offshoring is not the same as outsourcing because outsourcing involves handing

process ownership over to a third party, whereas with offshoring the company may
still own and control the process itself in the lower cost location.

One of the questions which sometimes emerges with regard to offshoring is: can the
cost savings enjoyed by offshoring be offset by other unforeseen costs?
 Evaluating and selecting outsourcees

What is the total cost of outsourcing?

◦ Basic cost of the product

◦ Cost of managing the outsourcing arrangement
◦ Risks in term of transfer of technologies and intellectual property
◦ Cost of contingency planning to ensure delivery on time