MODULE 6

International Logistics Management

 Supply Chain Management
◦ SCM is the management of the flow of goods and services and includes all processes that transform raw materials into

finished products. It involves the active streamlining of a business’s supply – side activities to maximize customer value

and gain a competitive advantage in the marketplace.

◦ SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as

possible. Supply chains cover everything from production to product development to the information systems needed to

direct these undertakings.

How supply chain management works?
◦ Typically, SCM attempts to centrally control or link the production, shipment and distribution of a product.

◦ By managing the supply chain, companies are able to cut excess costs and deliver products to the consumer faster. This is

done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of

company vendors.

◦ SCM is based on the idea that nearly every product that comes to market results from the efforts of various organizations

that make up a supply chain.

◦ Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to

their operations.
◦ In SCM, the supply chain manger coordinates the logistics of all aspects of the supply chain which consists of five parts:

◦ The plan or strategy

◦ The source (of raw material or services)

◦ Manufacturing (focused on productivity and efficiency)

◦ Delivery and logistics

◦ The return system (for defective or unwanted products)- reverse logistics

Modes of Transport
◦ Marine
◦ Inland waterways
◦ Highway
◦ Rail
◦ Air
◦ Courier
◦ Multimodel
Importance of Logistics as a Strategic Resource

◦ Let’s say you are a medium sized corporation, not a nationally known name but maybe a name known in

your region. I would estimate that on inbound and outbound logistics your transportation spend is around

$250 million a year.

◦ Now, imagine if you could implement new practices and new ways of doing business that would help

you save 1–2% in transportation spend. That is $25–50 million annually in savings.
 Manufacturing strategy
◦ Success of global operation strategy depends on compatibility, configuration, coordination and control

◦ Compatibility: it is the degree of consistency between the foreign investment decision and the company’s competitive
strategy. Low cost or differentiation strategy.

◦ Efficiency/ cost: cost minimization strategy, offshore manufacturing, high training cost, risk of stockout and high
inventories.

◦ Dependability : prompt deliveries, availability of components in time, reduce the supply chain length, trust in quality, price
promises.

◦ Quality (performance reliability, good service, good maintenance)

◦ Innovation(develop new products and ideas)

◦ Flexibility (variety of products, adjust production volume)

 Manufacturing Configuration
◦ Centralized manufacturing

◦ Regional manufacturing

◦ Multi- domestic manufacturing

◦ Offshoring:  the operating activities are relocated to another country, and the geographical location is
irrelevant. It is of two types 1) Nearshoring 2) Farshoring

◦ Nearshoring is the outsourcing of business processes, especially information technology processes, to

companies in a nearby country, often sharing a border with the target country. Therefore, it is the opposite of
Farshoring

◦ Onshoring is the exact opposite of Offshoring, it refers to the relocation of business processes to a lower-
cost location inside the national borders.
 International logistics
◦ International logistics is the process of planning and managing the flow of goods and products in your company’s supply

chain from acquisition to customer purchase, where part of the process involves crossing at least one international border.

◦ The international logistics is a process of developing in space and time simultaneously. After that, there are a set of

regulations, rules and conditions that are to be taken into account to receive outputs expected; namely, goods delivered in

time, to the right place, in right quantity and quality.

 Global Production & Distribution
◦ In today’s global economy, firms must decide

◦ Location of productive activities

◦ Long-term strategic role of foreign production sites

◦ Whether to own foreign production activities or outsource those activities

◦ Which items should be outsourced and which ones kept with them

◦ How to manage a globally dispersed supply chain and what the role of internet-based information technology should be in

the management of global logistics

◦ Whether to mange global logistics or outsource.

Relevance of Logistics in Export Management
◦ Generation of Demand

◦ Cost Reduction in Doing Business

◦ Tapping Clients in the World

◦ Ensuring Rapid Economic Growth

◦ Bridging Gap between Demand and Supply

◦ Ensuring Critical Supplies on Time

 Exporting
◦ Exporting is the most popular way for many companies to become international.

◦ Exporting is usually the first mode of foreign entry used by companies

◦ Selling to foreign markets involves numerous high risk, arising from a lack of knowledge about and unfamiliarity with

foreign environments, which can be heterogeneous, sophisticated and turbulent.

 Generation of Demand
◦ The demand of any product is improved significantly from increased mobility, unobstructed movement of products &

services and access to better logistics infrastructure. This is because enhanced trade and logistics infrastructure create

place, time and form utilities for the customers & users.

◦ Both customers and users can be serviced at any time and at any place.

◦ Thus, improved international logistics infrastructure helps in increasing the overall sales of the company’s products.
 Cost Reduction in Doing Business
◦ Improved logistical infrastructure helps in keeping cost of business at the lower side as transportation of

products from one place to another becomes almost uninterrupted due to better ports, railway network, roads

and civil aviation infrastructure.

◦ For example, Due to better road connectivity in China, a truck can travel 1,300 km into this country in about

74 hours. And the same distance, which is equivalent to distance between Delhi-Kolkata, is covered in about

144 hours in India. This delay not only extends trade cycle, but the quality of certain goods get poor and

fetches lower prices in markets.

 Tapping Clients in the World
◦ Improved global logistics services from top logistics companies and better transportation are important for the

movement of goods and services from one region to another. This helps companies to have a tap on the

customers in every nook and corner of the world.

◦ For example, Indian industry has many potential fields such as electronics, engineering, chip designing, auto

components, etc. It can contribute to the world’s markets only if the country has improved trade logistics

infrastructure and networking systems; otherwise the business opportunities can be outpaced by the nation’s

rivals from other developed countries.

 Ensuring Rapid Economic Growth
◦ In the development process of any country, growth in the economy plays a vital role. This is possible from the

expansion in trade & logistics infrastructure that create demand in economic system for products such as iron

& steel, cement and manpower.

◦ For example, India has to make its logistical infrastructure better, which will not only grow its economy but

also help its companies to accomplish a sustained superior performance in international markets through

enhanced trade supply chain process.

Bridging Gap between Demand and
Supply
◦ one of the major challenges that any company faces in international markets at all levels from sourcing of raw materials to

work in progress to distribution to customers is to bridge this gap. So, better transporting goods from one place to another

and timely supply of products to meet the demand will fill the gap between demand and supply of a product.

◦ For example, China with main economic clusters on the east coast results to transporting commodities at far-away regions

in the western and remote northern parts of the country. This creates the problem of demand and supply in the country’s

economic system. Better connectivity from road, rail network, airstrips and sea helps companies to distribute their

resources between places where there are abundant resources and where there are scare.
Ensuring Critical Supplies on
Time
◦ An efficient logistics system in international trade operations helps companies in making timely supply

of products to their international buyers. Due to complex functionality of logistic system and long

distance involved between two countries, the problem of safety, care and timing of shipment often cause

nightmares to suppliers, particularly in case of perishable & high value products and goods with expiry

date restrictions. Such products include newspapers, flowers and marine products.