Chapter 16 Logistics and Supply-Chain Management

1Chapter16LogisticsandSupply-ChainManagement2LearningObjectivesTounderstandtheescalatingimportanceoflogisticsandsupply-chainmanagementascrucialtoolsforcompetitiveness.Tolearnaboutmaterialsmanagementandphysicaldistribution.Tolearnwhyinternationallogisticsismorecomplexthandomesticlogistics.Toseehowthetransportationinfrastructureinhostcountriesoftendictatestheoptionsopentothemanager.Tolearnwhyinternationalinventorymanagementiscrucialforsuccess.3InternationalLogisticsInternationallogisticsisthedesignandmanagementofasystemthatcontrolstheforwardandreverseflowofmaterials,services,andinformationinto,through,andoutoftheinternationalcorporation.4InternationalLogistics(cont.)Throughtheimplementationofinternationallogistics,thefirmcanimplementcost-savingprogramssuchasjust-in-time(JIT),electronicdatainterchange(EDI),andearlysupplierinvolvement(ESI).Thetwophasesofthemovementofmaterialsinclude:materialsmanagement,orthetimelymovementofmaterials,parts,andsupplies.physicaldistribution,orthemovementofthefirm’sphysicalproducttoitscustomers.5ThreeConceptsofBusinessLogisticsTotalCostConceptTrade-offConceptSystemsConcept6Supply-ChainManagementSupply-chainmanagementistheintegrationofbusinessprocessesfromenduserthroughoriginalsuppliers,thatprovideproducts,services,andinformationthataddvalueforcustomers.Supply-chainmanagementconnectsacompany’ssupplysidewithitsdemandside.Itopensupsupplierrelationshipsforcompaniesoutsideofthebuyer’sdomesticmarket.7TheInternationalSupplyChainPhysicalDistributionManagementTransportationCorporationSuppliersCustomersDomestic/ImportSourcingDomestic/ExportDistributionThroughflowInboundMaterialsOutboundMaterialsForwardandReverseFlowofInformation,Products,andFundsPhysicalDistributionManagementTransportationTransportationTransportationOrderProcessingOrderProcessingOrderProcessingOrderPlacementInventoryManagementMaterialsManagementCustomerServiceStorageStorageStorageInventoryManagementInventoryManagementCostumer-FirmInterfaceSupplier-FirmInterface8TransportationInfrastructureAfirm’slogisticsplatformisdeterminedbyalocation’seaseandconvenienceofmarketreachunderfavorablecostcircumstances.Thepublicsector’sinvestmentpriorities,safetyregulations,taxincentives,andtransportpoliciescanhavemajoreffectsonthelogisticsdecisionsoffirms.Thelogisticsmanagermustlearnaboutexistingandplannedinfrastructuresabroadandathomeandfactorthemintothefirm’sstrategy.9VesselsUsedinOceanShippingLinerServiceBulkServiceTrampService10AirfreightAirfreightisavailabletoandfrommostcountries,includingthedevelopingworld.Internationalairfreightisexpectedtogrowto190billiontonsin2005,comparedtoonly70billiontonsin1995.Fortypercentoftheworld’smanufacturedtravelbyair.Itemsthatarehigh-valueorhighindensitytendtotravelbyair.11ConsiderationsforSelectingaModeofTransportPredictabilityTransitTimeCostNon-economicFactors12ExportDocumentationAbillofladingisacontractbetweentheexporterandthecarrierindicatingthatthecarrierhasacceptedresponsibilityforthegoodsandwillprovidetransportationinreturnforpayment.Acommercialinvoiceisabillforthegoodsstatingbasicinformationaboutthetransaction,includingadescriptionofthemerchandise,totalcostofthegoodssold,addressesoftheshipperandseller,anddeliveryandpaymentterms.Afreightforwarderspecializesinhandlingexportdocumentation.13InternationalInventoryIssuesInventoriestieupamajorportionofcorporatefunds,thereforeproperinventorypoliciesshouldbeamajorconcerntotheinternationallogistician.Just-in-timeinventorypoliciesminimizethevolumeofinventorybymakingitavailableonlywhenneeded.Thepurposeofestablishinginventorysystemsare:tomaintainproductmovementinthedeliverypipelinetohaveacushiontoabsorbdemandfluctuations14ThreeFactorsthatDecidetheLevelofInventoryOrderCycleTimeDesiredCustomerServiceLevelsUseofInventoriesasaStrategicTool15InternationalPackagingIssuesPackagingisinstrumentalingettingthemerchandisetothedestinationinasafe,presentablecondition.Becauseoftheaddedstressofinternationalshipping,packagingthatisadequatefordomesticshippingmaybeinadequateforinternationalshipping.Packagingconsiderationsthatshouldbetakenintoaccountareenvironmentalconditionsandweight.Onesolutiontothepackagingproblemhasbeenthedevelopmentofinter-modalcontainers.Costattentionmustbepaidtointernationalpackaging.16StorageFacilitiesAstationaryperiodisinvolvedwhenmerchandisebecomesinventorystoredinwarehouses.Thelocationdecisionaddresseshowmanydistributioncenterstohaveandwheretolocatethem.Storagefacilitiesabroadcandifferinavailabilityandquality.Thelogisticianshouldanalyzeinternationalproductsalesandthenrankorderproductsaccordingtowarehousingneeds.17SpecialTradeZonesForeigntradezonesareareaswhereforeigngoodsmaybeheldorprocessedandthenre-exportedwithoutincurringduties.Tradezonescanbeusefulastransshipmentpointstoreducelogisticscostandredesignmarketingapproaches.Governmentsandfirmsbenefitfromforeigntradezones.18ExportProcessingZonesandEconomicZonesInexportprocessingzones,specialrulesapplythataredifferentinotherregionsofthecountry.Thesezonesusuallyprovidetax-freeandduty-freetreatmentforproductio