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Chapter 16
Global Logistics and Distribution
Definition of Global Logistics (P. 514)

Global logistics is defined as the design
and management of a system that directs
and controls the flows of materials into,
through and out of the firm across
national boundaries to achieve its
corporate objectives at a minimum total
cost (see Exhibit 16-1).
What is the supply chain?
Supply Chain
=
Information Flows
+
Physical Flows
EXHIBIT 16-1 Global Logistics
Materials Management
and Physical Distribution

Materials
management refers
to to the inflow of raw
material, parts, and
supplies through the
firm.
Physical distribution
refers to the movement
of the firm’s finished
products to its
customers, consisting
of transportation, warehousing,
inventory, customer service/order
entry, and administration.

Regional Variations in Distribution Costs
EU
US
Transportation
2.79%
3.23%
Warehousing
3.03
1.98
Inventory
1.73
1.93
Customer Svc./Order Entry
0.83
0.49
Administration
0.79
0.44
Total
9.17%
8.07%
Global Perspective 16-1 (p. 515)
Managing Global Logistics (p. 516)


The following factors contribute to the increased
complexity and cost of global logistics:
 Distance
 Exchange rate fluctuations
 Foreign intermediaries
Modes Of Transportation
 Value-to-Volume Ratio
 Perishability
 Cost of Transportation
Managing Global
Logistics (contd.)




Ocean Shipping
 Liner Service
 Bulk Shipping
Air Freight
Trucking
Stack Train
Intermodal
Transportation
Managing Global Logistics (contd.)

Third-Party Logistic (3PL) Management
 The largest 3PL sector is the value-added
warehousing and distribution industry.
 Logistical Revolution with the Internet

The trend toward third-party logistics is a result of the
Internet and the intranet as well as concentrating on core
competencies.
Maquiladora Operations (p. 530)



The maquiladora industry, also known as the inbond or twin-plant program, is essentially a
special Mexican version of a free trade zone.
Mexico allows duty-free imports of machinery
and equipment for manufacturing as well as
components for further processing and
assembly, as long as 80 percent of the plant’s
output is exported.
Mexico permits 100 percent foreign ownership
of the maquiladora plants in the designated
maquiladora zone.
Maquiladora Operation (contd.)



Most of the maquiladora plants are located
along the U.S.-Mexico border, such as Tijuana
across from San Diego, Ciudad Juarez across
from El Paso, and Nuevo Laredo across from
Laredo. Other cities include Monterrey, Mexico
City, and Guadalajara.
Mexico has been an attractive location for laborintensive assembly because of cheaper labor.
Under NAFTA regulations, local content
requirements have encouraged companies to
move their operations to Mexico.
Global Retailing

“Push” versus “Pull”
On-Time Retail Information Management
 Reduced Inventory
 Market Information at the Retail Level
 Strong logistics capabilities can be used as an
offensive weapon to help a firm gain
competitive advantage in the marketplace.
Global Retailing (contd.)
Retailing Differences Across the World:
 Industrialized countries tend to have a lower
distribution outlet density than the emerging markets.
 The advanced facilities available in the developed
world allow a much higher square footage of retail
space per resident,due to the large size of the retail
outlets.
 Large-Scale Retail Store Law (LSRSL) in Japan
Global Retailing (contd.)
E-Commerce and Retailing
 Countries such as Japan and Germany are
warming up to the same e-commerce revolution as
the United States has experienced.
 E-commerce is not limited to the developed
countries.
 China, the world’s most populous nation, is
expected to become one of the world’s largest
Internet markets as early as 2003.
 Despite the rapid growth of the Internet, the need
for local or regional distribution of products is likely
to remain as important as it was before the Internet
revolution.