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CHAPTER 13
Global Logistics
Comparison of Domestic and
International Logistics
Domestic
International
About 10% of U.S. GDP today
Cost
Transport mode Mainly truck and rail
Inventories
Lower levels, reflecting short-order, leadtime requirements and improved transport
capabilities
Agents
Modest usage, mostly in rail
Financial risk
Low
Cargo risk
Low
Government
agencies
Primarily for hazardous materials, weight,
safety laws, and some tariff requirements
Administration
Minimal documentation involved (e.g.,
purchase order, bill of lading, invoice)
Communication
Cultural
differences
McGraw-Hill/Irwin
13-2
Voice, paper-based systems adequate, with
growing usage of electronic data
interchange and Internet
Relative homogeneity requires little product
modification
Estimated at 16% of world GDP today
Mainly ocean and air, with significant intermodal
activity
Higher levels, reflecting longer lead times and
greater demand and transit uncertainty
Heavy reliance on forwarders, consolidators, and
customs brokers
High, owing to differences in currencies, inflation,
levels and little recourse for default
High, owing to longer and more difficult transit,
frequent cargo handling, and varying levels of
infrastructure development
Many agencies involved (e.g., customs,
commerce, agriculture, transportation
Significant paperwork; the U.S. Department of
Commerce estimates that paperwork cost for an
average shipment is $250
Voice and paper costly and often ineffective;
movement toward electronic interchange but
variations in standards hinder widespread usage
Cultural differences require significant market and
product adaptation
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
International Market Entry Strategies
• Exporting
• Licensing
• Joint ventures
McGraw-Hill/Irwin
13-3
• Ownership
• Importing
• Countertrade
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Major Participants in an International
Logistics Transaction
Domestic
bank
Domestic
seller
Domestic
government
agencies
Export
facilitators
Inland
transportation
carrier
Domestic
port or terminal
of exit
International
carrier
(air, water)
Foreign port
or terminal
of entry
Product
movement
Information
flow
McGraw-Hill/Irwin
13-4
Foreign
government
agencies
Foreign inland
transportation
carrier
Foreign
bank
Foreign
buyer
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How Duty Drawbacks Work
1) U.S. car
manufacturer
issues purchase
order to German
parts
manufacturer.
3) German
parts shipped via
ocean enter U.S.
port; importer pays
duty at port of entry to
U.S. Customs.
4) U.S. manufacturer
produces cars using
U.S.-made and
German parts.
5) U.S. manufacturer ships cars to
port of export; files documentary
proof of original import
and subsequent
manufacture
to collect refund.
McGraw-Hill/Irwin
13-5
2) German
manufacturer
receives
purchase order;
manufactures
parts.
6) Export
cars containing
U.S.-made and
German parts to
Australia;
provide proof of
export to U.S.
Customs.
Source: Adapted from Lisa H. Harrington, “How to Take Advantage of Duty
Copyright
© 2001
by The McGraw-Hill
Companies,
Inc. All rights reserved.
Drawback,”
Traffic
Management
28, no. 6 (June
1989), p. 121A.
The Global Logistics Environment
13-6
Customer
service
Inventory
Logistics
executive
Warehousing
and storage
Packaging
Competition
Other
activities
Transportation
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Responding to
Competition with Logistics
13-7
• Increasing the number of cross-national partnerships,
alliances, mergers, and/or acquisitions.
• Expansion of many previously domestic-based
organizations into international markets.
• Development of global communications networks
operating 24 hours a day.
• Establishment of country and regional warehouses in
major world markets.
• Identifying and developing relationships with logistics
service providers that offer transportation, storage,
materials handling, and other services on a global basis.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Exporting Companies
•
•
•
•
•
13-8
Export distributor
Customshouse broker
International freight forwarder
Trading company
Non-vessel-operating common
carrier (NVOCC)
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
13-9 a
How NVOCCs Work
LCL shipper
LCL shipper
LCL shipper
LCL shipper LCL shipper
NVOCC
Less than container load
(LCL) shipments
McGraw-Hill/Irwin
Full container
Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How NVOCCs Work (cont.)
13-10
13-9 b
NVOCC
Consignee
Consignee
Less than container load
(LCL) shipments
McGraw-Hill/Irwin
Consignee
Consignee
Full container
Consignee
Bill of lading
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.