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Chapter 13 (1) Chapter 13 (1) Presentation Transcript

  • Chapter 13
    • Global Logistics and Distribution
  • Chapter Overview
    • 1. Definition of Global Logistics
    • 2. Managing Global Logistics
    • 3. Free Trade Zones
    • 4. Maquiladora Operation
    • 5. Global Retailing
  • Introduction
    • Global logistics and distribution have played a critical role in the growth and development of world trade and in the integration of manufacturing on a worldwide scale.
    • The use of appropriate distribution channels in international markets increases the chances of success dramatically.
    • In the United States, the total logistics cost has amounted to ten to eleven percent of the country’s GDP every year in the last decade.
  • Introduction (contd.)
    • As firms start operating on a global basis, logistics managers need to manage shipping of raw materials, components, and supplies among various manufacturing sites at the most economical and reliable rates.
    • The development of intermodal transportation and electronic tracking technology has resulted in a quantum jump in the efficiency of the logistic methods employed by firms worldwide.
  • 1. Definition of Global Logistics
    • 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).
    • 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,
  • 1. Definition of Global Logistics (contd.)
    • inventory, customer service/order entry, and administration.
  • 2. Managing Global Logistics
    • The following factors contribute to the increased complexity and cost of global logistics:
      • Distance
      • Exchange rate fluctuations
      • Foreign intermediaries
      • Regulation
      • Security
  • 2. Managing Global Logistics (contd.)
    • Modes of Transportation
      • Value-to-Volume Ratio
      • Perishability
      • Cost of Transportation
      • Ocean Shipping
        • Liner Service
        • Bulk Shipping
      • Air Freight
      • Intermodal Transportation
  • 2. Managing Global Logistics (contd.)
    • Warehousing and Inventory Management
      • Hedging Against Inflation and Exchange Rate Fluctuations
      • Benefiting from Tax Differences
      • Logistic Integration and Rationalization
      • E-Commerce and Logistics
    • Third-Party Logistic (3PL) Management
      • The largest 3PL sector is the value-added warehousing and distribution industry.
  • 3. Free Trade Zones
      • 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.
    • A free trade zone (FTZ) is an area that is located within a nation (say, the United States), but is considered outside of the customs territory of the nation.
  • 3. Free Trade Zones (contd.)
    • FTZs provide many cash flow and operating benefits to zone users and include (see Exhibit 16-2):
      • 1. Duty deferral and elimination
      • 2. Lower tariff rates
      • 3. Lower tariff incidence
      • 4. Exchange rate hedging
      • 5. Import quota not applicable
  • 4. Maquiladora Operation
    • The maquiladora industry , also known as the in-bond or twin-plant program , is essentially a special Mexican version of a free trade zone and was started in 1965.
    • 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.
  • 4. Maquiladora Operation (contd.)
    • Mexico permits 100 percent foreign ownership of the maquiladora plants in the designated maquiladora zone.
    • 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 labor-intensive assembly because of cheaper labor.
  • 5. Global Retailing
    • In developed countries, retailing employs between 7 percent and twelve percent of the workforce.
    • In 2002, Wal-Mart was the largest retailer in the world with a total revenues of $220 billion. Only 10 percent of its sales are generated outside its core NAFTA region.
    • “ Push” versus “Pull”:
      • The traditional supply chain powered by the manufacturing push is becoming a demand chain driven by consumer pull, especially in the developed countries.
  • 5. Global Retailing (contd.)
    • 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.
    • Retailing Differences Across the World :
      • Industrialized countries tend to have a lower distribution outlet density than the emerging markets.
  • 5. Global Retailing (contd.)
      • 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
        • This law helped to protect the small retail stores
      • E-Commerce and Retailing
  • 5. Global Retailing (contd.)
        • 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 is already the fastest growing Internet market in Asia.
  • 5. Global Retailing (contd.)
        • Brazil is the most wired nation in Latin America.
        • 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.
        • Despite the rapid growth of the Web, the need for local or regional distribution of products is likely to remain as important as it was before the Internet revolution.
    • B5M1
    THANK YOU FOR LISTENING
  • QUIZ 3
    • 1. Discuss the drivers of foreign market pricing.
    • 10 marks
    • 2. Discuss the advertising budgeting method.
    • 10 marks