Chapter 13 (1)


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Chapter 13 (1)

  1. 1. Chapter 13 <ul><li>Global Logistics and Distribution </li></ul>
  2. 2. Chapter Overview <ul><li>1. Definition of Global Logistics </li></ul><ul><li>2. Managing Global Logistics </li></ul><ul><li>3. Free Trade Zones </li></ul><ul><li>4. Maquiladora Operation </li></ul><ul><li>5. Global Retailing </li></ul>
  3. 3. Introduction <ul><li>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. </li></ul><ul><li>The use of appropriate distribution channels in international markets increases the chances of success dramatically. </li></ul><ul><li>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. </li></ul>
  4. 4. Introduction (contd.) <ul><li>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. </li></ul><ul><li>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. </li></ul>
  5. 5. 1. Definition of Global Logistics <ul><li>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). </li></ul><ul><li>Materials management refers to to the inflow of raw material, parts, and supplies through the firm. </li></ul><ul><li>Physical distribution refers to the movement of the firm’s finished products to its customers, consisting of transportation, warehousing, </li></ul>
  6. 6. 1. Definition of Global Logistics (contd.) <ul><li>inventory, customer service/order entry, and administration. </li></ul>
  7. 7. 2. Managing Global Logistics <ul><li>The following factors contribute to the increased complexity and cost of global logistics: </li></ul><ul><ul><li>Distance </li></ul></ul><ul><ul><li>Exchange rate fluctuations </li></ul></ul><ul><ul><li>Foreign intermediaries </li></ul></ul><ul><ul><li>Regulation </li></ul></ul><ul><ul><li>Security </li></ul></ul>
  8. 8. 2. Managing Global Logistics (contd.) <ul><li>Modes of Transportation </li></ul><ul><ul><li>Value-to-Volume Ratio </li></ul></ul><ul><ul><li>Perishability </li></ul></ul><ul><ul><li>Cost of Transportation </li></ul></ul><ul><ul><li>Ocean Shipping </li></ul></ul><ul><ul><ul><li>Liner Service </li></ul></ul></ul><ul><ul><ul><li>Bulk Shipping </li></ul></ul></ul><ul><ul><li>Air Freight </li></ul></ul><ul><ul><li>Intermodal Transportation </li></ul></ul>
  9. 9. 2. Managing Global Logistics (contd.) <ul><li>Warehousing and Inventory Management </li></ul><ul><ul><li>Hedging Against Inflation and Exchange Rate Fluctuations </li></ul></ul><ul><ul><li>Benefiting from Tax Differences </li></ul></ul><ul><ul><li>Logistic Integration and Rationalization </li></ul></ul><ul><ul><li>E-Commerce and Logistics </li></ul></ul><ul><li>Third-Party Logistic (3PL) Management </li></ul><ul><ul><li>The largest 3PL sector is the value-added warehousing and distribution industry. </li></ul></ul>
  10. 10. 3. Free Trade Zones <ul><ul><li>Logistical Revolution with the Internet </li></ul></ul><ul><ul><ul><li>The trend toward third-party logistics is a result of the Internet and the intranet as well as concentrating on core competencies. </li></ul></ul></ul><ul><li>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. </li></ul>
  11. 11. 3. Free Trade Zones (contd.) <ul><li>FTZs provide many cash flow and operating benefits to zone users and include (see Exhibit 16-2): </li></ul><ul><ul><li>1. Duty deferral and elimination </li></ul></ul><ul><ul><li>2. Lower tariff rates </li></ul></ul><ul><ul><li>3. Lower tariff incidence </li></ul></ul><ul><ul><li>4. Exchange rate hedging </li></ul></ul><ul><ul><li>5. Import quota not applicable </li></ul></ul>
  12. 12. 4. Maquiladora Operation <ul><li>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. </li></ul><ul><li>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. </li></ul>
  13. 13. 4. Maquiladora Operation (contd.) <ul><li>Mexico permits 100 percent foreign ownership of the maquiladora plants in the designated maquiladora zone. </li></ul><ul><li>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. </li></ul><ul><li>Mexico has been an attractive location for labor-intensive assembly because of cheaper labor. </li></ul>
  14. 14. 5. Global Retailing <ul><li>In developed countries, retailing employs between 7 percent and twelve percent of the workforce. </li></ul><ul><li>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. </li></ul><ul><li>“ Push” versus “Pull”: </li></ul><ul><ul><li>The traditional supply chain powered by the manufacturing push is becoming a demand chain driven by consumer pull, especially in the developed countries. </li></ul></ul>
  15. 15. 5. Global Retailing (contd.) <ul><li>On-Time Retail Information Management </li></ul><ul><ul><li>Reduced Inventory </li></ul></ul><ul><ul><li>Market Information at the Retail Level </li></ul></ul><ul><ul><ul><li>Strong logistics capabilities can be used as an offensive weapon to help a firm gain competitive advantage in the marketplace. </li></ul></ul></ul><ul><li>Retailing Differences Across the World : </li></ul><ul><ul><li>Industrialized countries tend to have a lower distribution outlet density than the emerging markets. </li></ul></ul>
  16. 16. 5. Global Retailing (contd.) <ul><ul><li>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. </li></ul></ul><ul><ul><li>Large-Scale Retail Store Law (LSRSL) in Japan </li></ul></ul><ul><ul><ul><li>This law helped to protect the small retail stores </li></ul></ul></ul><ul><ul><li>E-Commerce and Retailing </li></ul></ul>
  17. 17. 5. Global Retailing (contd.) <ul><ul><ul><li>Countries such as Japan and Germany are warming up to the same e-commerce revolution as the United States has experienced. </li></ul></ul></ul><ul><ul><ul><li>E-commerce is not limited to the developed countries. </li></ul></ul></ul><ul><ul><ul><li>China is already the fastest growing Internet market in Asia. </li></ul></ul></ul>
  18. 18. 5. Global Retailing (contd.) <ul><ul><ul><li>Brazil is the most wired nation in Latin America. </li></ul></ul></ul><ul><ul><ul><li>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. </li></ul></ul></ul><ul><ul><ul><li>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. </li></ul></ul></ul>
  19. 19. <ul><li>B5M1 </li></ul>THANK YOU FOR LISTENING
  20. 20. QUIZ 3 <ul><li>1. Discuss the drivers of foreign market pricing. </li></ul><ul><li>10 marks </li></ul><ul><li>2. Discuss the advertising budgeting method. </li></ul><ul><li>10 marks </li></ul>