International Logistics Management

Definition of International Logistics

International Logistics
 The process of planning, implementing, and controlling the flow and
storage of goods, services, and related information from a point of
origin to a point of consumption located in a different country.
 International Logistics - Basics

Logistics:
Focuses on transportation and storage of materials and final
goods
The 7 R‘s:
„ensuring the availability of the right product,
in the right quantity
and the right condition,
at the right place,
at the right time,
for the right customer,
at the right cost“
Logistics & International Logistics

Domestic Domestic
Suppliers Customers

Logistics

Company

International Logistics

Foreign Foreign
Suppliers Customers

Supply Chain Management

Logistics and International Logistics, are integrated.

Why is international Logistics necessary?

 Move goods from suppliers to buyers

 Move finished goods to the customer
Products have little value to the producer until they
are moved to the customer’s point of consumption
 Time utility- products are delivered at the right time.
 Place utility- products are delivered to the desired
location.

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Major Logistics Functions
The major logistics functions include;

 order processing
 warehousing
 inventory management
 transportation
 Order Processing

 Orders can be submitted in many ways; by mail,

telephone, through salespeople, or via computer.

 Order processing systems prepare invoices and

order information. The warehouse receives
instructions to pack and ship the ordered items.
And bills send out.
 Warehousing
 Every company stores its goods while they wait to
be sold.
 A company must decide on (1) how many and (2)
what types of warehouses it needs and (3) where
they will be located.
 The company might own private warehouses or rent
space in public warehouses or both.
 Both has advantages and disadvantages. Owning a
private warehouse;
 bring more control

 ties up capital

 is less flexible if locations change

On the other hand, public warehouses;
 charge for rented space

 provide additional services for inspecting, packaging,

shipping and invoicing goods but at a cost

 offer wide choice of locations and warehouse types

 Basic types of warehouses are; (1) storage warehouses

and (2) distribution centres.
 storage warehouses store goods for reasonable to

long periods
 distribution centers are just store them for less time.

They are large and automated warehouses designed

to receive goods from suppliers, take orders and
deliver goods to customers.
 Inventory
 Inventory decisions involve (1) when to order and (2) how
much to order.
 In deciding when to order, the company must think of the
risks of running out of stock and costs of carrying too much.
 In deciding how much to order, the company must think of
order-processing costs and inventory-carrying costs.

 Just-in-time logistic systems are used by some companies in

which the producers carry only small inventories only enough
for a few days of operations. Such systems result in savings
in inventory carrying and handling costs.
The Fundamentals of Transportation

The Objective of Transportation

 Maximize value to firm through negotiation to

provide profit contribution
 Make sure service is provided effectively
 Satisfy customer needs

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 The Fundamentals of Transportation (Cont.)

Legal Forms of Transportation

Transportation service companies are classified
legally as either common, contract, exempt, or
private carriers.
 Common carriers- offer transportation services to all
shippers at published rates between selected locations
without bias.

 Contract carriers- not bound to serve the general public.

Contract carriers serve specific customers under
contractual agreements.

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 The Fundamentals of Transportation (Cont.)

Legal Forms of Transportation (Cont.)-

 Exempt carriers- exempt from regulation of services &

rates & they transport certain exempt products like
domestic animals, coal, or newspapers.

 Private carrier- not subject to economic rule & typically

transports goods for the company just to get high
profit.

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 Transportation
 The choice of transportation carriers affects
 (1) the pricing of products,
 (2) delivery performance,
 (3) condition of the goods when they arrive - all affect
customer satisfaction.
 In shipping goods, there are five transportation modes: rail,
water, truck, pipeline, and air.
 Rail; is the most cost-effective mode for shipping large

amounts products e.g. coal, farm and forest products over

long distances.

 Truck; trucks are very flexible in their routing and time

scheduling. They can move goods door to door, saving
 the need to transfer goods from truck to rail and back
again. They are efficient for short hauls of high-value
products. They can offer faster service.

 Water; the cost is very low for shipping bulky, low-

value, perishable products e.g. coal, oil, metallic earth.
It is the slowest mode and affected by the weather.

 Pipeline; are specialized means of shipping petroleum,

natural gas and chemicals from sources to markets. It
costs less than rail but more than water.

 Air; costs higher than rail and truck but ideal when
speed is needed and distant markets have to be
reached. Products are non-perishables (fresh fish, cut
flowers), high-value, low-bulk items (technical
instruments, jewellery).
 In choosing a transportation mode, shippers
consider five criteria; (1) speed - door to door
delivery time, (2) meeting schedules on time,
(3) ability to handle various products, (4)
number of geographic points served, (5) cost
per tone-mile.
 The Fundamentals of Transportation (Cont.)
The Modes of Transportation
Motor Carriers (trucks)- most flexible mode of
transportation & carries. 80% of IB used this methods for
exchange of freight. Where as rail & air for short-to-
medium pull.
 Less-than-truckload (LTL) & truck-load (TL) carriers.

LTL carriers move small shipments & fees are higher.

 General freight carriers carry the majority of goods

shipped & include common carriers.

 Specialized carriers transport liquid petroleum,
household goods, building materials, & other
specialized items.

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 The Fundamentals of Transportation (Cont.)
The Modes of Transportation (Cont.)

Rail Carriers- Beneficial when the distance is long & the

shipments are heavy or bulky.
 Rail slow & inflexible, but have begun from
purchasing carrier & thus offer point-to-point pickup
& delivery service known as trailer-on-flatcar (TOFC)
service.

 Railroad infrastructure & hitimely parts are also

problems for the railroads.
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 The Fundamentals of Transportation (Cont.)

The Modes of Transportation (Cont.)

Air Carriers- Expensive relative to other modes but fast.

 Airlines cannot carry extremely heavy or bulky

cargo.
 For light, high value goods over long distances

quickly. Most small cities & towns do not have

airports.
 Half of the goods transported by air are carried by

freight–only by FedEx., UPS Airlines, TNT Airlines,

and DHL Aviation

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 The Fundamentals of Transportation (Cont.)

The Modes of Transportation (Cont.)

Water carrier Inexpensive, slow & inflexible. Includes
interior river, coastal & deep-sea.
 Inland waterway transportation is used for
heavy, bulky, low-value materials (e.g., coal,
particle).
 Competes w/rail & pipeline.

 Water carriers are not as compared to trucks

for door-to-door delivery or manufacturing unit .
 Supertankers are +1,500 ft long & 200 ft wide.

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 The Fundamentals of Transportation (Cont.)

The Modes of Transportation (Cont.)

Pipeline Carriers- Limited in variety they can
carry.
 Little maintenance once pipeline is running.

 Materials pull in a liquid or in the form of

gas. (Indraprastha gas ltd)

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The Fundamentals of Transportation (Cont.)

Transportation Regulation & Deregulation

 Pro- Regulation tends to assure adequate transportation
service throughout the country while protecting
consumers from monopoly pricing, safety, & liability.

 Con- Deregulation encourages competition & allows

prices to adjust as demand & negotiations.

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