IBS3002 Logistics & International Trade

Chapter 7
International logistics

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Contemporary logistics, Murphy (2015) & International logistics, Pierre David (2011)
Topic areas

 Introduction to International logistics and its elements

 Macro-environmental influences on International logistics
 Documentation, terms of sale and methods of payment for international shipment
 The unique activities of international trade specialists
 Transportation and inventory considerations in international distribution
 Logistics Performance Index (LPI)

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International Logistics

 International logistics are logistics activities associated with goods that are sold across
national boundaries – occurs in the following situation:
1. A firm exports a portion of a product made or grown
2. A firm imports raw materials
3. Goods are partially assembled
4. The firm is global in outlook and sees almost all nations as being markets, sources of
supply, or sites for markets or for assembly operations
5. Products shipped in bond

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Macro-environmental influences on IL

 Macro-environmental influences refer to the uncontrollable forces and conditions facing an

organization and include cultural, demographic, economic, natural, political, and
technological factors

 provide greater challenges when doing business

outside of one’s home market (ex: regulations and laws
are difference among countries)

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Macro-environmental influences on IL

 Political factors
- Political restrictions on international trade can take a variety of forms
+ Tariffs
+ Non-tariffs barriers (import quotas)
+ Embargoes
- Degree of federal government in cross-border trade
+ Balance of payments
+ Subsidies
+ Cargo preference rules
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Macro-environmental influences on IL

 Economic factors
+ Currency fluctuations
+ Market size (population)
+ Income (GDP, GNP/ capital)
+ Infrastructure
+ Economic integration

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Macro-environmental influences on IL

 Cultural factors
+ Religions
+ Values
+ Rituals
+ Beliefs
+ Languages
+ National holidays
+ Time orientation

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Macro-environmental influences on IL

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International documentation

 Flow of documentation is as a part of the main logistical flow as the flow of product
 Exporter: preparing the requisite documentation, assembling the documentation, ensuring that
the documentation arrives when and where they are needed
 Domestic shipments typically only require several pieces of documentation
 Export shipments typically require approximately 10 pieces of documentation
 Cross-border trades can require more than 100 separate documents
 Necessary documents are required at the point of importation
 Documentation can act as a nontariff barrier

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International documentation

 Commonly used documents include:

+ Certificate of origin
+ Commercial invoice
+ Shipper’s export declaration (SED)
+ Shipper’s letter of instruction (SLI)

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 Terms of sale
 Terms of sale involves:
+ Parties working within the negotiations channel
+ Looking at the possible logistics channels
+ Determining when and where to transfer the following between buyer and seller
- Physical goods
- Payment for the goods, freight charges and insurance for the in-transit goods
- Legal title to the goods
- Required documentation
- Responsibility for controlling or caring for the goods in transit, i.e.livestock

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 Terms of sale
 Terms of sale for international shipments are commonly referred to as Incoterms
- Use is not mandatory, but generally accepted by legal authorities, buyers, and seller
worldwide
- Incoterms 2010/ 2020

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Terms of sale

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Terms of sale

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 Methods of payment
 Methods of payment refers to the manner by which a seller will be paid by a buyer
 Much more challenging in international logistics and domestic logistics
 Four methods of payment include:
+ Cash in advance
+ Documentary credit
+ Collection
+ Open account
 Payment method:
+ Should be established at the time that a shipment price is decided upon
+ Can be influenced by key factors: the country/product is to be sold in 15
the seller’s assessment of buyer risk
 International Trade Specialists
 International Freight Forwarders specialize in handling either vessel shipments or air
shipments
 Principle function of International Freight Forwarders include:
+ Advising on acceptance of letters of credit
+ Booking space on carriers
+ Preparing an export declaration
+ Preparing an AWB or B/L
+ Obtaining consular documents
+ Arranging for insurance
+ Preparing and sending shipping notices and documents
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 International Trade & Supply Chain Specialists

 Non-vessel Operating Common Carriers (NVOCC): are the common carriers and thus have
common carrier obligations to serve and deliver
 Export Management Company (EMC): is the firm that acts as the export sales department for
a manufacture and often specialize by products or by country
 Export packers: custom pack shipment when the exporter lacks the equipment or the expertise
to do so itself, to allow goods to move easily through customs and protect product

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 Transportation considerations in IL

 Ocean shipping

 International airfreight

 Surface transportation

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 Transportation considerations in IL

 Ocean shipping
 Approximately 60% of cross-border shipments move by water transportation
 Variety of ships type include:
+ Dry-bulk
+ Dry cargo
+ Liquid bulk
+ Parcel tanker
+ Containerships
 Shipping conferences and alliances pool resources and extend market coverage (ex: the Grand
Alliance II, the New World Alliance, CYKH Group) -> sharing vessel space, offer shippers
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a
broader service network
Transportation considerations in IL

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 Transportation considerations in IL

 International Airfreight
 Three types of international airfreight operation:
+ Charted aircraft
+ Integrated air carriers (carrying parcels)
+ Scheduled air carriers

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 Transportation considerations in IL

 Surface transport consideration

 Surface transportation considerations include an understanding of both a country’s
infrastructure and its modal operating characteristics
 Transit times can be significantly impacted by a country’s infrastructure and modal operating
characteristics
 Short sea shipping (SSS) is an alternative to surface transporting – waterborne transportation
that utilizes inland and coastal waterways to move shipments from domestic ports to their
destination

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 International Trade Inventories

 Safety stock must be large due to greater uncertainties, misunderstanding or delays

 Inventory valuation is difficult because of continually changing exchange rates
 Inventory policies must be considered careful because inventory available for sale in one
nation may not necessary serve the needs of markets in nearby nations
 Product return (reverse logistics) policies also need to be considered
 Insufficient warehousing practices (warehouse facilities) can lead to higher inventory carrying
costs

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 Logistics Performance Index (LPI)

 2007, updated in 2010, 2012, 2014, 2016, 2018

 Created in recognition of the importance of logistics in global trade
 Incorporates data for approximately 155 countries

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Logistics Performance Index (LPI)

“Logistics
performance
is strongly
correlated
with the
quality of
service”

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Logistics Performance Index (LPI)

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Logistics Performance Index (LPI)

Bảng xếp hạng LPI của Việt Nam qua các năm
(Báo cáo Logistics Việt Nam 2018)
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