Challenges of International Trade Logistics

International logistics managers face many challenges daily, and the last few years have seen a rise in the severity of
those challenges. The fundamental problem is that growing supply chains run through more jurisdictions and require
more personnel. So they accumulate more possible points of failure and bottlenecks as they expand. Let’s look at a
few of the most common international logistics challenges, keeping in mind that this list is representative, not
comprehensive.
 Traversing geography.
Supply chains are just physically longer when they cross international borders, sometimes including oceans. Things
take longer to get from point A to point B, requiring more investment in transportation and, often, multiple modes of
transport. Ships, airplanes, trucks, trains, vans, cars, bicycles and, increasingly, aerial drones can be part of getting
materials and goods from their origin into the hands of the consumer. More miles and more modes of transport
don’t just elongate timelines, it introduces challenges and bottlenecks, as well.
 Personnel.
Moving things along stretched supply chains requires a lot of people. Businesses need drivers and mechanics for the
vehicles, people to load and unload physical items multiple times in a journey, technology people to manage data
gathering, and more. A good third-party logistics partner can help with a lot of this, but at the end of the day, it's
your business's product and customers, so you need to be confident that your supply chain isn't only well-designed
but well-staffed, too.
 Translation difficulties.
This is a whole category of challenges, as many things need to be translated or converted in an
international supply chain. Language needs to be common or translated — and not just regularly
spoken languages, like English and Mandarin, but also industry-specific jargon that's often needed to
achieve clarity on goals and problems. Currencies need to be converted. Tracking systems need to
talk to each other. Lots of data need to be integrated. Most of these challenges fall within the
transaction and communication channels, but they're no less important to a reliable operation than
the movement of physical goods.

 Government rules and regulations.

Every country has different laws and regulatory frameworks in which businesses must operate, and
making sure an entire global supply chain is compliant with all the applicable rules is difficult. These
challenges range from acquiring permissions to paying taxes to making sure all your documentation
and forms are filled out correctly and submitted as required. When it comes to regulatory legal
advice, always consult an expert attorney (or, in the case of a global distribution network, several
attorneys).
 Political risk.
Sometimes, the politics of a country changes with little or no warning. Traveling employees might
go from not needing a visa to needing one. An airport might suddenly not be allowed to fly a
route your business depends on. A labour strike could cripple a port’s operations for days or
weeks. There could be huge delays at the border. And, as in 2022, a nuclear superpower might
invade a country critical to the global supply chain, and, as a small American business, there’s very
little you can do about it but find a way to cope. Despite some logistics innovations historically
coming from military efforts, wars are, on balance, as overwhelmingly bad for economies as they
are for humanity.

Advantages of International Trade Logistics

The main goals of international trade logistics are, by and large, like any business logistics process:
to ensure efficient and reliable operations that run smoothly and predictably while driving down
costs and reducing uncertainty. Beyond that, good international logistics management can yield
improved relationships with customers, partners and even with prospects.
 Cost efficiency.
This is usually the first goal that prompts businesses to focus on optimizing international
logistics. Doing business across international borders can be expensive. There are multiple
tax regimes to understand and manage, tariffs and other costly requirements, and the costs
of long-distance shipping. These costs add up. By all the cost structures and options, from
international real estate opportunities to regulatory frameworks, understanding businesses
can respond to a complex and sometimes changing constraints to reduce costs.

 Reliability.
With international logistics, one misunderstanding of a local rule could result in an entire
shipment being unusable (for example, if it gets confiscated or a perishable shipment is
turned away or stalled). More common threats to timeliness and predictability also loom,
from delays in processing and mistakes in filling out forms to last-minute changes in import,
export or travel policies. Having dedicated people, services, and technology to spot and
respond to these threats to reliability can go a long way toward making an international
operation more dependable. In some cases, “reliability” is just another way of saying
“viability” because, without this, some businesses wouldn’t be able to survive.
 Relationships.
International Supply Chain Flow
Building a good international logistics operation often
means making friends in many places. And when you
have a reliable, efficient operation, it’s easier to build
friendships. Growing businesses that pay their bills on
time are a favourite of suppliers. Being the company
that gets customers what they need, when they need it,
at a fair price builds loyalty, especially when
competitors are struggling. In some cases, an
international supply chain may be the one competitive
advantage that attracts customers, especially for
product categories where offerings have low
differentiation. In Intl’n Logistics businesses that remain
today have done so on the back of logistical expertise.
They can get customers not only what they need but
also when and where they need it, with comparatively
high reliability.
The most crucial approach for a business just starting in
international logistics is to consider that it is all in
service of a common goal: doing a good job for
customers.
 Scope of Logistics

The basic nature of business is that it procures or buys something, whether goods or
information; changes its form in some way which adds value and then sells a product
or service onto someone else. In manufacturing industries in particular, the following
sequence may occur a number of times.
Logistics Management in a Manufacturing Unit
 Examples of International Trade Logistics

Examples of international logistics are everywhere — The clothes you’re wearing, the last vehicle you rode in and the
device you’re using to read this article almost certainly crossed international borders or have components that did. It’s
well known that many modern products are assembled out of parts and materials from all over the world, but far less
obvious is what the company had to do to get it to you quickly and cheaply. (Ex: FTWZ) Here are examples of two areas
in which international logistics plays a crucial role: where to locate facilities and finding the right business partners.
Locating Facilities
1. United Parcel Service (UPS) has its biggest shipping facility, at over 5 million square feet, in Louisville, Kentucky. That
isn't where UPS is headquartered (which is Atlanta); Louisville doesn't have one of the world's most active airports (the
world's busiest would be, again, Atlanta); and it's not that there are a lot of customers or executives in Louisville,
either. However Louisville is close to the population-weighted geographic center of the United States, which minimizes
total transport distances when running a hub-and-spoke system. That, in turn, minimizes flight times and fuel costs
and gives employees on the ground more precious minutes to get cargo from the plane it arrived on to the plane it
needs to leave on.
2. Though Anchorage, Alaska, is a town of fewer than 300,000 people, its airport is the fourth-busiest air cargo hub on
the planet, and many companies run logistics through there only because it’s a convenient stopover between North
America and Asia. Not many customers live there; not many businesses have major operations or production there.
But it’s critical to getting goods (especially time-sensitive products, like perishable inventory) back and forth promptly
and cost-effectively.
International Trade Logistics (ITL) involves the planning, implementation, and control of the flow of goods and
services across international borders as it involves complex processes and strict multilayered coordination from
transportation and warehousing to regulatory compliance, specialized infrastructure and technological integration.

1. Container Shipping for Electronics (Chinese manufactures exports smartphones to the US.)
Logistics Activities:
Consolidation: Assembling goods from multiple suppliers at a Chinese port.
Transportation: Using container shipping to transport the goods to the US.
Customs Clearance: Completing documentation like the Bill of Lading, packing list, and certificate of origin to clear
customs at both departure and arrival points. (Ex. Customs Clearance-China)

2. Cold Chain Logistics for Perishable Goods (Export buffalo meat from Delhi to Haiphong(Vietnam). (Even Ex.KNP)
Logistics Activities:
Temperature Control: Using refrigerated containers (reefers) to maintain the meat at optimal temperatures. Normally
-18 deg C.
Regulatory Compliance: Ensuring compliance with health and safety standards in both countries.

3. Automobile Exports via Roll-On/Roll-Off (RoRo) Ships (Exporting cars from Japan / S.Korea to P.Gulf) (CMB-KUW)
Logistics Activities:
Specialized Carriers: Using RoRo ships designed to carry vehicles.
Port Handling: Loading and unloading cars safely at ports equipped for RoRo operations.
Inventory Management: Tracking shipments and managing delivery schedules to dealerships.
Cargo Operation at Port on a PCC / PCTC
4. Pharmaceutical Exports with Special Handling (Exporting Vaccines from India to African countries.)
Logistics Activities:
Cold Chain Management: Ensuring the vaccines remain in a temperature-controlled environment throughout transit.
Regulatory Documentation: Providing detailed paperwork to meet international health regulations.
Last-Mile Delivery: Distributing vaccines to remote areas via trucks or drones.

5. Exporting Hazardous Chemicals (China exports industrial chemicals to India (Delhi). (Ex: 2x20’ Imp into TKD)
Logistics Activities:
Regulatory Compliance: Following international standards like IMO’s Dangerous Goods Code (IMDG) for packaging and
labeling.
Specialized Transport: Using tankers with safeguards for chemical spills.
Customs Inspections: Lengthy clearance processes due to safety concerns and documentation requirements.

6. Renewable Energy Project Components (Shipping wind turbine blades from Den. to Aus. for an offshore wind farm)
(Ex: Ship to Shore & Yard Cranes import for Vizhinjam Port from China – Weather Delays)
Logistics Activities:
Oversized Cargo: Turbine blades often exceed standard container sizes, requiring customized vessels and port handling
equipment.
Multiple Modes of Transport: Combining sea, rail, and road transport with strict scheduling.
Weather Dependencies: Delays caused by wind or storms, particularly at the offshore installation site.
Exxon Valdez ( Oil Spill | Prince William Sound, Alaska | March 1989)

What Happened?

On March 24, 1989 the oil tanker Exxon Valdez ran aground in Prince
William Sound, Alaska, spilling 11 million gallons of oil. The ecologically
sensitive location suffered one of the largest environmental disasters in U.S.
history. Exxon settled in 1991 with funds disbursed in three discrete parts:
criminal plea agreement ($25 million), criminal restitution ($100 million),
and civil settlement ($900 million).
What Were the Impacts?

The spill affected more than 1,300 miles of shoreline, with immense impacts for fish and wildlife and their habitats, as
well as for local industries and communities. The oil killed: An estimated 250,000 seabirds, 2,800 sea otters, 300 harbor
seals, 250 bald eagles, 22 killer whales, billions of salmon and herring eggs. More than 25 years since the spill, some
species remain in a “Not Recovering” or “Unknown” status.

The incident brought about significant and much-needed changes in maritime regulation regarding prevention and oil
spill response. The maritime industry was also forced develop contingency plans for large oil spills and create regional
and national response organizations. The event resulted in the Oil Prevention Act of 1990 (OPA90).
The incident also promoted amendments to the IMO’s MARPOL Convention that called for double-hulled tankers by
2015, which was also a mandate of the U.S. OPA90. MARPOL also required the International Safety Management (ISM)
Code, which were adopted in 1993, and the 1995 amendments to the Convention on Standards of Training, Certification
and Watchkeeping Seafarers (STCW), which further set standards for deck officers on the bridge of a vessel.
7. Large-Scale Infrastructure Projects (Exporting Telecommunication Towers from India to Africa for a project.)
Logistics Activities:
Heavy-Lift Cargo: Using specialized cranes and transport vessels for oversized equipment.
Remote Destinations: Delivering to landlocked areas requiring coordination between seaports, railways, and road
transport.
Local Regulations: Navigating import restrictions, tariffs, and tax regulations specific to infrastructure projects.

8. Trading Through Conflict Zones (Humanitarian aid shipments to a war-torn country)

Logistics Activities:
Safety Concerns: Ensuring the safety of transport personnel in conflict areas.
Route Planning: Avoiding restricted or dangerous zones.
International Cooperation: Working with NGOs, UN bodies, and governments to facilitate shipments.
The LNG shipping industry

Container Cum RORO Vessel

Oil Tanker General Cargo Ship

Passenger / Cruse Ship

 Metal Loading Arms Manifolds Flexible Loading Pipes

Loading / Unloading systems on Tankers

Liquid Bulk Terminal with Storage Facility
 Understanding 1PL, 2PL, 3PL, 4PL and Beyond

In the logistics industry, there are various terms used to describe the different levels of logistics
management. These terms range from 1PL to 4PL and beyond. Understanding these terms is crucial
for businesses that want to optimize their logistics operations.

The term "third-party logistics" (3PL) is used to describe the growing trend of companies outsourcing
their logistics and supply chain operations to third-party providers who specialize in transportation,
warehousing, and distribution services. The term gained popularity in the industry and has since
become widely used to describe the practice of outsourcing logistics functions to external service
providers.

Understanding the different levels of logistics management is essential for businesses that want to
optimize their logistics operations. Whether you're using 1PL, 2PL, 3PL, or 4PL logistics, each level has
its benefits and drawbacks. The key is to choose the level that best fits your business needs. By doing
so, you can improve your logistics operations, reduce costs, and increase efficiency, giving you a
competitive edge in the marketplace.
1PL: First Party Logistics

The abbreviation 1PL stands for the first party logistics

model. In this case, a manufacturing company organizes
all its logistics processes and operations internally. All
related administrative and operational requirements are
performed by the company itself: from procurement and
intralogistics to the handling of shipments and customer
interaction.

1PL is mainly used by smaller companies with

manageable processes and a limited number of regular
customers. Also, for start-ups with restricted resources,
1PL is often the most obvious approach to market entry.
If the complexity of requirements increases after a while,
the logistics model can be changed at any time.

However, 1PL solutions can also be recognized, at least in

part, at group level and in large companies. This is
particularly the case when clearly defined sub-processes
such as factory traffic or warehouse management are
handled completely autonomously.
2PL: Second Party Logistics

In 2PL, an external logistics service provider comes

into play as a partner of the manufacturing
company. Typically, 2PL models involve the external
commissioning of specific transport processes
within the supply chain. This can involve all the
different types of freight and freight routes –
whether by road, rail, water, or air.

2PL service providers contribute their experience in

handling transport processes, as well as the
appropriate equipment, vehicles, and capacities.
This direct business relationship between two
partners leads to sustainable relief for the client.
Especially for standardizable, regularly recurring
logistics requirements, 2PL is clearly the right
choice.
3PL: Third Party Logistics

Third-party logistics (3PL) goes one step further. When the

logistics requirements of a company become too complex to
be handled either internally or in the 2PL model, the tasks
are outsourced to 3PL partners. This is a common step,
especially when complex and sustainable end-to-end logistics
solutions are to be provided. All essential sub-processes and
workflows, from mere transport and warehouse
management to order processing and distribution, are being
handled together.
To this end, 3PL service providers usually rely on digitization and advanced technological solutions. RFID-based systems for
automated procurement in the warehouse may be part of this, as well as digital, paperless solutions to guide transport
processes, integrated transportation management systems (TMS) and modern warehouse management systems (WMS).

With the 3PL logistics model, a wide variety of requirements can be met reliably and efficiently in both the B2B and B2C
markets. Various service modules are combined according to the needs of the client company. In this way, sector-specific
logistics systems can be implemented, for example for chemicals and pharmaceuticals, for temperature-controlled transports
(e.g., in the food sector), or for the specific requirements of automotive logistics.

With this flexibility and diversity, 3PL logistics models are the best choice for large companies to meet their logistics needs
from a single source.
4PL: Fourth Party Logistics

4PL or Fourth Party Logistics is a segment that continues to

grow strongly. Here, logistics companies come into play that are
able to realize an even deeper integration of all processes for
their customers – once again significantly beyond the 3PL
logistics model. In the end, responsibility for the whole process
lies entirely with the external service provider, from the initial
planning to the execution.

It is obvious that this logistics model requires close networking

of the partners. 4PL providers do not simply process orders,
but design and implement comprehensive logistics models
customized to each individual case. This calls for
comprehensive analysis and far-reaching insights into the
customer’s business model.
As a result, 4PL providers generate long-term benefits and clear added value for their customers. The focus is particularly
on aspects such as process optimization, cost reduction, transparency and hence greater sustainability: Because every
optimized process inevitably leads to lower resource and energy consumption and thus to an improvement in ecological
efficiency.
5PL: Fifth Party Logistics

Among market experts, 5PL (Fifth Party Logistics) is still

considered a relatively new and particularly high-growth
logistics model. 5PL providers are companies that meet all 4PL
requirements – and additionally support and advise their
customers from a strategic perspective.

Further services such as management consulting, process

analysis and optimization, project management, and IT
consulting are thus integral components of the 5PL logistics
model.

5PL providers are necessarily genuine integrators who bundle

comprehensive expertise in digitization, supply chain, big data
analytics, internet of things, and automation on behalf of their
clients.

The vision is to realize autonomous, constantly

self-optimizing and highly efficient supply chains with this
logistics model.
International Trade Logistic Channels
International logistics has three essential process flows that sometimes are grouped into distinct “channels” so
companies can focus on them one at a time. Although international logistics is fundamentally about moving
physical goods and materials across borders, when you do that, money and information must flow as well.
 International distribution channel (movement of physical goods).
This is the main thing we talk about in international logistics: moving physical things across borders. Transportation,
storage, production, delivery, and the entire physical supply chain are covered in this channel. While this is the
“main event,” so to speak, it’s helpful to remember that it’s only one of three channels, and it couldn’t happen
without the other two.
 International transaction and payment channel (movement of money).
Except for very rare barter transactions, when goods move across borders, so does money — often in the opposite
direction. With international logistics, this can be considerably more complicated than when operating within the
same country.
Which currency will you and your customers be using to pay for things? What payment options will you request or
offer? What are the reporting and tax requirements of both countries involved in the transaction? Are you using
any payment processing services, and what associated fees do they have?
This can become enormously complex for a business striving to do everything it can to make life easy and painless
for customers while at the same time shopping or negotiating for favourable arrangements from suppliers.
 Documentations and communications channel (movement of information).
When conducting business across international borders, good communication is essential. It
minimizes the chances of misunderstandings and makes everything run smoothly. The
communications channel includes correspondence and conversations, contracts and formal
agreements, documentation from notes to government forms — and, increasingly, shared data for
tracking, verification, and analytics.

Domestic Logistics – An Overview

Domestic logistics, at its core, refers to the efficient management of the movement of goods,
resources, and information within the borders of a single country. It encompasses the entire process,
from the point of acquisition to storage and distribution, ensuring that products reach their final
destination seamlessly.
In eCommerce, where speed and efficiency are paramount, domestic logistics can make or break a
business. Small enterprises, in particular, benefit from its simplicity and cost-effectiveness, allowing
them to compete with larger competitors on a level playing field.
International Trade Logistics - Flow of Goods, Information and Money