INTRODUCTION

CHAPTER 1: INTERNATIONAL LOGISTICS

& GSM
 INTRODUCTION
Logistics Introduction:
• Logistics can be defined as the process of planning, implementing and managing the
movement and storage of raw materials, work-in-progress inventory, finished goods
and the associated information from the point of origin to the point of consumption.
• Logistics and supply-chain management have become increasingly important over the
last two decades. Over that period most businesses have gone through a significant
period of change.
• Growth has become all important for companies, together with achieving scale. This
has prompted an unprecedented wave of acquisitions and mergers across all industry
sectors.
• New technology combined with consumer demand has driven companies to expand
their range of products, and indeed to significantly increase the level of new product
introduction.
• The need to satisfy demanding shareholders has meant that businesses have focused
on manufacturing and distribution efficiencies, seeking ways to reduce costs. This in
turn has prompted companies to seek lower-cost locations for their manufacturing
bases, moving factories to Asia, Central and South America, and Eastern Europe.
Companies now operate in a global market that, while offering opportunities, is
extremely competitive and demanding.
Logistics Introduction:
• All of these changes have affected companies’ supply chains and logistics
requirements. Now supply chains are extended over several continents and
include suppliers as well as customers. They are significantly more complex,
involving sea, air, rail and road movements, and different types of storage
requirements, as well as the multitude of ancillary activities such as relabeling,
repacking, configuration, postponement, line sequencing and reverse logistics.
Already challenging for most companies, supply chains have become even
more difficult for many businesses.
• The result is that according to research by investment banker Lazard Freres and
BG Strategic Advisors, the outsourced logistics and supply-chain market has
grown at a rate greater than 20 per cent per year since the mid-1990s (Gordon,
2006). Globally around US$148 billion is spent on outsourced contract logistics,
with a further US$117 billion spent with freight forwarders
Role of the Supply Chain
• The supply chain has been defined as the sequence of events in a goods flow, which
adds value to the value of a specific good.
• The global supply chain crosses international boundaries. Basically, the supply chain
is linking the producer/manufacturer/supplier with the distributor/consumer
involving a dedicated service.
• It is completely transparent with each element of the supply chain throughout the
transit. It may be the movement of cars from China to Europe/North America, or
the reefer container market embracing food products direct from the supplier to
the consumer/supermarket store/distribution centre crossing international
boundaries
• These events may include conversion, assembling and/or disassembling and
movements and placements.
• The key to a successful supply chain is customization, innovation, scalability
(integration of unlimited number of clients); multichannel, security and flexibility
Contract logistics
Contract logistics is used to define the logistics activities that relate to warehousing, distribution
and other associated activities that are outsourced. The term refers to the asset-intensive nature of
the activity and the need for a contract to be in place between the third-party logistics provider and
the customer.

Distribution
Distribution can be defined as the process of delivery of manufactured products to the customer

Fourth-party logistics
A fourth-party logistics service provider can be defined as an integrator that assembles the
resources, capabilities and technology of its own organization and other organizations to design,
build and run comprehensive supply chain solutions.
Freight forwarding

• Freight forwarding may be defined

as the secure and efficient
movement of goods on behalf of
an exporter or importer,
commonly known as the shipper.
Freight forwarders might use the
services of shipping lines, airlines
or road and rail freight providers,
or in some cases the freight
forwarding company itself
provides the service.
Offshoring
• Offshoring is the relocation of the provision of services from one country to another
to benefit from cost savings (for example through lower labour costs in India).
• Organizations can undertake offshoring without outsourcing and vice versa, be they
manufacturers or service providers.
• Car manufacturers have been both offshoring and outsourcing for years. They select
the most effective locations around the world for their manufacturing facilities, and
outsource some, but by no means all, of their manufacturing supply
Outsourcing
Outsourcing can be defined as the strategic use of external specialized service providers
to execute and manage activities or functions that are normally seen as non-core to the
business. Outsourcing should not be, but often is, confused with offshoring
Third Party Logistics:
Third-party logistics can be defined as the management of outsourced logistics,
transportation and distribution activities. 3PL is commonly used as the term to
describe an external provider who manages outsourced activities on behalf of
the shippers or customers whose business processes they support.
Transportation or freight transport:
Transportation or freight transport may be defined as the physical movement of
goods, both inbound and outbound, including the collection of product and its
delivery to the end user. Transportation can be executed across a variety of
modes including air, sea, rail and road.
Managing the Supply Pipeline for Global Trade Flow:
Managing the flow of goods, information and money across borders is a highly complex, regulated
and dynamic process. All companies, large and small, eventually reach a decision point with regard
to global trade management. This is the core competency that justifies a continuous investment in
people, technology and resources, or it is a process best managed by a partner whose primary focus
and business is achieving excellence in global trade management (GTM).

• Many companies do not believe that GTM is or should be a core internal competency
• The ability to scale GTM resources and capabilities quickly and cost-effectively is a growing
challenge
• Outsourcing partnerships typically provide companies with better visibility/transparency to their
GTM performance than when the processes are managed ‘in house
• Improves operational performance and process control
• Ability to scale global trade activities without adding resources/cost. Examples, including Black &
Decker and ITEC, reached a point where they either had to increase the size of their GTM team to
keep up with increased trade activities or outsource the function to a third party. A further
example arises in an automotive manufacturer, which had been able to increase its global trade
activities while reducing its in-house GTM team by 90 per cent
• Reduction in customs duties paid
Managing the Supply Pipeline for Global Trade Flow:

Today, supply chains are becoming more fragmented and dynamic than they were a decade ago.
The more countries in the supply chain, the more difficult it becomes to understand and manage
the multitude of trade regulations and constraints involved. This is driven by companies in an effort
to reduce cost and/or penetrate new markets quickly, and relocate their manufacturing operations
and vendor base to low cost countries such as China, India, Brazil and Mexico. Moreover, the
manufacturing base exports the product to a third country. This represents a complex operation
difficult to manage.
Global Logistics Operators

The global logistics operator concentrates on six key areas sought by customs.
1 Strategic solutions to the problems of long-distance product sourcing and movement. This is
achieved by matching the client’s business needs to the latest techniques and expertise to formulate
solutions to the problems of long-distance product sourcing and movement. An example is the
European-based department stores buying a range of consumer products from the Far East. Key
factors are quality control, coping with variations in consumer demand and distributing supplies in a
cost effective manner
2 Companies that can provide capabilities interfaced across a range of different transport modes
including sea, road, rail, canal and air .
3 Improvements in quality of service to end customers. This basically centers on customer asset
management – ensuring the goods arrive in a quality condition to a prescribed schedule with zero
failure rate
4 Improvements in profits realized through all the marketing and financial benefits to the user
inherent in the global logistic system
5 Management of ‘trade-offs’ within the supply chain
6 A fully outsourced logistics management service.
Global Logistics Operators:

The Global Logistics operator Focus Attention

On the Four Key Service areas Detailed Below:

❖ Supply Chain Management

❖ Delivery and Customs Clearance
❖ Distribution Management
❖ Import Logistics and outbound Distribution.
 Comparison between National (Domestic) and
International Logistics
❖ Companies realize that trading overseas raises standards at all levels within the
company and develops a fast moving management culture change.
❖ It encourages adaptability and continuous research to become more competitive in a
high-tech fast moving environment.
❖ The national logistics operator serving the local indigenous market usually has the
advantage of being aware of the structure of the market.
❖ The international logistics operator in designing the supply chain permeates several
countries and may extend to several thousand miles from
Australia/China/India/Malaysia to Europe and North America and vice versa. In
consequence it is often the practice to engage the 3PLs and 4PLs.
❖ The international logistics operator must be competent in all areas of the global supply
chain
 International Transport

❖ International transport comprehension is at the core of developing an efficient global

logistics strategy. It is important that the global logistics entrepreneur fully
understands the economic characteristics of individual transport modes and the
international conventions associated with each.
❖ The range of transport modes embrace rail, sea – bulk and containerized cargo – air,
inland waterways (usually linked to seaports) and road. Global logistics usually
embraces combined transport or multi-modalism such as road/sea/rail, road/air/road,
rail/sea/rail, which form the supply chain in transport terms on a door-to-door basis.
❖ International transport law embraces all transport modes. No international uniform
regime is in force to regulate liability for loss, damage or delay arising from
multi-modal transport
 International trade law/regulation is at the core of
conducting business overseas and the global logistics
International Trade entrepreneur must be aware of all its ingredients when
Law formulating a strategic and operational/planning
process.
 International Trade Law
The laws which are included through the process of International Trade are as Follows:

❖ Vienna Convention on Contracts for the International Sale of Goods came into force on 1
January 1988. It was sponsored by UNCITRAL
❖ Product liability is the liability of the producer of a product which, owing to a defect,
causes injury, damage or loss to the ultimate user. The US and EU have differing
directives. Global logistics operators should check out the directives operative in the
country of importation
❖ Intellectual property rights.
❖ Patents embrace virtually all machine products, and processes – including their
individual components/parts
❖ Designs.
❖ Copyright gives rights to the creators or original literary
❖ Trademarks are signs that distinguish goods and services of one trader from those of
others.
 Employment Law
❖ Employment law covers both criminal and civil laws. It embraces a wide area and
includes contract of employment, trade unions and their relations with employers and
members, work councils, redundancy, health and safety, taxation, and so on.
❖ Internationally, employment law differs widely. Employment law is very relevant to
global logistics strategists who are outsourcing their manufacture/assembly/service
base on a joint venture, operating alliance, merger and acquisition and setting up a
company in another country .
❖ The EU may be regarded as a highly regulated employment market
Globalization and International Trade
Environment:
❖ Logistics and globalization feed off each other in terms of their development. During the past
25 years, the pattern of international trade has changed dramatically. Hence the need for the
logistics operator to comprehend the international trade environment that s/he operates in
to devise an efficient supply chain.
❖ There are various factors that have contributed to the changed international trade
environment. This includes e-commerce, open communications systems, politics, technology,
economics, cultural and legal and international agencies.
❖ the WTO, who have opened up market access, and the ISO, who feature in food chain supply
chain management code.
❖ Globalization of markets and trade results in the provision of a product or service that can be
sold virtually in any market of the world.
❖ The key to it is the design and specification of the product or service and the added value it
provides to the user or consumer