Topic 9 – Global Logistics Strategies Outline 1.1 Key Issues in Global Logistics 1.2 Global Logistics Management Process 1.3 Guidelines for Developing a Global Logistics Strategy 1.4 Organizing for Global Logistics 1.5 Financial Aspects of Global Logistics

1.1 Key Issues in Global Logistics Response Times a. Customers expect longer and less reliable order cycle times internationally?  Longer distances travelled  Substantial international freight moves by ocean  Additional documentation, arrangements and coordination required. May take considerable time to complete.

1.1 Key Issues in Global Logistics Order Completeness & Shipping Accuracy a. More important in global logistics than in domestic markets due to:  Higher cost of back orders  Higher cost of expedited shipments

1.1 Key Issues in Global Logistics Shipment Condition a. Packages must be adequately protected to reduce damage in transit and handling. b. Cost & time needed to replace damaged items can be substantial.

1.2 Global Logistics Management Process Key questions for analysis, planning & control Controlling the logistics program Environmental Analysis Plan Implementation Planning Structure What are the unique characteristics of each market? What characteristics does each market have in common with other national markets? Should the firm cluster national markets for logistics operating and/or planning purposes? Who should make logistics decisions? Major assumptions about each market. Valid? Customer service needs of target markets Characteristics of logistics systems available Strengths & weaknesses in each market What are our objectives? Balance of payments and currency situation and impact on firm’s physical distribution system How do we structure our logistics organization to optimally achieve objectives, given available skills & resources What is the responsibility of each organizational level? How to develop effective operational logistics plans What transportation, inventory, packaging, warehousing and customer service strategies do we have for each target? How to measure and monitor plan performance What steps to take to bridge gaps in performance Source: Adapted from Keegan, W.J., (1996), Global Marketing Management, 5th ed., NJ : Prentice Hall: p. 37.

1.3 Guidelines for Developing a Global Logistics Strategy General Management Guidelines a. Recognize problems. Logistics-related problems include maintaining control of global supply chains, obtaining information from customers and suppliers and responding to government regulatory bodies. b. Analyze options arising from new situations or opportunities. Logistics-related options include transportation modes, carriers & routing, consignment, and postponement. c. Prepare for rapid execution of plans, programs and strategies.

1.3 Guidelines for Developing a Global Logistics Strategy Logistics-Specific Guidelines a. Logistics planning should be integrated into the company’s strategic planning process. b. Logistics departments need to be guided by a clear vision and must measure output regularly. c. Import/export management should ensure integrated management of all elements of the supply chain, from origin to destination. d. Opportunities to integrate domestic and international operations should be pursued to leverage total company volumes with globally oriented carriers.

1.4 Organizing for Global Logistics Centralization versus Decentralization a. Centralize planning & control functions  Example: Information systems should be centralized for integrated decision-making. b. Decentralize operations functions  Example: Customer service work best when localized in foreign market. c. Group all important international logistics elements together under a single manager.

1.4 Organizing for Global Logistics Factors affecting Logistics Strategies & Organizational Structures a. Rapid product introduction across numerous regions b. Focused market needs c. Quick-response delivery d. Expanded, special services e. Innovative channels

1.5 Financial Aspects of Global Logistics Working Capital Considerations a. Financing required for inventory, credit, investment in buildings and equipment, etc. b. Longer time to get payment for product sold due to longer distances, border crossing delays and government regulations that may restrict smooth movement of goods from manufacturer to customer. c. Impact of exchange rate fluctuation on lag time from the time product is shipped, delivered to the consignee and finally paid

1.5 Financial Aspects of Global Logistics Inventories a. Higher inventory levels are often required due to greater uncertainty and delay. b. Impact of inflation on accounting for inventory costs and profit

1.5 Financial Aspects of Global Logistics Investment in Facilities & Logistics Networks a. High capital expenditure for direct investment in facilities and logistics networks b. Impact of currency exchange fluctuations on valuation of assets and cost of operations in foreign markets

1.5 Financial Aspects of Global Logistics Payment a. Letters of Credit b. Insured transactions – lower overhead costs than letters of credit

Topic 9 Summary and Conclusion

Management of a global supply chain is more complex and filled with more uncertainty and risk, than that of a purely domestic market. Greater pressures are exerted on logistics’ capability to achieve consistent response times, order completeness, shipping accuracy and shipment condition. International logisticians must analyze the environmental elements of foreign markets, plan comprehensively and set appropriate objectives, develop an appropriate structure to achieve these objectives, and continuously measure performance.