1. CHAPTER 13 Global Logistics

2. Comparison of Domestic and International Logistics Domestic International Estimated at 16% of world GDP today Mainly ocean and air, with significant intermodal activity Higher levels, reflecting longer lead times and greater demand and transit uncertainty Heavy reliance on forwarders, consolidators, and customs brokers High, owing to differences in currencies, inflation, levels and little recourse for default High, owing to longer and more difficult transit, frequent cargo handling, and varying levels of infrastructure development Many agencies involved (e.g., customs, commerce, agriculture, transportation Significant paperwork; the U.S. Department of Commerce estimates that paperwork cost for an average shipment is $250 Voice and paper costly and often ineffective; movement toward electronic interchange but variations in standards hinder widespread usage Cultural differences require significant market and product adaptation Cost Transport mode Inventories Agents Financial risk Cargo risk Government agencies Administration Communication Cultural differences About 10% of U.S. GDP today Mainly truck and rail Lower levels, reflecting short-order, lead-time requirements and improved transport capabilities Modest usage, mostly in rail Low Low Primarily for hazardous materials, weight, safety laws, and some tariff requirements Minimal documentation involved (e.g., purchase order, bill of lading, invoice) Voice, paper-based systems adequate, with growing usage of electronic data interchange and Internet Relative homogeneity requires little product modification

3. International Market Entry Strategies • Ownership • Importing • Countertrade • Exporting • Licensing • Joint ventures

4. Major Participants in an International Logistics Transaction Domestic seller Domestic bank Domestic government agencies Export facilitators Inland transportation carrier Domestic port or terminal of exit International carrier (air, water) Foreign port or terminal of entry Product movement Foreign government agencies Foreign inland transportation carrier Information flow Foreign bank Foreign buyer

5. How Duty Drawbacks Work 1) U.S. car manufacturer issues purchase order to German parts manufacturer. 3) German parts shipped via ocean enter U.S. port; importer pays duty at port of entry to U.S. Customs. 2) German manufacturer receives purchase order; manufactures parts. 4) U.S. manufacturer produces cars using U.S.-made and German parts. 5) U.S. manufacturer ships cars to port of export; files documentary proof of original import and subsequent manufacture to collect refund. 6) Export cars containing U.S.-made and German parts to Australia; provide proof of export to U.S. Customs. Source: Adapted from Lisa H. Harrington, “How to Take Advantage of Duty Drawback,” Traffic Management 28, no. 6 (June 1989), p. 121A.

6. The Global Logistics Environment Uncontrollable Elements Economic Political and legal Controllable Elements Customer service Other Inventory activities Logistics Competition Social and cultural executive Warehousing Packaging and storage Transportation Geography Technology

7. Responding to Competition with Logistics • Increasing the number of cross-national partnerships, alliances, mergers, and/or acquisitions. • Expansion of many previously domestic-based organizations into international markets. • Development of global communications networks operating 24 hours a day. • Establishment of country and regional warehouses in major world markets. • Identifying and developing relationships with logistics service providers that offer transportation, storage, materials handling, and other services on a global basis.

8. Exporting Companies • Export distributor • Customshouse broker • International freight forwarder • Trading company • Non-vessel-operating common carrier (NVOCC)

9. How NVOCCs Work LCL shipper LCL shipper LCL shipper LCL shipper LCL shipper NVOCC Less than container load (LCL) shipments Full container Bill of lading a

10. How NVOCCs Work (cont.) NVOCC Consignee Consignee Consignee Consignee Consignee Less than container load (LCL) shipments Full container Bill of lading 13-9 b