International vs Domestic supply chain

The environment in which international logisticians operate is quite different from the domestic environment.
Is it different? Why?
Different – cross border, different culture, different language, international law, countries law, different currencies and
different holidays.
The decisions regarding international transportation are much more complicated than those regarding
domestic transportation. What are the different decision for international vs domestic?
Different decision for international vs domestics? tariff and tax, different modes of transport air or ocean, types of
packaging, insurance coverage, where to place your warehouse, entry mode intermediaries.
The number of intermediaries involved in an international transaction is greater than in a domestic
transaction. What are the intermediaries for international?
Intermediaries for international? Types of intermediaries – agents, wholesalers, distributors, and retailers. Shipping
broker and insurance banks.
The inherent risks and hazards of international transportation are much greater. What are the risks
Damage while transportation (i.e. plane crash, fragile or perishable/time-sensitive goods). Theft and robbery risk.
Differences in custom politics and laws. Regulations and sanctions preventing exports/imports.
Impact on international trade
1) Goods become cheaper
2) Domestic consumption increase
3) New jobs and company created
4) Increase in wealth
International trade drivers for companies
1) Cost drivers – Companies increase their sales worldwide to recover their high investment cost
a. Export reduces production cost due to heavy capital investment
b. Import offers lowest possible price to consumer (import from outsource production)
2) Competition drivers – enter foreign markets to keep up with their competitors, obtain first mover advantage
a. Compete against competitors for market share, defend against competitor by going into their home
market
3) Market drivers – Company enter foreign markets because their customers expect them to be present in those
countries
a. Follow their customers and focus on new emerging markets
4) Technology drivers – customers use technology to make purchases from these markets
a. Companies can reach out to a worldwide customer base with the use of technology
Theory of Absolute Advantage
The ability of a nation to produce a product/service more cheaply than another nation. This might be result of input or
level of available capital such as factories or infrastructure.
Theory of Comparative Advantage
The ability of a country/firm to produce a particular good/service at a lower marginal and opportunity cost over
another.
Factor Endowment Theory
Country will enjoy a comparative advantage if naturally endowed with a greater abundance of one of the factors of
economic production (Land, Labour, Capital, Entrepreneurship)
International Product life cycle Theory
3 stages of a product cycle. Stage 1 product created in developed country, using new technology and serving a
market’s need. Stage 2 competitors start making similar products in other developed countries in response to local
needs. Stage 3, manufacturing of product become routine and costs needs to be reduced. Therefore, production moves
to developing countries.
Cluster Theory
Competitive cluster form when companies in same industry feed on each other’s know-how, pushing them to innovate
faster. They become efficient and innovative that they become world-class suppliers
Types of infrastructures which help facilitate transportation, communication and business exchanges.
1) Transportation infrastructure – allow goods to move efficiently within and between countries
2) Communication infrastructure – allows businesses to communicate clearly and quickly
3) Utilities infrastructure – allow businesses to sustain their daily operations
4) Services infrastructure – consist of banking, business services (logistics) and distribution channels to facilitate
business transaction
5) Legal and regulatory infrastructure – court procedure, intellectual property right protection and standard
infrastructure (safety, design and performance standards)
Transportation infrastructure
1) Ocean and water transportation
a. Water Draft (depth of water), air draft (bridge clearance)
b. Crane and port operations (space limitation, warehouse space & transportation within and out of the
port)
2) Air transportation (Airport facilities)
a. Runway (length of runway determines whether an airport can handle large cargo planes, number of
runway determines capacity)
b. Hours of operation, space and warehousing (storage facilities, accessibility)
3) Railroad transportation
a. Gauge (unique railroad track gauges to prevent rival armies from using)
b. Multi-modal (containers or truck trailers)
c. Road infrastructure (quality, congestion and civil engineering structures)
4) Other means of transportation
a. Self-collection station, drones and P2P deliveries (point to point)
Mode of entry to new market
Factors affecting the mode of entry
1) Size and growth of the market
2) Potential market shares of the exporter
3) Type of product and marketing strategy of the exporter (aftersales and return)
4) Willingness of the exporter to get involved (active or inactive exporter)
5) Characteristic of the importing country (infrastructure facilities)
6) Time horizon considerations (product life cycle & protection by patent)
Coordinating direct export strategies
- Standardize approach – uses single method of entry in all market, simplifies the management of international
sales
- Tailored approach – used a mixture of indirect/active exporting, decision depend on the characteristic of the
market and firm’s resource availability
Manufacturing at home
1) Indirect exporting – Exporter does not seek export sales, allows manufacturer to concentrate on domestic
market and leave exporting to experts
a. Export trading companies (ETC) – firm with offices in multiple countries that purchases goods and
resell them
 b. Export management corporation (EMC) – act as a representative for exporter abroad but never take
title to the goods, earns a commission on sales
c. Piggy backing – suppliers have to deliver product to main company’s subsidiary as well
2) Active exporting – exporter actively participates in finding potential market abroad, best option for large firms
with international experience
a. Agent – individual/small firm located in the importing country acting as a representative of the
exporter, do not take title of goods and earn commission from exporter
b. Distributor – Distributor located in importing country, purchase goods from exporter and resell them
for profit
c. Marketing subsidiary – foreign office of parent organization in the foreign country, wholly owned by
the parent company
Manufacturing abroad
1) Contract manufacturing
a. Contracted firm manufacture product and distribute through normal distribution channel. Applied
when there are barriers to entry or when transportation cost is too high.
b. Outsourcing to another company and using that channel to satisfy exporting country’s market.
2) Licensing & Franchising
a. Allow the use of patented technology/trade secret/brand name by paying royalty
b. Franchisor allow an entire business model to be used by franchisee in exchange for royalty
3) Joint Venture & Subsidiary
a. Firm jointly owned by two or three companies to share the cost of investing in a facility abroad.
Owners of JV are companies complementary to the JV products
b. Subsidiary is an independent company owned by exporting company established in foreign country.
Huge cost required to setup a subsidiary
Other issues of market entry
1) Parallel imports
a. Different pricing at different market due to exchange rates  Companies(entrepreneurs) purchase and
resell at the country lower than distributors to earn more profit
2) Counterfeit goods
a. Product which imitates a genuine good and deceive consumers (lower quality and cost)
3) Foreign trade zones
a. Goods can b shipped to FTZ without paying duties or being subjected to quotas
Haier’s case study

Year 1984 1996 1998 1999 2000 2001

Country Germany Indonesia and Malaysia USA Vietnam Italy
Philippine and
Bangladesh
Export Indirect export Active direct Active Active export Active Active export
manufacture export export export
at home
Mode of Contract Joint venture Joint Subsidiary Joint Joint venture &
entry manufacturing venture venture Acquisition
Why export Low brand Big consumer Big Biggest consumer Big Big consumer
strategies awareness, Low risk consumer, market, gain consumer market, entry to
low quality Same market similar to brand awareness, market, Europe,
developing china improve quality, developing understand the
market learn from other nation rules of the trade
unions
Investment low Middle Middle High Middle high
cost
Key take-away from Haier
1) Growing international firm takes time, should focus on improving quality in white goods industry
2) Reduce transportation cost and tariffs by manufacturing in or close to the market
3) Use local distributor because they are familiar with local market practices, environment and have no barrier in
language and culture
4) Use local staff and build R&D, leverage on them to expand into develop and developing markets
International terms of trade
1) Pre-carriage – domestic transportation in the exporting country
2) Main carriage – the international transportation between the exporting country and importing country
3) On-carriage – domestic transportation in the importing country
4) Risk – risks involved in international transportation
5) Custom clearance – clearance procedure in the importing country
Incoterm – facilitate the division of responsibilities between exporter and the importers
1) The type of product being sold (weight, volume, perishability, value, sensitivity to temperature changes)
2) Method of shipment
3) Ability and willingness of either the exporter and importer to perform the tasks involved
4) The amount of trust between parties
5) 7 incoterm rules that can be used for any means of transport, 4 incoterms only used for ocean transportation
E term – focus on where the goods originate
1) Ex-work (EXW)
a. Exporter must package the goods for international voyage with relevant documents to clear the goods
for exporting country & importing country
b. All responsibilities lie with the importer
F term – shipments where the seller does not pay for freight
1) Free carrier (FCA)
a. Recommended for multi-modal mode and containerized goods.
b. Exporter must package the goods for international voyage with relevant documents to clear the goods
for exporting country & importing country
c. When the goods are delivered to the carrier, loaded on the truck, exporter’s responsibility dissolves
2) Free on board (FOB, Ocean)
a. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange, pay for pre-carriage and load onto the ship (Only for non-containerized cargo)
b. Responsibility of exporter dissolves when the goods on board the ship in the port of departure
3) Free alongside ship (FAS, Ocean)
a. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for pre-carriage. (Only for non-containerized cargo)
b. Responsibility of exporter dissolve when goods are delivered to the port of departure, unloaded from
the mode of transportation
C terms – international seller does pay for the freight
1) Carriage paid to (CPT)
a. Recommended for road, air, ocean container transport
b. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for pre-carriage, main carriage and on-carriage to the city of destination
c. Responsibility of exporter dissolve when the goods deliver to first carrier in the exporting country
2) Carriage and insurance paid to (CIP)
a. CIP can be used for any mode of transportation (similar to CPT but comes with insurance)
b. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for pre-carriage, main carriage, on-carriage and insurance (110% of good’s value)
to the city of destination
c. Responsibility of exporter dissolve when the goods deliver to first carrier in the exporting country
 3) Cost and freight (CFR, Ocean)
a. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for pre-carriage, main carriage to the port of destination
b. Responsibility of exporter dissolves when the goods are on board the ship in the port of departure
4) Cost, insurance and freight (CIF)
a. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for pre-carriage, main carriage and insurance (110% of good’s value) to the city of
destination
b. Responsibility of exporter dissolves when goods are delivered on board the ship in the port of
departure
D term – focus on where goods are delivered to
1) Delivered at terminal (DAT)
a. Exporter must package the goods, provide relevant documents to clear customs in importing country
& arrange and pay for transportation to the terminal at which the goods are being delivered
b. Responsibility of the exporter dissolves when exporter delivers goods, unloaded from the mode of
transportation to the terminal
2) Delivered at place (DAP)
a. Exporter must package the goods, provide importer with documents necessary to clear custom,
arrange and pay for pre-carriage, main carriage and on-carriage to the city of destination.
b. Responsibilities of the exporter dissolves when the goods are delivered to the place of delivery, still
loaded on the mode of transportation
3) Delivered duty paid (DDP)
a. Exporter must package the goods, arrange and pay for pre-carriage, main carriage and on-carriage to
the city of destination, and clear customs in the importing country.
b. Responsibilities of exporter dissolves when the goods delivered to the place of delivery, still loaded
on the mode of transportation
Importance of incoterms
1) Cost efficiency – negotiating right incoterm allows you to control your shipping costs (reducing mark-up
quoted by seller)
2) Route optimization – sellers are to arrange delivery via most economical routing of cargo which may not be
align with your business timeline as compared to choosing your own shipping route.
3) Control & Visibility – Booking through your agent, allows you to have more control & visibility on real-time
status of the cargo and flexibility to change the route to suit business needs
4) Insurance – an option to procure the right insurance for your cargo which will become effective with the
passage of risk. When handled by foreign insurance, it may not be reputable insurer which may be challenging
when there’s loss & damage goods involved.
International Terms of payment
1) Characteristic of international payment
a. Credit information – difficult to find credit information in foreign country
b. Lack of personal contact – different physical locations, communication is not done face-to-face and
difficult to know the person
c. Collections are difficult and expensive – difficult to collect past due account, expensive to trace
d. No easy legal resource – no single court that has jurisprudence over international trade disputes
e. Higher litigation cost – legal proceedings more expensive & complicated than domestic case
2) Risk in international trade
a. Country risk & commercial risk
i. Country risk – the possibility of not being paid because customer’s country does not have the
foreign currency to pay the debt, political unrest, chances of strike and variation to foreign
exchange rates
ii. Commercial risk – individual firm not able (not willing) to pay due to numerous reasons.
Difficult to find reliable credit information on international firm (exporters can only buy
credit reporting on companies)
 b. Exposure – consequence of a loss to particular firm
3) Different methods of payment
a. Traditional methods (Cash in advance, open account, letter of credit, documentary collection)
i. Cash in advance – customer provide payment in advance before shipment of goods can take
place. “Risk free” to exporter  no concern of money collection, exchange fluctuation etc.
Recommended for doing business in few countries where fraud is rampant
1. high probability of losing sales
ii. Open account – exporter sends an invoice to customer and expect customer to pay it
promptly. Recommend method to be used with well-established or long term relationship
customers
1. low or nil probability of losing sales
iii. Letter of credit – documents from importer’s which promise to pay the exporter if the
importer does not pay. Credit worthiness of the bank is substituted for the importer, and the
exporter is protected. *LOC are documentary; the bank is only obligated to pay upon
presentation of these documents by the importer. Recommend method to be used where
exporter has no pre-existing business relationship with importer or importer country
considered to be risky.
1. Advising bank (a separate entity) comes into play when the exporter’s bank is not
familiar to advise a letter of credit issued by a bank with unfamiliar background
2. fairly high probability of losing sales
iv. Documentary collection – Exporter ask bank located in importing country to safeguard its
interests by not releasing the documents until importer satisfies certain requirements. Exporter
keeps control of the document until importer accepts the draft or makes payment
1. Sight draft – acceptance/payable at sight of document
2. Time draft – importer has to pay exporter a certain number of days after date of
acceptance
3. Date draft – importer has to pay exporter a certain number of days after date of
shipment for the goods
4. low probability of losing sales
b. Alternative methods (Purchasing cards, trade card, bank guarantees)
Sales contract Currency – the currency at which transaction takes place (exporter’s country or importer’s
country)
1) Risk of currency fluctuation – Speculative risk depending on which way the exchange rate fluctuates
a. Exporter’s currency – all risks are borne by importer and it has to determine the transaction risk
b. Importer’s currency – all risks are borne by exporter and it has to determine the transaction risk
c. Third country’s currency (Special drawing rights) – importer and exporter bear the risk of currency
fluctuation WOT their country currency
2) Risk of currency convertibility – pure risk, a payment in foreign currency cannot be converted into exporter’s
currency
a. Hard currency –can easily be converted into another currency (USD, EUR, Yen)
b. Convertible currency –can be converted to another currency
c. Soft currency – cannot be easily converted into another currency (North Korea Won, Zimbabwean)
d. Inconvertible currency – cannot be converted into another currency
Exchange rate quotations
1) Direct quotation – value of foreign currency expressed in units of the domestic currency
2) Indirect quotations – value of domestic currency expressed in units of foreign currency
1
Indirect quotaion=
Direct quotation
3) Spot exchange rate – exchange rate found in financial sites for a foreign currency for immediate delivery
(subject to interpretations that vary from country to country)
4) Forward exchange rate – exchange rates for a foreign currency to be delivered any number of days in future
(30, 90, 180 days projected forward exchange rates by banks)
 5) Currency options – purchase options to buy or sell a particular currency at particular price to protect against
fluctuations in the value of a currency in the future
a. Call option – firm agrees to buy a particular currency at particular rate on a given date
b. Put option – firm agrees to sell a particular currency at particular rate on a given date
Types of currencies
1) Floating currency – value determined by market forces and the exchange rate varies frequently
2) Pegged currency – value determined by a fixed exchange rate with another widely traded currency (HKD to
USD)
Factors affecting exchange rate
1) Purchasing power parity (PPP) – Big mac index, Foreign price/US price
2) Fisher effect – interest rates that business and individuals pay to borrow money should be uniform throughout
the world
a. Nominal interest rate = Real interest + inflation rate (of the country)
3) International fisher effect – Difference in spot exchange rate between two countries is a result of difference in
inflation rate (higher nominal interest = higher inflation rate, value of currency will decrease over time)
Transaction Exposure – fluctuation in exchange rate between signing contract and payment of contract
1) Forward-market hedging – utilize the forward market for currency to manage firm’s exposure
2) Money-market hedging – utilize the bank system in foreign country to manage firm’s exposure
3) Options-market hedging – utilizes the option market for currencies to manage firm’s exposure
International documents
1) Documentation requirements
a. Issuance of original document to several parties
b. Document filled correctly within specified time frame, each document has different requirements
c. Printed copy, electronically submission might not be possible
2) Invoices
a. Details of exporting goods, incoterm used, term of payment, HS code & description of goods
b. Pro forma invoice – quote provided by the exporter to importer for LOC
c. Consular invoice – commercial invoice provided by consulate of the country. Used as a trade barrier
d. Specialized invoice – simplify work of custom officers, form easily available and not a trade barrier
3) Export documents
a. Export license
i. An express authorization by a given country’s government to export specific product (focus
on 3 elements of goods; type of product exported, person or entity purchasing the product,
ultimate country of destination)
b. Shipper’s export declaration
i. Data-collection document that tabulate what products are exported from and to the countries
c. Certificate of end-use
i. In the event of sensitive export, ammunition or biohazardous product, which is to ensure that
product is used for acceptable purpose.
4) Import documents
a. Certificate of origin – document by exporter’s chamber of commerce to attest that goods originated
from the country in which exporter is located
b. Certificate of insurance – attest that the goods are insured during their international voyage
c. Certificate of inspection – independent inspection company to attest the goods confirm to the
description contained in the invoice provided by exporters
d. Certificate of free sale – document which attest that product exported conforms to all of the
regulations in place in the exporting country (quality standards)
e. Certificate of manufacturing – document by exporter’s chamber of commerce that goods were
manufactured in the country in which exporter is located
f. Certificate of analysis – independent laboratory attest that the goods conform to the chemical
description and purity of level contained in the invoice provided by exporter
 g. Certificate of certification – independent inspection company to attest goods conform to agricultural
standard of importing country
h. Phyto-Sanitary Certificate – certificate that attest the agricultural goods are free from pest/disease
and conform to the standards of importing country
i. Import license – express authorization granted by government of importing country to import
particular goods
j. Import form – administrative forms that have to be submitted by importer to clear customs
5) Transportation documents
a. Bill of lading – contract between buyer and shipper, receipt for the goods, certificate of title
i. Each contract of carriage can be negotiated (some include loading/unloading cost, some
don’t)
ii. LOC always call for a clean bill of lading
iii. Consignee will take ownership of the goods after transported to the port, ocean bill of lading
allows negotiation of this ownership
b. Charter parties – contract of carriage between carrier and shipper to utilize most or all of carrying
capacity of the ship to transport bulk commodities. Can be single or multiple trips or a specified
duration
c. Packing list – Document by exporter that lists out what a shipment contain, in great detail
d. Manifest – document generated by shipping company (carrier) which list all cargo on board the
transportation vehicle.
e. Shipper’s letter of instruction – document in which shippers spells out how it wants the carrier to
handle the goods while in transit (refrigerated cargo, position of goods, etc)
Types of service provided
Ocean Transportation
1) Types of service
a. Liner service – operates on a regular schedule travelling from one group of ports to another group of
pots
b. Tramp service – does not operate on a regular basis and is available to be chartered for any voyage
2) Size of vessels
a. Deadweight tonnage – measure how much weight a ship is carrying or can safely cary
b. Gross tonnage – total volume of a ship’s carrying capacity, measured as the space below deck
c. Gross registered tonnage – gross tonnage calculated to determine the fee that ship will have to pay to
use a canal
3) Types of vessel
a. Container ships – 60% of world trade, growing 7.5% annually since 1990
b. Roll-on/off ships – carries self-propelled cargo (livestock/self-loading)
c. Break-bulk ships – unusual size in bags, intense labour required to load and unload
d. Combination ships – cater to all sorts of cargo and contain their own board cranes to carry container
4) Flag
a. Flag of convenience - The laws are applicable on board the ship based on the flag on the ship (taxes &
regulations)
5) Non-vessel-operating common carrier – purchase space on a ship on a given voyage and sell this space to
companies which needs to ship cargo
6) Security
a. Pre-shipment inspection & notification (cargo manifest must be sent to custom border protection
24hours before arriving in US)
7) Freight charges
a. Arbitrary charge (cleaning fee)
b. BAF/FAF (fuel adjustment factor/surcharge)
c. CAF (currency adjustment factor)
d. CY (container yard to container yard charges)
e. CFS (container freight stations to container yard movement of cargo)
f. Chassis charge (charge for truck chassis in port of departure/destination)
g. THC (terminal handling charge or container yard charge)
Air Transportation
1) Types of service
a. Airmail service – small percentage of all shipments
b. Express air service – time-defined delivery, generally the next day or overnight
c. Scheduled airfreight services – operate a passenger aircraft and fetch cargo in the belly of the airplane
(combination of multiple)
d. Charter airfreight service – do not operate on a regular schedule and depend on demand, main purpose
to fulfil emergency shipments
e. Leased airfreight service – contract between owner of aircraft and user to reduce their capital cost and
to satisfy short-term demand fluctuations
2) Types of aircraft
a. Passenger aircraft – carries passengers and cargo (non palletized cargo)
b. Freighters – carries only cargo – palletize and ULDs
c. Combi aircraft – carries cargo on main deck and travel with passengers
d. Quick-change aircraft – flexible change from passenger to cargo by removing seats
3) Air regulations
a. International Air Transport Association (IATA)
b. International Civil Aviation Organization (ICAO) – implements standards for international aviation
practices
4) Freight tariffs
a. Weight of shipment
b. Volume weight of shipment (Dimensional weight), airline charge the higher of the two prices
5) Environmental issues
a. Heavy reliance on fossil fuel resulted in air pollution and heavy carbon emission
b. Noise pollution – impact on populations living near airports & freight movement takes place at night
6) air cargo security - Pre-shipment inspection & notification (cargo manifest must be sent to custom border
protection 24hours before arriving in US)
Multimodal Transportation
1) Truck transportation
a. Weight that can be placed in the truck
b. Hours that truck can operate
c. Size of equipment
d. Training that a driver must have
2) Rail transportation
a. Ownership of railroad (private or public)
b. Infrastructure standards (gauge, electrification, curves, etc)
c. Relationship between passenger traffic vs merchandise traffic
3) Intermodal – transportation of goods from one place to the other using multiple modes of transport tool
Packaging
1) Protects the goods during transport process
2) Allows the handling of goods without damage (always the responsibility of exporter regardless of incoterm)
3) Customer service strategy of the firm (good packaging reflects positively on the exporter’s firm)
4) 3-tiers of packaging – Primary, Secondary and Tertiary
Tertiary Packaging
1) Protect goods in transit from mechanical damage: breakage, crushes, dents etc.
2) Protect the goods from water damage: Sea water, rain, flood, container sweat etc
 3) Protect the goods from theft and pilferage
Retail/Primary packaging to be considered
1) Packaging size/design – accommodate to different consumer preferences
2) Legal requirement – weight of product must be kept below a threshold so it can be handled by hand
3) Storage & Transportation – standardize pallet size to dictate size of secondary packaging
Ocean packaging
1) Full-container-load (FCL)
a. Palletization of goods into different pallets (different region uses different size of pallet)
b. Inflatable dunnage to prevent the goods from moving around
c. Centred in the container and solidly braced against the wall if the FCL isn’t fully filled
d. Desiccant should be used to protect from ambient humidity
2) Less-than-container-load (LCL)
a. Boxed or crated with strong corners, protected from humidity with shrink wrap and well-marked
handling instructions
3) Break-bulk shipments
a. General cargo is placed directly into the hold of a ship (too big to fit into container)
b. Break-bulk cargo must be packaged so that it can be handled at all steps of the voyage
c. Labour intense and time-consuming to load/unload the cargo
d. International plant protection convention (IPPC) mandates fumigation (chemical treatment of wood)
to prevent insect infestation
4) Bulk cargo
a. Loading and unloading with continuous method such as vacuum pumps, conveyor belts, pipes etc
b. Cargo that is placed in the holds of the ship without packaging
Air Packaging – secondary packaging not appropriate for air shipment & commercial marking make the goods an
open target for thieves
Road and Rail packaging – Similar to ocean LCL packaging, emphasize on braces & dunnage for transporting of
goods
Packaging Security practices
1) Tamper-proof seals on all FCL shipments
2) Measures designed to hide the nature of goods being shipped (making it seem anonymous)
3) Measures designed to keep shipment information confidential
Types of Cargo
1) Dangerous goods – flammable, explosive, or toxic goods
a. Container should be shipped above deck and abide by the shipment rules of International Maritime
Organization (if by ocean) or International Air Transport Association (IATA)
b. Declaration of IMDG code (International Maritime Dangerous goods code)
2) Refrigerated goods – goods that demand particular care and specialized packaging services
a. Refrigerated containers which are self-powered or powered through the ship’s electrical system
Custom clearance
1) Duty determination – the amount of tax paid on an imported good.
a. Type of goods (classification)
i. Every product has international 6-digit code to determine product’s tariff, specific rules of
interpretation (section  chapter  heading altogether)
b. Value of goods (valuation)
i. Duty collected based on value of goods (amount billed by exporter to importer’s invoice)
ii. The use of incoterm (CIF or CIP where landing value includes insurance vs DAP where the
cost of on-carriage and insurance should be deducted from dutiable amount)
 iii. Goods imported in US are valued on FAS or FCA basis, or value of goods as they leave
exporting country. Receive goods via CIF and CIP should deduct cost of international
transport & insurance from invoice to determine dutiable amount
iv. Comparative method – Compare identical or similar goods imported in similar quantity
v. Deductive method – estimate price of similar goods within 90 days of importation in
importing country using normal mark up
vi. Computed or reconstructed value method – calculate the manufacturing cost, customary
expense and a reasonable amount of profit
vii. Method of last resort – well-informed custom official determines the value of goods
c. Country of origin (rules of origin)
i. Substantial transformation
ii. Change in HS code classification
2) Tariffs rates – associated with HS classification category for different types of country
a. Duty – variation of tax depending on the type of HS classification of product
b. Dumping – exporters selling their product at a low price to gain market shares in the importing
country
c. Punitive duty – specific tax for specific product due to preferential treatment
d. Border traffic tax – imposing tax on all cross-border goods
e. Safeguard tax – impose tax to protect footwear industry against foreign competition (can be other
industry)
f. Temporary protection tax – impose a sudden tax as a form of short-term protectionism against export
country
g. Value-added tax – sales tax collected at the point of entry in the country, final consumer of the
product actually pays the tax
3) Non-tariff barriers
a. Absolute quotas – limit and set by importing country’s government on the quantity of specific
commodity to be imported in a year
b. Tariff-rate quotas – importing country places a two-tiered tariff rate, upon exceeding the quota, the
second tier tariff sets in
c. Pre-shipment inspection – perform by independent companies to determine the goods are of sufficient
quantity and quality to be shipped to importer country. PSI becomes non-tariff barrier when they
become too frequent and cumbersome
4) Custom clearance process
a. Required marking
i. Products must be labelled with country of origin (for manufacturing)
b. Merchandise visas
i. For importing countries with quotas, exporting countries need to have a monitoring system to
allow these goods to enter
c. Custom brokers/bonds – independent firm representing the importer with experience of dealing with
custom effectively. Custom bond, a sum of money deposited with custom, with custom broker as
guarantor and the duty will be paid from the custom bond if it is not paid on time
d. Duty drawbacks – tax break granted by some countries to exporter who are using imported parts in
products they export
e. Custom standards
i. Reasonable care – set of behaviour that expect importers to be cleared quickly and keep
custom inspection to minimum
ii. Informed compliance – set of training and performance, if importer found compliant, the
number of checks will reduce, allowing minimal delay at entry. It lowers cost, as merchandise
is cleared quickly
5) Foreign Trade Zone – goods can be shipped to FTZ without paying duties or subjected to quotas. Goods are
subjected to tax when they leave FTZ and enter the country
International logistics for competitive advantage
1) Communication challenges
a. Communicating effectively and accurately – communication through impersonal fashion (e-mail, fax,
and letters), vocabulary is clear and unambiguous, units should be metric and culturally sensitive
 b. Ease of learning the language - English has become “everyone’s second language” because it is
relatively easy to learn
2) International English (written)
a. Native speakers should make the meaning of communication absolutely clear to the non-native
speaker
b. Always assume that person will rely on a dictionary for some words to understand
c. Always proofread carefully and avoid all grammatical and spelling errors
d. Always make sure that quantitative information (dates, currencies, etc) can be understood without
doubt
e. Always use simple and short sentences
f. Never use idiom that are sports/military-related as they are rarely understood

3) International English (spoken)

a. The vocabulary should be limited to correct and accurate terms (eliminate fillers and local idiomatic)
b. Sentence should be short and contain only one idea (less information to remember before entire
meaning of the sentence)
c. The speed at which the sentences are spoken should be slower
d. Repeating a sentence does not mean repeating it louder, repeat it with different vocabulary
4) Metric system – measurement system that is officially followed by almost all the countries, a standard
measurement on the package used in transportation. Use the measurement that are conventional in the country
of the importer
5) Cultural sensitivity – communications and interactions are made in a culturally-sensitive way
a. Forms of address – addressing each other formally/informally
b. Work culture – large divide between work and private life (assume they are separated)
c. Speed at which people operate – others favour delay to demonstrate, some prefer to be quick.
Advisable to mimic the response time received from the importer
d. Work day – the way people organize their workday determines when it is appropriate to make contact
6) Specific advice – international logistics can use several strategies to allow their company to gain competitive
advantage
a. Term of payment – confident of importer paying for goods  open account, if unsure of the ability
of importer to pay  letter of credit & credit insurance policy, more secure methods of payment will
decrease the probability of sales
b. Choice of currency – determine the most important hedging strategy for particular transaction, using
importer’s currency enable multiple quotes (especially when importer has little international
experience)
c. Use of incoterm – exporter should offer either DAP or DDP for customer-friendly option, DAT or
FCA to shoulder the shipment responsibility
d. Document preparation – accurate and timely document preparation and delivery ensures smooth
transfer of goods, information should be reflected in first contract, pro forma invoice, and be
communicated through documents
e. Packaging – good packaging requirement by exporter will help in smooth transfer of goods. Good
shape and labelling, crates & boxes prevents and reduce damaged goods, as well as, mishandled
shipment
Strategy and strategic management
Organizational strategy
1) Corporate strategy – overall purpose and scope of the organization, guide strategic decision-making
2) Business unit strategy – how business compete successfully in market, decisions about products & markets
3) Operational strategy – narrow in focus, operational issues such as resources, processes and people
Strategy formulation process
1) Strategy formulation (developing a supply chain strategy)
a. Assessment of the business’ current situation
i. Understand the business context and strategy, define the role of supply chain, identify and
prioritize improvement opportunities
 ii. Develop detailed plans to achieve goals, conduct regular performance review and executing
plans to achieve results and lastly monitoring the progress and making necessary adjustment
b. Vision of the business in a couple of years’ time
c. Mission and purpose statement, corporate values and beliefs
d. Identify key strategy and major focus areas & defining strategic action plans
i. Business’ competitive requirements: Innovation, reduced time to market, responsiveness,
service excellence, cost leadership, high quality, flexibility, reliability
ii. Supply chain drivers responsible for business competitive edge, Supply and demand by
consumers and suppliers.
iii. Efficient supply chains – Economy of scale, capacity utilization (low Demand & Supply
uncertainty)
iv. Responsive supply chain – flexible to changing, built to order (low supply uncertainty, high
demand uncertainty)
v. Risk hedging supply chain – risk pooling of safety stock and inventory (low demand
uncertainty, high supply uncertainty)
vi. Agile supply chain – combine the strength of responsive and risk hedging supply chain (high
demand uncertainty and high supply uncertainty)
2) Implementation
a. Less than 10% of effectively formulated strategies are implemented, reasons for failure: failure to
define objectives correctly, failure to coordinate & obtain employee commitment, poor
communication etc
3) Evaluation
a. Plans to achieve objectives from SWOT analysis must be articulated with appropriate measures (KPI)
i. Objective must be SMART (specific, measurable, achievable, realistic, and time-bound)
ii. Focus on the different parts of supply chain (network integration, reverse logistics etc)
Technology and innovation in global supply chain
Shipment visibility – the ability of parts/components/products in transit to be tracked from manufacturer to their final
destination. This allows data to be available to all stakeholders, including the customers.
Tracking technology
1) Universal Product Code (UPC) – consist of 12 numerical digits that are uniquely assigned to each trade item
which allows fast reading using big machine scanners or hand-held scanners. Commonly used in retail
supermarket stores, warehouse and logistic delivery (Downside: require to be in sight)
2) Radio-frequency identification (RFID) – electromagnetic field to automatically identify and track tags
attached to objects. Expensive to implement as compared to barcode
3) QR code – trademark for a type of matrix barcode. Fast scanning by any mobile devices, used on shipment
labels (UPS and DHL allow customized shipment label for customers) and is easy to use and self-print. QR
Code also used for promotion (link-directed)
Internet of things (Impact on global supply chain) – Connecting the unconnected through broadband internet
1) Operation efficiency
a. Traffic and fleet management
b. Resource and energy monitoring
c. Connected production floor (easy management of facilities in terms of production)
2) Safety and security
a. Equipment and employee monitoring
b. Health monitoring and physical security
c. Physical security
3) Customer experience
a. Connected retail (Internet virtual try-on concept which allows consumers to preview the products
without having to go down to the physical store front)
b. Customer recognition and context-aware offers (algorithm-based marketing)
Self-Driving Vehicle (SDV)
 1) Technology overview
a. Navigation
b. Situational analysis
c. Motion planning
d. Trajectory control
2) Regulations, public acceptance & liability
a. Regulation and on road approval
b. Public acceptance and ethical difficulties
c. Liability – Shift from drivers and vehicle owners to manufacturers
3) Implications for logistics
a. Warehousing operations – connectivity between autonomous vehicle and technological gadgets
b. Outdoor logistics operation – takes self-driving vehicles beyond closed environment of warehouse
c. Line haul transportation – Autonomous driving reduce the number and severity of accidents
d. Last mile delivery – reduce the complexity of last-mile delivery (from operation’s perspective)
Last mile delivery
1) Self-collect stations – DHL pack station and Singpost Pop station
2) Drones – amazon prime and google project wing
3) Point to point (P2P) Deliveries – UberRush
Reverse logistics – Traditionally designed to handle product flow in single direction, product return and waste
management requires product flow back from customers to suppliers/manufacturers  to reduce wastage, reverse
supply chain
1) Part of return management (Receipt  sort and stage  return processing  return analysis  support
operations)
2) From point of consumption/intermediate point back towards origin or away from the supply chain
3) Recapture value or properly dispose of goods
Returns management
1) Avoidance – analysing returns, determining the causes of product returns and implement strategies to
minimize the return request (product design – more stringent control & quality check)
a. Measuring vendor performance in terms of product failures
2) Gatekeeping – the screening of return request & products, guidelines to make reverse flow efficient. Manage
the insertion of products into the reverse chain
3) Disposition – recycling, remanufacturing, refurbishing and removing products to waste sites or landfill.
Decisions to be made carefully to reduce the lost value in the reverse flow logistics
a. Types of returns – Manufacturing (raw materials), Distribution (Product recall, damage), Customer
(Warranty return, not satisfactory)
b. Return to vendor for refund, sell as new (repackaging required) or dispose of in landfill
4) Trade-off between the cost of conducting quality control of manufactured product against cost of warranty
a. Management of return policies and procedures
b. Repair, remanufacturing, refurbishment and upgrading of products
c. Contracting of third party service providers to handle reverse logistics activities
Reasons for return
1) Refuse of items upon delivery or items are undeliverable
2) Excess or wrongly delivered items
3) Damaged, malfunctioning or defective items
4) Items reached the end of marketing period while still unsold
5) Consumer returns due to buyer’s dissatisfaction
6) Product recall and warranty returns

Cost category Forward logistics Reverse logistics

Transport Lower bulk rates Higher cost per unit
Inventory-holding Generally higher Low holding cost
Obsolescence Result of bad inventory management Higher cost as product less likely to sell
 Collection Distribution from DC High cost of special arrangement
Sorting Standardized Inspection cost
Handling Low cost (unitised) High cost (single units)
Refurbishment & repackaging Non-existent Variable and often applicable
Book value Little change, except with Always below market value of new
obsolescence product

Information management of reverse logistics – special information requirement of reverse logistics cannot be
handled by ERP, WMS and TMS
1) End-to-end information system should support: Warranty and return management, Recall management, depot
repair and management, Regulatory compliance management and business analytics and reporting

Logistics and environment – Reduction of carbon footprint through various strategies

1) Closed-loop supply chain – forward and reverse logistics activities combined into single system aiming to
have zero-waste supply chain, maximise reuse, recycling and composting of material. Lastly return products
to manufacturer at end of useful life
2) Use of renewable source of energy for manufacturing process (solar panel/hydroelectric power)
3) Redesigning products or reconfiguring the way services are provided
4) Optimise the distribution network to minimise the distance travel to make deliveries
Green supply chain & logistics
Positive with respect to company bottom-line
1) Better brand image (perceived by the consumers)
2) Greater sustainability
3) Lower cost - long term material usage reduction
4) More grants for green project (greater tax savings form government)
5) Less legal implication
Negative with respect to company bottom-line
1) High investment capital – equipment cost
2) Lack of necessary skills and expertise to manage green supply chain
3) Longer return on investment – difficult to quantify the benefits of invested capital
4) Potential misalignment of strategy – corporate strategy and environmental issue in conflict (profit-driven vs
sustainability)
5) Different standards worldwide & higher risk
Green procurement
1) Suppliers green record and utilizing of green materials – easier compliance with environmental regulations,
company can avoid expensive local permit application for waste disposal
2) How procured material will affect carbon footprint in the supply chain (location from where raw materials are
sourced) – keeping up with competitors, shifting towards a more sustainable resource as a form of investment
3) Possible recycled material substitutes – promote environmentally responsible products and services 
improve environmental and social performance (amongst consumers)
Challenges of green procurement
1) Lack of clear definition – procurement professionals are unware or struggle to define “environmentally
preferable” products.
2) Integration into management systems – requires consistent management system to ensure consistent
application of environment initiatives. Different people have different definitions of “green products”
3) Changing the “only cost” mind set – profit driven mentality to sustainability
Green logistics – reduce trips and carbon emission
 1) Newer fuel-efficient vehicle, truckload and vehicle fill optimization
2) Fleet management – lower cost and better utilization of fleet
3) Route optimization – lower cost and better utilization of fleet
4) Reverse logistics – increase customer loyalty and brand value (CSR, non-damaging to environment)
Green packaging
1) Over packaging result in the following: Wastage, excessive cost, resource overuse and misuse, environmental
degradation due to landfill
2) Reduce packaging, reduce packaging, recycle packaging, reform packaging
Carbon footprints – the total amount of greenhouse gases produced to directly and indirectly support human activities,
usually expressed in equivalent tons of carbon dioxide
1) Carbon offset – reduction in carbon dioxide or greenhouse gases made in order to compensate for or to offset
emission made elsewhere (tree planting)
2) Carbon trading – buying and selling permits and credits to carbon dioxide emission (European Union
Emissions trading system EU ETS), not resolving the situation but the blame is re-allocated to other parties