CUSTOM AND FREIGHT

International Logistics
FOWARDING
MANAGEMENT
BSM32024
Learning Objectives

• To discuss macro environmental influences on international

logistics
• To explain documentation as well as terms of sale and methods
of payment for international shipments
• To distinguish among the unique activities of international trade
specialists
• To examine transportation and inventory considerations in
international distribution
• To introduce you to the Logistics Performance Index
 International Logistics Key Terms

• Cargo preference • Export packers

• Certificate of origin • Gross world product
• Commercial invoice • Import quota
• Embargoes • Incoterms
• Export management • International freight
company forwarders
• International logistics
 International Logistics Key
Terms

• Letter of credit
• Load centers
• Logistics performance
index (LPI)
• Macroenvironmental
influences
• Methods of payment
 International Logistics Key Terms

• Open skies agreement • Shipping conferences

• Shipper’s export • Short-sea shipping
declaration (SED)
• Tariffs
• Shipper’s letter of
instruction (SLI)
Internationa
l Logistics
• International logistics
• logistics activities associated
with goods that are sold
across national boundaries.
 International
Logistics

• International logistics occurs

when:
• A firm exports a portion of a
product made or grown
• A firm imports raw
materials
• Goods are partially
assembled in one country
and then shipped to
another, where they are
further assembled or
processed
 International Logistics

• International logistics occurs when:

• The firm is global in outlook and sees almost all nations
as being markets, sources of supply, or sites for markets
or for assembly operations
• Because of geography, a nation’s domestic commerce
crosses foreign borders.
Macro environmental
Influences on
International
Logistics
• Macroenvironmental influences
• refer to the uncontrollable forces
and conditions facing an
organization and include cultural,
demographic, economic, natural,
political, and technological factors.

Source:
[Link]
ts/[Link]?dLetter=M.
 • Political factors
• Political restrictions on
international trade can take a
variety of forms
• Tariffs
• Nontariff barriers
• Import quota
– Limits the amount
or product (either
in units or by value)
that may be
imported from any
one country during
a period of time
• Embargoes
─ the prohibition of
Macro environmental trade between
particular countries

Influences on International
Logistics
 Macro environmental Influences on
International Logistics
• Political factors
• Degree of federal government in cross-border trade
• Balance of payments
─ system of accounts that records a country’s international
financial transactions1
• Subsidies
• Cargo preference rules

1
Ibid
Macro environmental
Influences on
International
Logistics
• Economic factors
• Currency fluctuations
• Market size
• Income
• Infrastructure
• Economic integration
 Macro environmental Influences on
International Logistics

• Cultural factors
• Religion
• Values
• Rituals
• Beliefs
• Languages
Macro environmental Influences on
International Logistics
Macro environmental Influences on
International Logistics
 Macro
environmental
Influences on
International
Logistics
How is
International
Logistics
Different
from/Same
as Domestic
Logistics?
 International Documentation

• Flow of documentation is as much a part of the main logistical flow

as the flow of product
• Domestic shipments typically only require several pieces of
documentation
• Export shipments typically require approximately 10 pieces of
documentation
• Cross-border trades can require more than 100 separate
documents
This material in this section is drawn from Donald F. Wood, Anthony Barone, Paul R. Murphy, and Daniel L. Wardlow, International Logistics, 2nd
1
International Documentation
 International Documentation

• Terms of sale involves:

• Parties working within the negotiations channel
• Looking at the possible logistics channels
• Determining when and where to transfer the following between buyer and seller:
• Physical goods
• Payment for the goods, freight charges, and insurance for the in-transit
goods
• Legal title to the goods
• Required documentation
• Responsibility for controlling or caring for the goods in transit, i.e. livestock
 International Documentation

• Terms of sale for international shipments are commonly referred

to as Incoterms.
– Developed in the 1930’s and is periodically revised
– Current version – Incoterms 2010 reflects rapid expansion of global trade with
focus on improved cargo security and new trends in cross-border
transportation1

[Link]—Incoterms 2010.
1
 International Documentation

• Incoterms 2010 involve two key changes

– Organizing the terms by modes of transport
• Characterized as Group 1
• Applies to any mode of transport
– Using the terms in both international and domestic transportation
• Characterized as Group 2
• Applies to sea and inland waterway transport only
Transportation
Considerations
in
International
Logistics
 Logistics Performance Index (LPI)

• Relatively new international logistics concept (2007)

• Updated in 2010
• Created in recognition of the importance of logistics in global trade
• Incorporates data for approximately 155 countries
Logistics Performance Index
(LPI)

• Measures a country’s performance across six

logistical dimensions

• Efficiency of the clearance process by

border control agencies, including
customs
• Quality of trade- and transport-related
infrastructure
• Ease of arranging competitively priced
shipments
• Competence and quality of logistics
services
• Ability to track and trace consignments
• Timeliness of shipments in reaching
the destination within the scheduled
or expected delivery time

1
The material in this section is based on
Logistics Performance Index,
[Link]
Components of an Advanced Transport and Trade
Facilitation System
 Promotion of Cross-border Flows

A. Deregulation of Transport Services

- Removal of cabotage
- Privatization of transport infrastructure
- Reform of commercial & legal frameworks
- Reinvention of the customs function
 Promotion of Cross-border
Flows
B. New Business Logistics Systems
(Lower costs, minimum inventory, quick market feedback & expanding market
reach)
C. Better Financial Coordination
(New payment systems, lower risk)
• D. Use of IT and other knowledge technologies to speed up cross
border flows
 Factors
Underlying the Transportation
Innovations

Transformatio Logistical
Innovations and the

n of the
Globalization
'New'
& Competitive
Forces
Transportation
Enterprise

Transport Public Policies of

Enterprise Trade & Transport,

Deregulation,
Liberalization &
Drive for
Corporate
Advantage
Competition

Changes in
Emerging Firm &
Knowledge Society: Industry
Changing Nature of Structure
Work & Work Force

Technical & Social Business Factors

Factors

Source: Chatterjee, 2001 Adapted from OECD, 1996

 Post 1990, Transport Logistical Structure

• The Logistical Channel

• Just-in-Time (JIT)
• Quick Response Services
• Containers tracked around the world & ‘visible’ in transit
• Old paper system on cargo replaced by Electronic Data
Interchange (EDI) and e-mail
 Transport Logistical Structure

• Freight flow faster, cheaper and more reliable

• New types of Transport & Logistical Services
• (e.g. reliability & timeliness )
• - strategic outsourcing of a firm’s distribution function
• - flexibility in destination choices
• - additional production value and strategic competitive
• advantage
• - operation of distribution & warehousing facilities
• - where to source intermediate goods
 Transport Logistical Structure

• Management of value chains of other firms

• Moving into e-commerce
• Consumer demand oriented “pull” system
The Evolution of Novel Freight Service Attributes,
Logistical Systems, and Economic Benefits

Transport and
Information
Technologies
Transport
Transport Process
Service Innovations
Innovations

Transport Logistics
Policy Reforms - Travel costs Transport sector
- Ware housing productivity
- Inventory stock effects
New Freight
and its reorganization
Transport
Service
Attributes
Transport
Infrastructure
Transport - Using Sectors
Investments
Lower Costs, Changing Production Processes,
and
New Services, Market Expansion, Economies
of scale and Scope

Source: Lakshmanan and Anderson (2002)

 Convergent
Forces Leading
to the Rise of
the
Globalization
and Dynamic
Cities
Features
of
Internatio
nal
Logistics
 Features of International Logistics

Global Competition
• Multiple Market Access & Global Scale Economies  Allows New Strategic
& Competitive Options

Currency Fluctuation: F Risk x

• Economic Performance, measured In multiple currencies  Accounting &

Economic Exposure

Organizational Complexity & Diversity

• Need to Manage Complex and Diverse Demands across Distance, Time,
Language & Cultural Barriers
 Features of International Logistics

 Cross-border Requirements for Packaging, Recycling,

Infrastructure, etc. Features of International Logistics
• Many developing countries have good international seaports (to get
primary goods out) or airports (for national pride), but have poor
internal systems (to get products to consumers)
• Some variations are on purpose: keep out foreign goods or invaders

 Lower Costs + Increased Reliability and Integration

 Outsourcing  Need for Different Intermediaries
 Benefits of global trade

• Economic benefits: lower labor cost, lower priced manufacturing components.

E.g., labor- vs. capital-intensive industries

• Economies of scale

• Foreign market sales potential; first entrant/mover advantages

• Industry specialization: Japan – consumer electronics; Germany – machine tools