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CHAPTER 14

Global Logistics
Strategies
The Global Logistics 14-2 a

Management Process
1. What are the unique characteristics of each national market?
Environmental What characteristics does each market have in common with
analysis other national markets?
2. Should the firm cluster national markets for logistics operating
and/or planning purposes?
3. Who should make logistics decisions?
4. What are our major assumptions about target markets? Are they
valid?
5. What are the customers service needs of the target markets?
6. What are the characteristics of the logistics systems available to
our firm in each target market?
Planning 7. What are our firm’s major strengths and weaknesses relative to
existing and potential competition in each target market?
8. What are our objectives, given the logistics alternatives open to
us and our assessment of opportunity, risk, and company
capability?
9. What is the balance of payments and currency situation in target
markets? What will be their impact(s) on our firm’s physical
distribution system?
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
The Global Logistics 14-3
14-2 b

Management Process (cont.)

10. How do we structure our logistics organization to optimally


Structure achieve our objectives, given our skills and resources?

11. Given our objectives, structures, and our assessment of the


market environment, how do we develop effective operational
Plan
logistics plans? Specifically, what transportation, inventory,
implementation packaging, warehousing, and customer service strategies do
we have for each target market?

12. How do we measure and monitor plan performance? What


Controlling the steps should be taken to bring actual and desired results
logistics program together?

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Guidelines for Developing a Global 14-4
14-3

Logistics Strategy

• Logistics planning should be integrated into the


company’s strategy.
• Logistics departments need to be guided by a clear
vision and must measure output regularly.
• Import/export management should try to ensure
integrated management of all elements of the
logistics supply chain, from origin to destination.
• Opportunities to integrate domestic and international
operations should be pursued to leverage total
company volumes with globally oriented carriers.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Aspects 14-5
14-4

of Global Logistics

• Working capital
• Inventory
• Credit
• Investment in building and
equipment
• Accommodation of merchandise
adjustments

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
How a Letter of Credit Works 14-6
14-5

1) Seller asks buyer 2) Buyer asks its bank 3) After approving 4) Seller’s bank either
for letter of credit to issue L/C in buyer’s credit line, adds confirmation
(L/C). accordance with buyer’s bank (guarantees
seller’s terms. notifies seller’s payment to seller)
bank that it has or simply advises
issued L/C. seller that L/C has
been issued.

5) Seller makes 6) Seller’s bank 7) Buyer’s bank 8) On receipt of


shipment, presents examines and examines and funds, seller’s
documents in approves approves bank credits
accordance with documents, then documents. Once seller’s account. (If
L/C’s terms. sends them to approved, it debits a confirmed L/C,
buyer’s bank by buyer’s account seller’s bank
air mail or courier. and wires money would have paid
to seller’s bank. seller after Step 6.)

Source: Adapted from James Aaron Cooke, “What You Should Know about Letters of
McGraw-Hill/Irwin Copyright
Credit,” © 2001
Traffic by The McGraw-Hill
Management 29, no. 9 (Sept.Companies, Inc. All rights reserved.
1990), pp. 44-45.
Warehousing Questions 14-7
14-6

• Does the market for the organization’s


product justify a local warehouse?
• Is good warehouse labor available?
• How quickly do customers need products
delivered?
• Are third parties an option?
• What are the relevant costs associated
with public versus private warehousing?

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
NAFTA’s Effect on U.S. Exports 14-8
14-7

to Canada and Mexico

160
140
120
100
80 Canada
60 Mexico

40
20
0
1993 1994 1995 1996 1997 1998
*Figures in $U.S. billions.

McGraw-Hill/Irwin Copyright © 2001 Source:


by The U.S.
McGraw-Hill
DepartmentCompanies, Inc.
of Commerce All rights reserved.
(1999).
Strategies of Leading-Edge 14-9
14-8

Companies as a Result of NAFTA

• Customer service
• Manufacturing
• Channel design
• Sourcing
• Distribution
• Sales and marketing
• Organization

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Factors that Determine the 14-10
14-9 a

Attractiveness of Individual Markets


in Eastern Europe
• Degree of country indebtedness.
• Development of the banking system.
• Level of productivity of industries and
individual companies.
• Quality of workforce.
• Condition of infrastructure.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Factors that Determine the 14-11
14-9 b

Attractiveness of Individual Markets


in Eastern Europe cont.

• State of technology
• Depth of managerial skills.
• Supply of production materials.
• Profit repatriation regulations.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.