MULTINATIONAL LOGISTICS MANAGEMENT

HOW DO INTERNATIONAL LOGISTICS

DIFFER
FROM DOMESTIC LOGISTICS?

THE LOGISTICS SYSTEM (OR PIPELINE)

The Procurement
(or Supply) System
Raw Material
Supply Points

Raw Material Storage

Movement/Transportation

R
A
W
M
A
T
E
R
I

A
L
S

The Operating System

The Distribution System

Manufacturing

Movement/Transportation

Finished Goods Storage

Movement/Transportation

Markets

Movement/Transportation

STORAGE

PLANT #1

WAREHOUSE

STORAGE

PLANT #2

WAREHOUSE

STORAGE

PLANT #3

WAREHOUSE

Physical Supply Materials Management

Physical Distribution Marketing Logistics

Flows Within the Logistics Pipeline

Flow of Information

Function

Forecasting
Order Processing
Finished product transport
warehouse to customer
Finished product inventory
control
Distribution center warehousing
Transportation from plant to
distribution center
Packaging
Product Planning
Plant Storage
Production material control
Raw material storage
Raw material transportation
Raw material inventory control
Procurement

Flow of Material

Key Decisions in Logistics System Design

Major Components
Procurement

Order Processing
Inventory Policy
Transport Policy
Customer Service Policy

Facilities Network

Issues/Decisions
Degree of centralization
Supplier characteristics
Multiple vs. single sourcing
Degree of backward integration
Order cycle design
Information flows
Degree of automation
Coverage level
Form/Location of inventories
Transport modes
Utilization
Degree of forward integration
Frequency of delivery
Order communication
Inventory coverage levels
Order selection methods
Degree of centralization
Number of echelons
For each:
Number of facilities
Location
Scale
Layout
Product/process specialization
Links between facilities:
Information flows
Sourcing Patterns

THE TWO FACES OF LOGISTICS

TACTICAL

BROAD

SHORT TERM

QUALITATIVE

QUANTITATIVE

LONG TERM

DETAILED

STRATEGIC

BASIC STRATEGIC ALTERNATIVES

FOR MULTINATIONAL FIRMS IN
LOGISTICS MANAGEMENT
PLAN BUSINESS AROUND GEOGRAPHIC AREAS OR COUNTRIES
(MULTIDOMESTIC COMPANIES)
PLAN BUSINESS AROUND PRODUCTS (GLOBAL COMPANIES)

Basic Strategic Alternatives for Multinational Firms and

their Implications for Logistics Management
Multinational Firms
Tend to Plan Business
Around Geographic Areas
or Countries When:
Variations in customer needs for products
or services from country to country are:
Import restrictions on raw materials are:
Economies of scale in production are:
Restrictions on monetary exchange are:
Differences in cost of labor from one
country to another:
Potential economies form coordinated
planning of logistics are:
The strength of managements bias toward
decentralization is:
This will tend to produce a logistics management
effort that is:

Multinational Firms
Tend to Plan Business
Strategies Around
Products When:

Large
Stringent
Small
Stringent

Small
Liberal
Large
Liberal

Small

Large

Small

Large

Strong

Weak

Decentralized by
country
Not globally
coordinated
Less visible

Centralized by
product
Globally
coordinated
More visible

INTERNATIONAL VS. DOMESTIC LOGISTICS

RISKIER & MORE COMPLEX
ATTENTION PAID TO CULTURAL, POLITICAL, AND ECONOMIC FACTORS
INTERPERSONAL MANAGEMENT TASK MORE DIFFICULT:
MULTIPLE PLAYERS
HOME OFFICE
INTERNATIONAL BUSINESS PARTNERS
OFFICIALS IN CENTRAL AND LOCAL GOVERNMENT
WORKERS IN THE VENTURE
INVENTORY COSTS HIGHER
WHY?
PIPELINES LONGER & SLOWER PIPELINE INVENTORY
UNCERTAINTY (POLITICAL AND PRODUCTION)
PRODUCT PROLIFERATION
PILFERAGE AND RISK

MORE SKUs

SAFETY STOCK

INV. OF F.G.

CARRYING COST

INTERNATIONAL VS. DOMESTIC LOGISTICS

TRANSPORTATION MORE DIFFICULT AND COSTLIER
MULTIPLE TRANSPORTATION MODES
INTERNATIONAL TRANSPORTATION: OCEAN AND AIR CARRIAGE
DOMESTIC TRANSPORTATION: RAIL AND TRUCK
MANAGER HAS TO DEAL WITH:
NEW INSTITUTIONS, NEW TERMS, COMPLEX DOCUMENTATION AND
INTERMEDIARIES
NEED OF CONSOLIDATION

PLANNING EFFORT

(LARGE ECONOMIC VESSELS)

SLOWER AND COSTLIER SERVICE, MORE FREQUENT STOCKOUTS

INTERNATIONAL FACILITIES NETWORK MORE DIFFICULT TO CONTROL:
MANY LANGUAGES, CUSTOMS, LABOR NORMS
LACK OF INFRASTRUCTURE

DIFFICULT COMMUNICATION

(2 YEAR WAIT TO GET A TELEPHONE!)

ACCESS TO RAW MATERIALS AND LOCAL MARKETS