MULTINATIONAL LOGISTICS MANAGEMENT

HOW DO INTERNATIONAL LOGISTICSDIFFERFROM DOMESTIC LOGISTICS?

STORAGE

THE LOGISTICS SYSTEM (OR PIPELINE)

STORAGE

STORAGE

PLANT #1

PLANT #2

PLANT #3 WAREHOUSE

WAREHOUSE

WAREHOUSE

C

B

A

Raw Material Storage Manufacturing Finished Goods Storage

Movement/Transportation Movement/Transportation Movement/TransportationMovement/Transportation

Raw Material Supply Points

RAW

MATERI

ALS

Markets

The Procurement(or Supply) System

The Operating System The Distribution System

Physical Supply Materials Management Physical Distribution Marketing Logistics

Flows Within the Logistics Pipeline

Flow of Information Function Flow of Material

•Forecasting•Order Processing•Finished product transportwarehouse to customer•Finished product inventorycontrol•Distribution center warehousing•Transportation from plant todistribution center•Packaging•Product Planning•Plant Storage•Production material control•Raw material storage•Raw material transportation•Raw material inventory control•Procurement

Key Decisions in Logistics System Design

Major Components Issues/Decisions

Procurement Degree of centralizationSupplier characteristicsMultiple vs. single sourcingDegree of backward integration

Order Processing Order cycle designInformation flowsDegree of automation

Inventory Policy Coverage levelForm/Location of inventories

Transport Policy Transport modesUtilizationDegree of forward integration

Customer Service Policy Frequency of deliveryOrder communicationInventory coverage levelsOrder selection methods

Facilities Network Degree of centralizationNumber of echelonsFor 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 ALTERNATIVESFOR MULTINATIONAL FIRMS INLOGISTICS MANAGEMENT

•PLAN BUSINESS AROUND GEOGRAPHIC AREAS OR COUNTRIES(MULTIDOMESTIC COMPANIES)

•PLAN BUSINESS AROUND PRODUCTS (GLOBAL COMPANIES)

Basic Strategic Alternatives for Multinational Firms andtheir Implications for Logistics Management

Multinational Firms Multinational Firms Tend to Plan Business Tend to Plan Business Around Geographic Areas Strategies Around or Countries When: Products When:

•Variations in customer needs for productsor services from country to country are: Large Small•Import restrictions on raw materials are: Stringent Liberal•Economies of scale in production are: Small Large•Restrictions on monetary exchange are: Stringent Liberal•Differences in cost of labor from one country to another: Small Large•Potential economies form coordinated planning of logistics are: Small Large•The strength of management’s bias towarddecentralization is: Strong Weak•This will tend to produce a logistics managementeffort that is: Decentralized by Centralized by

country productNot globally Globally coordinated coordinatedLess visible 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) SAFETY STOCK

•PRODUCT PROLIFERATION MORE SKUs INV. OF F.G.

•PILFERAGE AND RISK 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

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•ACCESS TO RAW MATERIALS AND LOCAL MARKETS