A

PROJECT REPORT

ON

“International Logistics”
A detailed study done and Submitted in partial fulfillment of the
requirement for the award of degree of Bachelor of Business
Administration (BBA) under Bharati Vidyapeeth’s University
School of Distance Education Pune.

Submitted by

Mr. Suraj Jagannath patil

Year: 20 – 20

Under the guidance of

Prof. PRIYETA PRIYADARSHINI

Bharati Vidyapeeth’s University School of Distance Education,

Centre Navi Mumbai Sector 8, CBD-Belapur, Navi Mumbai –
400614

1
 DECLARATION

I hereby declare that the project titled “International logistics”

completed and written by me. This has not been previously submitted in any

form for the award of any Degree or Diploma or other similar title of this or any

other University or examining body. If it is found copied, at any stage the

University can take any action it deemed fit.

Place: SURAJ JAGANNATH PATIL

Date:

2
Founder

Dr.Patangrao Kadam

M.A., LLB., Ph.D.

GUIDE’S CERTIFICATE

This is to certify that the project report titled

“International logistics” is successfully done by Mr. SURAJ
JAGANNATH PATIL in partial fulfillment of the requirement for
the award of degree of Bachelor of Business Administration
(BBA) - International business
under Bharati Vidyapeeth University School of Distance
Education, Pune during the academic year 2018-2021 through
Bharati Vidyapeeth University School of Distance Education,
Navi Mumbai.

Date:

Place:

Prof. PRIYETA PRIYADARSHINI

Project Guide

3
 ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report on

““International logistics” I take this opportunity to owe my thanks to all my

faculty members for their encouragement and able guidance at every stage
of this report.

I also wish to thank my project guide Dr. Anjali Kalse for sparing her
precious time, valuable guidance and her contribution towards the success
of this project is unmatched.

I express my gratitude to all those who have directly or indirectly helped me

to make this project.

I wish to thank my parents who have always supported me and appreciated

my work wholeheartedly and been my inspiration.

SURAJ JAGANNATH PATIL

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 ABSTRACT

Development of international trade is driven by international

logistics and management and the provision of the global
supply chain. The ultimate objective of global supply chain
management is to link the market place, distribution network,
manufacturing/processing/assembly process, and procurement
activity in such a way that customers are serviced at a higher
level yet lower cost. Overall, this has introduced a new breed
of management in a computer literate environment operating
in a global infrastructure. Addressing this complex topic, Alan
Branch's new book fulfills two clear objectives: to provide a
concise, standard work on the subject, written in lucid
language that embraces all the ingredients of a notoriously
complex subject with a strategic focus to extol best practices
and focus on all areas of the industrial and consumer sectors
and their interface with changing international market needs.
Until now, no book dedicated to international logistics and
supply chain management was available. Practically-oriented,
this book features numerous case studies and diagrams from
logistic operators. An ideal resource for management students,
academics and managers who need a succinct treatment of
global operations, Branch's book skillfully illustrates his ideas
in practice. It is a book which should be on the shelf of every
practitioner and student of the subject.

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 CONTENTS
1. Introduction to International logistics
2. Evolution, Nature, Scope and Factors of International Business
3. Goals of International Business, Problems of International Business
4. International Logistics Strategy
5. The evolution and future of logistics
6. Concept and objectives of logistics
7. Development of International Logistics
8. General structure and elements of logistics
9. International logistics for the firm
10. International logistics for the firm
11. Chain of International Trade Logistics
12. Functions of International Logistics (Inbound & Outbound functions)
13. Target Function of International Logistics
14. International Commercial Terms (Incoterm)
15. Types of Export Documents
16. Cargo Insurance
17. Trade-off analysis
18. Forms of Logistics Management
19. Types of Logistics
20. The Importance of International Logistics
21. The Role of International Logistics and Why They Are So Economically Important
22. Indian Logistics Industry: Current Scenario and Future Outlook
23. Case Study
24. Advantages of International Logistics
25. Disadvantages of International Logistics
26. Conclusions
27. Refences

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TABLE OF CONTENT (DAIGRAM, TABLES, CHARTS:

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Introduction to International logistics

International means that it dealt with transactions involving individuals or firms in

more than one nation. Logistics mean the organized movement of goods, services,
and sometimes people.

Logistics was originally a military term encompassing the processes to supply

combat and troop support. In trade, logistics handles the physical movement of
products between one or more participants in the supply chain.

When we speak of international logistics systems, we mean the complex web of

carriers, for-warders, bankers, information and communication companies, traders
and so on that facilitate international transactions, trades and movements of goods
and ser-vices.

Global supply chain management refers to the complex integration of processes

necessary to manage materials from their point of origin through manufacturing
and shipment to the final consumer (or beyond in the case of recycling).

The foundation of logistics function is based mainly on Transportation by Road,

Rail, and Air & Sea.
Maritime trade has existed since times immemorial. History is replete with the
major maritime routes that connected continents across the globe and enabled
trade between them. Harbours and waterways have flourished in strategic
locations in all countries attracting trade and commerce.
Global trade is dependant 80% on sea route than air route, simply for the fact
that air route is far more expensive and is used only in case of light weight
cargo, perishable cargo, and priority shipments or in other conditions where
shipping would not be possible.
Shipping trade is characterized by shipping companies who own vessels and
specialize in the transportation of certain types of cargo like General Cargo,
Containerized cargo, bulk commodities carriers, oil tankers, gas tankers, OD
cargo carriers, etc. Normally the so-called mother vessels ply on the main
shipping route across the continents traveling through Pacific or Atlantic oceans
and calling on countries from point to point. Mother vessels are bigger vessels
with higher cargo carrying capacity. Some of the main routes normally

8
traversed by mother vessels are the Far East to Europe and Mediterranean,
Europe to America East Coast and the Gulf of Mexico, Far East Australia to
South Africa, Intra Asia, Asia to the Middle East, and Europe to South Africa,
etc. The schedules in detail are announced in advance for each of the vessels.
The feeder vessels carry cargo from individual ports in nearby countries which
discharge the cargo at the port of calling to be transhipped on to the main vessel.
Thus, for example, a cargo originating in India bound for South Africa may
follow the route where cargo reaches one of the ports in Ceylon or Dubai even
Singapore in some cases and travels right up to Europe where in is further
transhipped on another vessel bound to South Africa. Likewise, the global
shipping trade lanes have certain gateways and lanes which they operate and in
turn are fed and supported by feeder lanes and vessels.
Shipping liner announces schedules of the vessels a few months in advance.
Freight forwarding agents book space on the vessels either based on estimates
or based on their pipeline orders. Depending upon the volume that the forwarder
is able to give and patronize shipping lines, they get to bargain and negotiate for
better rates. In general cargo, the shipments are made in FCL Containers. FCL
stands for Full Container Load. FCLs come in two sizes called 20 feet and 40
feet containers which refers to the length of the container. Each container has
fixed dimension and weight carrying capacity. FCL Containers are provided by
shipping lines to the freight forwarders who stuff the cargo and get the cargo
sealed after customs inspection which is then picked up and loaded on the ship
at the port.
An efficient transport and trade logistical system is a prerequisite for sustained
economic development for any country of the world. It is especially more
important for an emerging economy like India which has one of the highest
transactional costs of doing business in the world. The prime reasons of high
transactional cost in India’s foreign trade are poor logistical infrastructure in
India, poor logistics management practices, and lower use of technology in
logistical operations. Logistical advantages and efficient transport system also
play an important role in promoting the development of the backward regions
including country hinterland and help in effective economic integration of such
areas into mainstream economy by opening them to trade and investments. In a
liberalized set-up, an efficient transport network, including improvements in
virtual as well as physical infrastructure and overall efficiency in logistical
system of the country, become all the more important in order to increase
productivity and enhance the competitiveness of the economy in the world
market.

9
Evolution, Nature, Scope and Influences of
International Business
During the latter half of the 1960s, economic analysts became increasingly
aware that the primary engines of growth in many modern industries took the
form of multinational companies. The ready identification of this now
commonplace finding had been rendered less obvious at the time by the
prevailing Keynesian economic methodology. Because this placed the focus of
analysis upon national economies it had tended to obscure the growth in
importance of extra-national entities such as multinational companies.

Even within the realm of microeconomic theory, where models of monopoly

and oligopoly had been developed to account for an observed increase in the
size of firms, this departure from the traditional assumptions of perfect
competition represented a response to growing empirical evidence of rising
industrial concentration in product markets which were measured in relation to
national output and consumption patterns.

Yet in Britain at least, by the end of the 1960s many of these very markets were
served, and in some cases dominated, by the local manufacturing subsidiaries of
firms whose headquarters lay abroad. Given this observed tendency for
economics to adopt nationally-defined categories of analysis, it is perhaps not
surprising to discover that much of the early work relating to the operation of
multinational corporations characterized them as a quintessentially American
form of business enterprise.

Evolution International Business

10
Early forms of foreign direct investment:
Because they transcended national boundaries, no data had ever been
systematically collected on the growth of multinationals over time. To help
rectify this omission a vast research project was initiated at the Harvard
Business School during the 1960s, under the direction of Raymond Vernon,
which traced the development of 187 U.S.-based firms (from the Fortune 500 of
1963/4) that controlled six or more foreign manufacturing subsidiaries.

To this was subsequently added data on 209 of the most important non-U.S.
industrial corporations which, at one time or another, had controlled at least one
foreign subsidiary. Altogether, the study collected information on a total of
28,318 foreign subsidiaries and it remains the single most comprehensive
statistical account of the growth of multinationals. The main statistical results
from the Harvard study were published by Vaupel and Curhan (1974) and a list
of the firms covered by the survey is given at the end of this chapter.

The findings of the Harvard study provided a useful guide to the origins of
many of the world's most important multinational companies. However, by
adopting the methodology of projecting backwards from the present, the study
acted to obscure the fact that other, less enduring, forms of FDI had developed
during the nineteenth century.

More recent research has 4 clearly illustrated that FDI predated multinational
corporations. Moreover, the Harvard database was limited to the study of
manufacturing subsidiaries and did not include companies whose activities
involved, for example, the provision of services. Thus, the study captured the
development of manufacturing multinationals but excluded many other forms of
FDI. Until quite recently, it was assumed that foreign investments which
preceded the rise of multinational companies invariably took the form of
portfolio investments.
It is certainly the case that, prior to World War One, many foreign governments
took advantage of the London capital market to raise the funds they needed for
social overhead capital, and that the foreign investors who subscribed to these
issues did so without in any way assuming responsibility for their management.
However, a great many companies were created in the U.K. before 1914 whose
operations occurred abroad but which were in practice ultimately controlled by
directors based in Britain.

For example, a study by Houston and Dunning (1976) showed that of the
13,500 enterprises quoted on the London Stock Exchange in 1914, 3,373

11
operated exclusively or mainly abroad, of which 78 per cent were registered in
the U.K. Wilkins (1988) has termed these enterprises "free-standing"
companies. Unlike conventional multinationals, they were set up as operations
with no parallel organization in Britain itself.

Although most of the shareholders who subscribed to these joint stock

companies did not exert control over the company's activities (for which reason
they have in the past been incorrectly categorized as portfolio investments),
their affairs were nevertheless frequently managed by a board of directors based
in Britain. Hence, given this form of control, free-standing companies did
constitute a genuine form of British foreign direct investment. Box 2.1 gives
some examples of typical free-standing companies.

Although each of the individual free-standing companies was a nominally

independent concern, a number of informal linkages existed between groups of
them, drawing them into 5 clusters. Particularly important in this respect were
financial institutions in the City of London which developed from commission
agencies (supervising the trade of other firms for payment of a commission) into
investment houses who promoted a series of free-standing companies during the
nineteenth century.

These investment houses, as Chapman (1985; 1992) has explained, provided

international networks which linked together sources of capital, from London
and elsewhere, with investment opportunities abroad. It was this ability to
connect together domestic sources of capital and expertise (comprising both
technical expertise and financial management skills) with influential contacts
abroad that enabled investment groups such as Finlay & Co., Butterfield and
Swire, Antony Gibbs & Co. and De Beers to emerge as strategic actors in the
growth of FDI during the nineteenth century.

Although these institutions were international in their scope, the organizational

structures that they used to manage their overseas assets were clearly different
to the conventional form of multinational corporation that developed in the
U.S.A. Table 2.1 lists some of the major British-based investment groups that
were operating around the turn of the nineteenth century.

FDI and managerial capitalism:

Portfolio investment and free-standing firms were both forms of foreign
investment in which capital was raised in a piecemeal, rather than strategic,
fashion. The individual firms remained relatively small-scale businesses and did
not develop particularly sophisticated forms of management or extensive
12
internal organizations; family and other personal connections persisted, and
mutual trust in partners and colleagues remained important as an organizational
mechanism.

In America, however, the process of rapid industrialization after 1870 brought

forth organizational methods and structures which were quite novel. Beginning
with the organization 6 of the railways which, often being single track, required
precise administrative co-ordination, American firms emerged as pioneers in the
creation of large-scale corporations utilizing modern management hierarchies.
(Chandler, 1977, 1990) This structures delegated responsibility for the
functional, day-to-day management of production, sales, purchasing, transport
and finance to a newly-created group of non-shareholding middle managers,
separating control from ownership, and created a new social group of
professional businessmen.

Above these middle managers stood the company's top management, for whom
long-term corporate strategy and growth became the principal concerns. These
new corporate structures were particularly suited to the needs of high-volume
production industries generated by the cluster of technical innovations of the
late 19th century which constituted the second industrial revolution.

The new technologies which engendered this revolution led to rapid changes in
many fields of production. They transformed the processing of tobacco, grains,
whisky, sugar, vegetable oil, and other foods. They revolutionized the refining
of oil and the making of metals and materials - steel, nonferrous metals
(particularly copper and aluminum), glass, abrasives and other materials. They
created entirely new chemical industries that produced man-made dyes, fibers,
and fertilizers.

They brought into being a wide range of machinery: light machines for sewing,
agricultural and office uses; and heavier, standardized machinery, such as
elevators, refrigerating units, and greatly improved printing presses, pumps and
boilers. (Chandler, 1990:62) To be successful, these innovations in technology
required massive investments in plant and machinery. In addition, the potential
benefits of high-volume production also required complementary investments in
management and marketing expertise.

It was by bringing together all three of these crucial forms of investment

(production, management and marketing), within the context of the
organizational structure of the corporation, that American firms gained 7 the
market positions which enabled many of them to expand from national to
multinational concerns from around 1870 onwards. The corporate structures of
American business adapted readily to multinational operations.

13
 They had already developed expertise in distribution and marketing across the
rapidly expanding market of the United States and these skills could be adapted
to other markets. Moreover, their organizational capacity could be replicated in
their foreign subsidiaries, giving them the necessary structure to effectively
manage the process of vertical integration in those industries where this was an
important source of competitive advantage.
By the time of the outbreak of World War One, many more American than
European firms had developed their own production and marketing
organizations abroad; an observation which remained valid until at least the
1960s.

Britain's Foreign Investments, 1865-1914:

The period 1815-1914, stretching from the end of the Napoleonic Wars to the
outbreak of World War One, is sometimes referred to as "Pax Britannica" to
signify the overwhelming supremacy that British naval power held throughout
the nineteenth century.

This military advantage enabled Britain to administer and enforce the safe
maritime passage of goods globally and, where necessary, to force reluctant
trading partners such as the Chinese to allow access to foreign vessels for the
purposes of trade.

The Napoleonic Wars also saw the City of London emerge as the unrivalled
financial center of world trade. Indeed, economic historians such as Rubenstein
(1993) and Cain and Hopkins (1993a,1993b) now argue that it was the financial
and allied service industries which developed in the South East of England,
more than the manufacturing industries of the North of 8 England, that served to
shape Britain's economic destiny, especially from 1850 onwards. British banks
were amongst the earliest of its multinational enterprises, as Jones (1993) has
demonstrated.

The institutions of the City were of vital importance in promoting sterling as the
linchpin of the free trading system. London's financial institutions provided the
sources of funding and the necessary services of accepting and discounting bills
of exchange which combined to enable the smooth functioning of the

14
international trading system, while the ability of the Bank of England to provide
convertibility of sterling to gold at a fixed rate meant that holding assets in
sterling accounts in London offered investors both security and a rate of
interest.

As a result, sterling became increasingly adopted as the currency of

international trade. Thus, the gold standard regime which supported the growth
of trade during the second half of the nineteenth century was essentially a
sterling standard, centered on London and underwritten by Britain's mercantile
and military preeminence. Underpinning its position of hegemony in
international trade was the fact that Britain had entered the nineteenth century as
the world's first industrial economy.

This industrial breakthrough could not have been achieved without the
resources and markets provided by the international trading system; the raw
cotton required by Britain's expanding textile firms, for example, simply could
not be grown in the British climate. As the century progressed, therefore, the
majority of economic interests in Britain outside of agriculture became ever
more closely identified with the policy of free trade.

Trading patterns developed that were increasingly based on an international

specialization of production, as conjectured by Ricardo's model of comparative
advantage, which saw Britain develop as an exporter of manufactures and an
importer of primary commodities. Britain's position in the world economy
meant that much of its early, portfolio-type 9 investment abroad was directed
towards the infrastructure required to support primary production activities.

Figures cited by Pollard (1985), reproduced in Table 2.2, show that around 1870
Britain's capital investments abroad, which at that time are estimated at
about,1,000m., focused on transportation, utilities and public works. Many
foreign government authorities, both national and provincial, used London
during the 19th century to raise finance.

By the outbreak of the First World War, these foreign investments had roughly
quadrupled in value compared with 1870, but the composition had changed
somewhat. Infrastructural services remained of primary importance, but lending
to foreign governments had become relatively less common while investments
directly into production (agriculture, mining and manufacturing) accounted for
an increased share.

Table 2.3 looks at the changing geographical dispersion of Britain's foreign

investments and shows that, between 1860 and 1913, the relative share of
capital exports going to Britain's emerging industrial rivals in Europe and

15
America fell (from 52 per cent to 25 per cent) while investments in the largely
primary producing regions of the British Empire and Latin America grew in
significance.

Clearly, a considerable portion of the investment flowing out from Britain at

this time was portfolio in nature. However, the recognition of the role of free-
standing companies has led analysts to reconsider the extent to which Britain's
foreign investments were actually direct in nature. Recent work by Corley
(1994) has suggested that in the period immediately before the outbreak of
World War One as much as 45 per cent of Britain's foreign capital holdings may
have been direct investments.

Of this 45 per cent, Corley suggests that about 35 per cent probably took the
form of free-standing quoted companies and the remaining 10 per cent were the
overseas investments of those domestic manufacturers who constituted Britain's
first group of multinational companies. 10 How did the nature of Britain's
foreign investment vary across these three constituent elements (portfolio, free-
standing and multinational)?

A breakdown by industry sector of the capital invested abroad by the group of

free-standing companies is provided in Table 2.4 for 1907, 1910 and 1913.
Compared with the portfolio investments given in Table 2.2 it suggests that
these direct investments showed a greater disposition towards extractive
industries (mining and oil) and market-based manufacturing activities (food
processing, metal manufacturing and other market-based activities), which
together account for somewhere in advance of 30 per cent of the total.
The geographical breakdown of the free-standing foreign direct investment
given by Corley, excluding railway investments, suggests that for the year 1910
the bulk of this capital (56 per cent) was invested in the countries of the British
Empire. Latin America received 16 per cent, China, Japan and Thailand 7 per
cent, while the industrialized United States and Europe received only around 10
per cent each.

Most of the free-standing investment in railways, however, which is excluded

from this breakdown, was directed towards Latin America. With regard to
Britain's early multinational manufacturing companies, evidence from the
Harvard study (Stopford, 1974) and from studies by Nicholas (1982) and Jones
(1986) all indicate a greater tendency for these firms to invest in the developed
markets of Europe and the United States compared with their free-standing
counterparts.

Another point of contrast between the pioneering multinationals and the free-
standing companies lies in the fact that the investments of Britain's early

16
multinational firms displayed a greater tendency to be trade replacing rather
than trade-enhancing. Jones (1986:8-10) found that the most important factors
encouraging foreign investment among the group of firms covered by his study
were the attractions of the foreign market, the need to avoid tariffs or other
forms of host government pressure, and the desire to maintain patent protection.

In contrast, the study finds little evidence 11 that the companies were investing
abroad in order to exploit lower labor costs for their operations. British
manufacturing firms investing abroad before 1914, were thus seeking an
alternative method of access to foreign markets to that offered by exports. The
relative cost of factors of production does not seem to have been the primary
consideration.

Interestingly, although three-quarters of the foreign investments by domestic

manufacturers studied by Jones involved the creation, rather than the
acquisition, of a foreign subsidiary concern, the majority of foreign investments
by these pioneering multinational companies (71 per cent) took the form of joint
ventures; either with local producers, other British firms or third-country
partners. Weaknesses in management, the spreading of risks, and the perceived
need to deflect nationalistic criticism all seem to have contributed to this
tendency of British firms to favor joint ventures, along with the fact that many
of the companies engaged in foreign expansion were relatively small scale.

The relative smallness of British companies also seems to have encouraged a

greater tendency towards the use of international product licensing during the
years before the First World War, when compared with American firms. Table
2.5 lists some of Britain's leading manufacturing multinationals which had
overseas production in operation before the First World War.

To sum up therefore, Britain's foreign investments on the eve of the First World
War embraced three distinct categories. First, portfolio investments, accounting
for at least one half of the total, were directed mainly towards trade-related
activities in the pre-industrialized world. Second, free-standing companies,
accounting for perhaps one third of the total of Britain's foreign investments,
were oriented more towards mining and utilities and, like the portfolio
investments, were based mainly in the British Empire and Latin America.

Since these investments were ultimately managed from Britain, they represented
the bulk (around three quarters) of Britain's foreign direct investment at this
time. The third category of foreign 12 investment, the overseas subsidiaries of
domestic firms, remained relatively small before the First World War,
accounting for perhaps as little as 10 per cent of Britain's total stock of foreign
investment.

17
These predominantly manufacturing investments showed a much greater
tendency to seek market opportunities in the industrialized regions of Europe
and the United States compared with the two other categories of Britain's
foreign investments.

Foreign investment from World War One to the Great

Crash:

In 1914, the era of international economic stability that had ushered in the rapid
expansion of FDI came to an abrupt and violent end. The immediate
consequences of the war in Europe for many of the multinational corporations
from the belligerent countries was that some of their foreign assets now lay in
enemy territory. In most instances, the ultimate result of this situation was a
process of repatriation.

The Anglo-American cigarette manufacturer BAT, for example, had acquired

substantial manufacturing capacity in Germany shortly before the war broke out
(Cox, 1989: 54).
During the conflict, the company was able to negotiate the sale of its 17 German
assets to the Deutsche Bank, one of the groups of large-scale German banks
which held interests in a range of industries. After the end of the war, BAT
received compensation totaling just over £1 million but did not reinvest in the
German economy until 1926.

Hence, one direct effect of the war was the nationalization of many foreign
subsidiaries. Whilst this seems mainly to have involved compensation, investors
with assets in Russia after the Bolshevik revolution of 1917 were less fortunate.
Indeed, the loss of the Russian market was a severe blow for many European
firms, notably those from Sweden, who had sought the potential market there as
a major location for their foreign activities.

The First World War proved to be a major setback for the international
ambitions of firms in Europe. Germany, in particular, was hard hit. During the
course of the war, German business interests were seized by the Allied nations,
and the assets sold off as part of the reparation payments.

Subsidiaries of German multinationals were sold off to domestic interests,

forming the basis for companies such as the English Electric Company of Great
Britain (formerly Siemens Brothers Dynamo Works) (Panayi, 1990) and

18
Sterling Drug of the United States (formerly the American subsidiary of Bayer)
(Chandler, 1990).

Threatened to the east by the rise of Bolshevism, stripped of its foreign

colonies, and forced to pay reparations by the Allies through the Treaty of
Versailles, Germany's foreign investments between the wars fell to negligible
levels when compared with the rapid growth before 1914. Elsewhere in Europe,
the period between the wars did witness the international development of some
major firms.

The Nestlé and Anglo-Swiss Condensed Milk Company grew rapidly and, by
1936, had acquired interests in more than 20 other companies in Europe, North
and South America, Australia and Asia (Humes, 1993). The international
expansion of the Dutch electrical giant Philips gathered pace after World War.

One when the need to secure inputs and the opportunities presented by the loss
of markets by German competitors led the 18 firm to engage in a policy of
vertical and horizontal integration that saw it organize affiliates across Europe
and in the U.S.A. (Sluyterman and Winkelman, 1993).

American multinationals and the postwar recovery:

Six years of global warfare, involving the occupation and seizure of assets
together with economic dislocation on an unprecedented scale, left even the
most robust of international 25 corporations in a precarious state by the end of
1945.

By and large, however, the western hemisphere managed to escape from the
destruction inflicted elsewhere, and American firms with investments in Latin
America were, certainly relative to European multinationals, enormously
strengthened as a result of the war. Moreover, the main bridgehead which these
firms had established in Europe, Great Britain, had remained allied and
unoccupied throughout the course of the conflict.

19
On these foundations, American corporations consolidated into the position of
world leaders across almost the entire range of advanced industries during the
1950s. The key to the success of American firms during this period lay in the
decisive lead which they had gained in technology.

The Second World War spurred technical progress across a wide range of
industries. Particularly important were advances in transport (notably the jet
engine) and communications, both of which served to make the operation of
international business far easier to manage in the post war period.

Also, after the war, a great deal of progress in electronics was achieved by
American firms, based upon the development of semi-conductors (and later
integrated circuits) which greatly stimulated the rate of product innovation and
heralded the start of the computer age (Auerbach, 1988: 298-310).

The postwar recovery also benefitted from the absence of the international
cartel agreements which had served to restrict competition and innovation
during the 1930s. Coupled with the liberal reforms in world trade ushered in
through the Bretton Woods agreements, the 1950s saw a restoration of
competition for market share between both domestic producers and foreign
firms in many product markets.
American producers, technically advanced and competitively more adept than
most of their European rivals, quickly increased their market presence in the
expanding markets of Western Europe. Beginning with exports, but finding
constraints on growth due to the shortage of dollars in Europe, many U.S. firms
were encouraged to replace this trade-led competition with overseas branch
plants, allowing them 26 both to service foreign markets and to promote their
goods more effectively.

Reflecting on his survey of American foreign direct investment in Europe in

the 1950s, Dunning (1983) has argued that, in the main, U.S. manufacturing
subsidiaries at this time were truncated replicas of their parent organizations
which, after a brief learning period, tended to operate with the minimum of
parental interference. Whilst this may still have been the case for its European
subsidiaries, it is important to note, as Chandler (1990) has pointed out, that
American corporations were also developing the more flexible multidivisional
structure which would enable them to effectively harness the advantages of
product diversification that their substantial commitment to research and
development had begun to generate.

As we will see later in the book, this role of technological leadership promoting
foreign investment by American firms was used by Vernon (1966) to develop
one of the earliest theories of international production based on the model of the

20
product life cycle. The growth of oligopolistic rivalry amongst U.S. firms was
also taken to be a cause of FDI. Knickerbocker (1973) noted a tendency for FDI
to be used as part of the competitive strategy of American firms against their
domestic rivals.

This oligopolistic reaction model of FDI argued that foreign investment by

firms within an industrial sector would tend to cluster at a narrow point in time
as rival firms in an oligopoly found themselves obliged to follow the lead of the
first-mover. Vernon and Knickerbocker's work provide examples of how the
American experience heavily influenced the development of theories of
international production in the 1960s.

The dominance of American firm in the early postwar growth of FDI and
international production in manufacturing is clearly indicated by the Bostock
and Jones (1994) study of inward FDI in Britain. Of the 376 new subsidiaries
identified in Britain between 1950 and 1962, 303 (81 per cent) represented
investments by U.S.-based firms. Given that U.S. firms had exerted almost the
same degree of foreign penetration in Britain between the wars, it is hardly 27
surprising to find commentators identifying multinational corporations as an
effectively American phenomenon during the 1960s.

International firms in depression and war:

The growth of Japanese influence in Asia and that of U.S. firms in Latin
America which occurred during the 1920s represented the beginning of a
process of economic regionalism that was a major characteristic of international
business between the wars and which came 21 increasingly to the fore after the
Great Crash of 1929.

The 1920s had seen the gradual reconstruction of the pre-war gold standard
(Britain restored sterling to gold in 1925) and this had been an important factor
in stabilizing the world economy, encouraging firms to engage once again in
international trade and investment. However, the structure was never as secure
after the war as it had been before 1914 (Aldcroft, 1977) and when, in 1929, the
Wall Street Crash provoked a financial crisis in the United States, the fragile
nature of the reconstructed order quickly became apparent.

By 1931, the system lay in tatters. The reconstructed gold standard suffered
from a number of structural weaknesses (Drummond, 1987). As was noted
earlier, one of the consequences of the First World War had been the emergence

21
of the United States as net exporter of capital. During the 1920s the U.S. ran an
almost permanent surplus on its current account and, as a result, built up large
stocks of gold.

In order for the fixed exchange rates of the gold standard to remain in parity,
indeed for the continued stability of the international economy as a whole, it
was necessary for America to continuously engage in foreign lending. One
result of this was that during the 1920s New York began to eclipse London as
the principal source of international investment funds.

However, much of this lending, upon which a number of European governments

relied for their financial stability, was short term and unreliable. The emergence
of New York as the de facto international financial center in the 1920s,
therefore, tended to increase the degree of international financial instability.
This became particularly clear when in 1928/9 the market for U.S. domestic
stocks boomed, squeezing out the funds required to support foreign issues and
threatening the stability of the international monetary system.

With the crash in October 1929, a great deal of short term American foreign
assets was repatriated. An international effort was made to revive foreign
lending from America in the wake of the crash, partly to counter the
deflationary pressures caused by the domestic liquidity 22 crisis. A recovery in
portfolio lending was engineered during 1930, mainly through the U.S.-
sponsored Young Plan.

But a crisis of confidence amongst private business had now been provoked by
the collapse in U.S. stock prices and the lending effort could not be sustained.
Indicative of this loss of commercial confidence is the contrast between
portfolio and FDI lending to the countries of Latin America and Asia, Africa
and Oceania during 1930.
While United States portfolio lending to the "periphery" rose between 1929 and
1930 (from $71 million to $225 million for Latin America, and from $17
million to $77 million for Asia, Africa and Oceania), direct investment declined.
In 1929 U.S. firms had invested $205 million in businesses in Latin America, in
1930 this fell to only $41 million; the comparable figures for Asia, Africa and
Oceania (taken as a whole) were $65 million and $14 million, respectively
(Kindleberger, 1986: 122).

The sectors which witnessed the main retreat in FDI by American firms during
the world 23 depression were mining and agriculture. This fall in investment
was undoubtedly linked to the collapse in the value of primary commodities as a
consequence of the sharp decline in world demand between 1930 and 1932.

22
Nevertheless, as the 1930s progressed U.S. firms continued to make
investments, notably in Latin American industries, switching progressively from
export processing to domestic manufacturing (Abel and Lewis, 1985: 285). The
extent of the redirection of U.S. FDI in South America can be gauged from the
fact that in 1914 U.S. manufacturing-based FDI in South America accounted for
barely 2 per cent of the non-oil total invested in that subcontinent; by 1940 this
ratio had risen to 25 per cent (Wilkins, 1974: 31;182- 3).

The tightening conditions for international investment flows and the tendency
for these flows to become increasingly regionalized after the collapse in the
volume of world trade after 1929 was particularly marked in the case of Great
Britain. The policy of according Imperial Preference in trading relations
towards the nations of the British Empire hardened after the decision had been
taken to withdraw sterling from the gold standard in 1931.

Britain's foreign trade consequently became much more focused on these

Empire economies, together with the handful of foreign countries whose
currency remained linked to sterling, and who together with the Empire
countries formed the so-called Sterling Area.

Table 2.2: Percentage Distribution of British Portfolio Investment Abroad, 1865/73-1909/13

1865/73 1909/13
Agriculture 1.7 5.6
Mining 5.2 9.3
Manufacturing 0.7 4.8
Transportation 47.6 46.6
Utilities 5.5 6.4
Public Works 17.8 17.3
Other, incl. Defense 21.5 10.0
Fig:1.1
Source: Pollard, S. (1985) "Capital Exports, 1870-1914: Harmful or Beneficial?", Economic
History Review, 2nd Series, 38(4), Table 1

23
Table 2.10: Number of International Cartel Member Corporations by Country, 1937

Number of Participants
Indirect/ Partial
Country Direct Total
France (and colonies) 67 2 69
Germany 57 57
Great Britain 31 9 40
Switzerland 25 25
Holland 20 20
Belgium 20 20
Czechoslovakia 17 3 20
Norway 16 1 17
Sweden 16 16
Austria 15 3 18
Italy 15 1 16
Poland 13 2 15
Finland 10 1 11
Yugoslavia 9 1 10
Hungary 8 3 11
United States 8 3 11
Japan 2 2 4
Fig:1.2
Source: Kudō, A. and Hara, T. (1992) International Cartels in Business History, Tokyo:
University of Tokyo Press, p.3.
.

24
Nature International Business

 International Restrictions- In international business, there is a fear of the

restrictions which are imposed by the government of the different countries.
Many country’s governments don’t allow international businesses in their
country. They have trade blocks, tariff barriers, foreign exchange
restrictions, etc. These things are harmful to international business.

 Benefits to Participating Countries- It gives benefits to the countries

which are participating in the international business. The richer or developed
countries grow their business to the global level and they get maximum
benefits. The developing countries get the latest technology, foreign capital,
employment opportunities, rapid industrial development, etc. This helps
developing countries in developing their economy. Therefore, developing
countries open up their economy for foreign investments.

 Large Scale Operations-International business contains a large number of

operations at a time because it is conducted on a large scale globally.
Production of the goods at a large scale, they have to fulfill the demand at a
global level. Marketing of the product is also conducted at a large scale to
make them aware of the product. First, they fulfill the domestic demand and
then they export the surplus in the foreign markets.

 Integration of Economies-International Business combines the economies

of many countries. The companies use the finance, labor, resources, and
infrastructure of the other countries in which they are working. They produce
the parts in different countries, assembles the product in other countries and
sell their product in other countries.

 Dominated by Developed Countries-International business is dominated

by developed countries and their MNC’s. Countries like U.S.A, Europe, and
Japan all are the countries that are producing high-quality products, they
have people working for them on high salaries. They have large financial
and other resources like the best technology and Research and Development
centers. Therefore, they produce good quality products and services at low
prices. They help them to capture the world market.

25
 Market Segmentation-International business is based on market
segmentation on the basis of the geographic segmentation of the consumers.
The market is divided into different groups according to the demand of the
consumers in different countries. It produces goods according to the demand
of the consumers of the different market segmentations.

 Sensitive Nature-International Business is highly affected by economic

policies, political environment, technology, etc. It can play a positive role to
improve the business and can also be negative for the business. It totally
depends on the policies made by the government; it can help in expanding
the business and maximizing the profits and vice-versa.

26
Scope of International Business

The term international business was not popular two decades earlier. The
term international business has emerged from the term ‘international
marketing’, which in turn emerged from the term ‘international trade’.

 International Trade to International Marketing: Originally, the

producers used to export their products to the nearby countries and
gradually extended the exports to far-off countries. Gradually, the
companies extended the operations beyond trade. For example, India used
to export raw cotton, raw jute and iron ore during the early 1900s. The
massive industrialization in the country enabled India to export steel, jute
products and cotton garments during 1960s.India, during 1980s could
create markets for its products, in addition to mere exporting through
export marketing efforts to generate demand for Indian products like
textiles, electronics, leather products, tea, coffee etc. This process is true
not only with India, but also with almost all developed and developing
economies of the world.

 International Marketing to International Business: The

multinational companies which were producing the products in their
home countries and marketing them in various foreign countries before
1980s, started locating their plants and other manufacturing facilities in
foreign/host countries. Later, they started producing in one foreign
country and marketing in other foreign countries. For example, Uni Lever
established its subsidiary company in India, i.e., Hindustan Lever Limited
(HLL). HLL produces its products in India and markets them in
Bangladesh, Sri Lanka, Nepal etc. Thus, the scope of international trade
is expanded into international marketing and international marketing is
expanded into international business.

 Wide Scope: The scope of international business is much broader

involving international marketing, international investments, management
of foreign exchange, procuring international finance from IMF, IBRD,
International Finance Corporation (IFC), International Development
Association (IDA) etc., management of international human resources,
management of cultural diversity, management of international
production and logistics, international strategic management and the like.

27
 Inter-country Comparative Study: International business studies the
business opportunities, threats, consumer’s preferences, behaviour,
cultures of the societies, employees, business environmental factors,
manufacturing locations, management styles, inputs and human resource
management practices in various countries. International business seeks
to identify, classify and interpret the similarities and dissimilarities
among the systems used to anticipate demand and market products. This
system presents inter-country comparison and inter-continental
comparison. Comparative analysis helps the management to evaluate the
markets, finances, human resources, consumers etc. of various countries.
It also helps the management to evaluate the market potentials of various
countries. The study also indicates the degree of consumer acceptance of
the product, product changes and development in different countries.
Managements of international business houses can group countries with
similar features and design the same products, fix similar price and
formulate the same marketing strategies.

28
Factors of International Business
Various companies are involved in transacting their goods, services and capital
across the national borders and are affected by number of factors. various
restrictions are also imposed on companies that are transacting their business at
international level. various internal and external factors directly impact the
working of these business firms.
Various external environment factors directly affecting the working of large
MNCs include social conditions of economy, political and legal factors, etc.
However, internal factors can be controlled by the management team of
companies by taking various strategic initiatives.

Following is the detail discussion on various external factors that are affecting the working
of international corporations:

 Political factors: Various political factors affect the international factors.

Political factors such as changes in tax rates, policies and actions of
government, political stability of country, foreign trade regulations etc.
affects the working of an international business firm. Lack of political
stability in the country directly impacts the operations of business firm.
Also, various tax policies and government initiatives sometimes hinders the
expansion of business in other countries. Thus, effective political
environment of business influences the growth of business firm (Shaw,
2018).

 Economic factors: Economic factors relates to the economic system of

the country where the firm has its operations. Various economic factors
such as inflation rate, interest rate, income distribution, employment level,
allocation of government budget, etc., directly impacts the operations of
business firm (NDUNGU, 2012). Various economic factors such as
purchasing power of customers also determines the demand of various
products and services.

 Legal factors: Legal factors relate to the legal environment of the country
in which firm operates. Different laws prevail in different countries and
international business firms have to abide by the laws of each country.
Laws relating to age and disability discrimination, wage rates, employment
and environment laws affects the working of business firms. Along with
this, various international lending agencies affects the legal culture and
working policies of business firm.

29
 Social factors: Social factors such as education, awareness and trends and
status of people in the society affects the consumer behavior to purchase
various goods and services. Also, Social environment and culture such as
customs, lifestyles and values differ from country to country which further
directly impacts the international business.

 Environmental factors: Environment factors such as weather, climate

change, temperature etc. affects the business firm and the demand pattern
of various goods and services. increasing environment awareness has made
this external environment factor a significant issue to be considered by
business firms. Move towards environment friendly products and services
also has affected the demand pattern of various goods and services.

 Technical factors: Technological changes in the industry has both

positive and negative impacts on the working of business firms.
Technological changes and development of automated work processes
helps in increasing the efficiency of business processes. However,
technological changes also threaten the demand of various products and
services in the industry.

Fig:1.3

Above figure shows the corruption index in Australia:

30
Goals of International Business

 Expand Sales: Companies’ sales are dependent on (a) the consumers’

interest in their products or service and (b) the consumers’ willingness and
ability to buy them. The number of people and the extent of their
purchasing powers are higher for the world as a whole than for a single
country. Hence companies increase the potential market for their sales by
pursuing global markets. Thus, higher sales mean higher profits because of
economies of scale. So, increased sales are a major motive for a company’s
expansion into international business.

 Acquire Resources: Manufacturers and distributors also look for foreign

capital, technologies and information that they can use at home, to reduce
their costs. Sometimes, a company operates abroad to acquire something
not readily available in the home country so as to improve its product
quality and differentiate itself from competitors, potentially increasing
market share and profits.

 Minimize Risk: Companies seek out foreign markets to minimize swings

in sales and profits arising out of business cycle recessions and expansions
which occur differently in different countries.

 To Achieve Higher Rate of Profits: The basic objective of business is

to achieve profits. When the domestic markets do not promise a higher rate
of profits, business firms search for foreign markets that hold promise for
higher rate of profits. Thus, the objective of profit affects and motivates the
business to expand operations to foreign countries. For example, Hewlett
Packard in the USA earned 86.2% of its profits from the foreign markets
compared to that of domestic markets in 2007. Apple earned US $ 730
million as net profit from the foreign markets and only US $ 620 million as
net profit from its domestic market in 2007.

31
 Severe Competition in Home Country: The countries oriented towards
market economies since 1960s experienced severe competition from other
business firms in the home countries. The weak companies which could not
meet the competition of the strong companies in the domestic country
started entering the markets of the developing countries.

 Liberalization and Globalization: Most of the countries in the globe

liberalized their economies and opened their countries to the rest of the
globe. These change in policies attracted multinational companies to extend
their operations to these countries.

 To Increase Market Share: Some of the large-scale business firms

would like to enhance their market share in the global market by expanding
and intensifying their operations in various foreign countries. Companies
that expand internally tend to be ‘oligopolistic’.

32
Problems Faced by International Business

International marketing is not as easy as domestic marketing. International

marketing environment poses a number of uncertainties and problems. As
against, national markets, international markets are more dynamics, uncertain,
and challenging. Especially, cultural diversities and political realities in several
nations create a plenty of barriers that need special attention. In the same way,
geographical constraints cannot be totally undermined. Widespread terrorism
has created a new threat to international trade.

Though the world is advancing in terms of information technology, innovative

and superior methods of organizing marketing efforts (like horizontal
organisation, network organisation, virtual organisation), global efforts for
smooth international trades, and so forth, yet international marketing is not that
much easy to pursue, it has become a challenge to accept.

1. Tariff Barriers:
Tariff barriers indicate taxes and duties imposed on imports. Marketers of guest
countries find it difficult to earn adequate profits while selling products in the
host countries. Sometimes, to prevent foreign products and/or promote domestic
products, strategically tariff policies are formulated that restricts international
marketing activities. Frequent change in tariff rates and variable tariff rates for
various categories of products create uncertainty for traders to trade
internationally. Antidumping duties levied on imports and defensive strategies
create difficulty for exporters.

2. Administrative Policies:
Bureaucratic rules or administrative procedures – both in guest countries and
host countries – make international (export and/or import) marketing harder.
Some countries have too lengthy formalities that exporters and importers have

33
to clear. Unjust dealings to get the formalities/ matters cleared create many
problems to some international players. International marketers have to
accustom with legal formalities of several courtiers where they want to operate.

3. Considerable Diversities:
Different countries have their own unique civilization and culture. They pose
special problems for international marketers. Global customers exhibit
considerable cultural and social diversities in term of needs, preferences, habits,
languages, expectations, buying capacities, buying and consumption patterns,
and so forth. Social and personal characteristics of customers of different
nationalities are real challenges to understand and incorporate. Compared to
local and domestic markets, it is more difficult to understand behaviour of
customers of other countries.

In the same way, as against domestic markets, to design and modify marketing
mix over time for international markets seem more difficult. Market
segmentation, product design, pricing, and distribution need more information
and efforts. Promoting products in international markets is a formidable task.
Message preparation and execution in suitable media in international markets is
not easy game to play.

Language and religious diversities are the real challenge for international
business players. There are 6000 languages in the world. China (20%) is the
largest in term of native speakers, followed by English (6%), and followed by
Hindi (5%). Yet English is recognized as global business language.

English speaking countries can contribute the largest share (40%) in global
business. Religious diversities seem difficult to cope with as they determine
needs and wants of people. At present Christianity is the largest in the world

34
(1.7 billion), followed by Islam (1.0 billion), followed by Hinduism (750
million), and followed by Buddhism (350 million).

4. Political Instability or Environment:

Different political systems (democracy or dictatorship), different economics
systems (market economy, command economy, and mixed economy), and
political instability are some of real challenges that international markers have
to face. Political atmosphere in different courtiers offer opportunities or pose
challenges to international marketers.

Governments in different nations have their priorities, philosophies, and

approaches to the international trades. They may adopt restrictive (protectionist)
or liberal approach to international business operations. Especially, political
approaches of dominant nations have more influence in international marketing
activities.

Long-term trend of global political environment is unpredictable and uncertain.

Economic policies of different nations (industrial policies, fiscal policies,
agricultural policies, export-import policies, etc.,) do have direct impact on
international trade. Drastic change in these policies creates endless difficulties
to international traders. While dealing with international markets, international
political and legal environment needs a special attention.

5. Place Constraints (Diverse Geography):

Trade in foreign countries of far distance itself practically difficult. In case of
perishable products, it is a real challenge. Exporting and importing products via
sea route and making arrangements for effective selling involves more time as
well risks. Segmenting and selecting international markets require the marketers
to be more careful.

35
6. Variations in Exchange Rates:
Every nation has its currency that is to be exchanged with currencies of other
nations. Currencies are traded every day and rates are subject to change. Indian
Rupee, European Dollar, US Dollar, Japanese Yen, etc., are appreciated or
discounted at national and international markets against other currencies. In
case of extraordinary and unexpected moves (ups and downs) in
currency/exchange rates between two courtiers create serious settlement
problems.

7. Norms and Ethics Challenges:

Ethics refers to moral principles, standards, and norms of conduct governing
individual and firm’s behaviour. They are deeply reflected in formal laws and
regulations. In different parts of the world, different codes of conduct are
specified that every international business player has to observe. However,
globalization process has emphasized some common ethics worldwide.
Corruption is another issue relating to business ethics.

8. Terrorism and Racism:

Terrorism is a global issue, a worldwide problem. People of the world are living
under constant fear of terrorists attracts anywhere in the world. To trade
internationally is not economically risky, but there is the threat to life. Racism
also restricts international trade activities.

9. Other Difficulties:
Besides these problems, there are many obstacles in international markets, such
as:
a. Changing ecological environment and global warming

b. Difference in weathers and natural climates

c. Inappropriate or inadequate role of international agencies supporting and

regulating international trades
36
d. Natural and man-made calamities

e. Difference in currencies, weights, standards, measures, and marketing

methods

f. Protectionist approach of some countries

g. Economic crisis across the globe.

37
Concept and objectives of logistics

The concept of logistics is fairly new in the business world. The theoretical
development was not used until 1966. Since then, many business practices have
evolved and logistics currently costs between 10 and 25 percent of the total cost
of an international purchase. There are two main phases that are important in the
movement of materials: material management and physical distribution;
Materials management is the timely movement of raw materials, parts, and
supplies. The physical distribution is the movement of the firm’s finished
products to the customers. Both phases involve every stage of the process
including storage. The ultimate goal of logistics is: “To coordinate all efforts of
the company to maintain a cost-effective flow of goods.”

Word, ’Logistics’ is derived from French word ‘loger’, which means art of war
pertaining to movement and supply of armies.

A military concept, fighting a war requires:

 Setting of an objective
 Meticulous planning to achieve the objective
 Troops properly deployed
 Supply line consisting weaponry, food, medical assistance, etc.
maintained
 Plan should be such that there is minimum loss to men & material

Almost any of international logistics definitions includes, in implicit or explicit

form, the fact that international logistics helps to integrate different parties ща
different supply chains throughout the world. Taking into account such term as
the "marketing logistics" they could develop the concept of the marketing
channel to the complex logistics channel. According to the definition of the
American Marketing Association marketing channel is a set of practices or
activities necessary to transfer the ownership of goods, and to move goods, from
the point of production to the point of consumption and, as such, which consists
of all the institutions and all the marketing activities in the marketing process.

A marketing channel alone is not sufficient to finalize a transaction and

physically transfer goods from a seller to a buyer. For this purpose, a part of
logistics serves, known as the physical distribution which is concerned with the
transporting of merchandise, raw materials, or by-products, such as hazardous
38
waste, from the source to the customer. A manager of physical distribution must
also assess and control the cost of transporting these goods and materials, as
well as to determine the most efficient way to store them, which usually
involves some form of warehousing. However, more than goods flow in
international logistics. The payment must go from the buyer to the seller; and
there is a flow in both directions of “paperwork” (documents may be on paper,
or increasingly in electronic form). To explain the system of various flows one
can, use the concept of complex channels of international logistics.

One of textbooks on international logistics splits the complex channel of

international logistics, - where goods move, as do orders, payments, and
documents, - into three partial channels, which are linked to the extent that sales
or payments trigger release of goods to the buyer, and that documentation must
be complete before goods can move forward:

The transaction channel, which handles the buying, selling (negotiating and
contracting) and collection of payment;
The distribution channel, through which the good moves physically;
The documentation/communications channel.

39
Objectives of logistics
1. Operating Objectives: In terms of logistical system design and
administration, each firm must simultaneously achieve at least six different
operational objectives. These operational objectives, which are the primary
determinants of logistical performance, include rapid response, minimum
variance, minimum inventory, movement consolidation, quality, and life-cycle
support. Each objective is briefly discussed.

2. Rapid Response: Rapid response is concerned with a firm’s ability to

satisfy customer service requirements in a timely manner. Information
technology has increased the capability to postpone logistical operations to the
latest possible time and then accomplish rapid delivery of required inventory.
The result is elimination of excessive inventories traditionally stocked in
anticipation of customer requirements. Rapid response capability shifts
operational emphasis from an anticipatory posture based on forecasting and
inventory stocking to responding to customer requirements on a shipment-to-
shipment basis. Because inventory is typically not moved in a time-based
system until customer requirements are known and performance is committed,
little tolerance exists for operational deficiencies

3. Minimum Variance: Variance is any unexpected event that disrupts

system performance. Variance may result from any aspect of logistical
operations. Delays in expected time of customer order receipt, an unexpected
disruption in manufacturing, goods arriving damaged at a customer’s location,
or delivery to an incorrect location-all result in a time disruption in operations
that must be resolved. Potential reduction of variance’ relates to both internal
and external operations. Operating areas of a logistical system are subject to
potential variance. The traditional solution to accommodating variance was to
establish safety stock inventory or use high-cost premium transportation. Such
practices, given their expense and associated risk, have been replaced by using
information technology to achieve positive logistics Control. To the extent that
variances are minimized, logistical productivity improves as a result of
economical operations. Thus, a basic objective of overall logistical performance
is to minimize variance.

40
4. Minimum Inventory: The objective of minimum variance involves asses
commitment and relative turn velocity. Total commitment is the financial value
of inventory deployed throughout the logistical system. Turn velocity involves
the rate of inventory usage over time. High turn rates, coupled with inventory
availability, means that assets devoted to inventory are being effectively
utilized. The objective is to reduce inventory deployment to the lowest level
consistent with customer service goals to achieve the lowest overall total
logistics cost. Concepts like zero inventories have become increasingly as
managers seek to reduce inventory deployment. The reality of re-engineering a
system is that operational defects do not become apparent until inventories are
reduced to their lowest possible level. While the goal of eliminating all
inventories is attractive, it is important to remember that inventory can and does
facilitate some important benefits in a logistical system. Inventories can provide
improved return on investment when they result in economies of scale in
manufacturing or procurement. The objective is to reduce and manage inventory
to the lowest possible level while simultaneously achieving desired operating
objectives. To achieve the objective of minimum inventory, the logistical
system design must control commitment and turn velocity for the entire firm,
not merely for each business location.

5. Movement consolidation: One of the most significant logistical costs is

transportation. Transportation cost is directly related to the type of product, size
of shipment, and distance. Many Logistical systems that feature premium
service depend on high-speed, small-shipment transportation. Premium
transportation is typically high-cost. To reduce transportation cost, it is desirable
to achieve movement consolidation. As a general rule, the larger the overall
shipment and the longer the distance it is transported, the lower the
transportation cost per unit. This requires innovative programs to group small
shipments for consolidated movement. Such programs must be facilitated by
working arrangements that transcend the overall supply chain.

41
6. Quality improvement: A fifth logistical objective is to seek continuous
quality improvement. Total quality management (TQM) has become a major
commitment throughout all facets of industry. Overall commitment to TQM is
one of the major forces contributing to the logistical renaissance. If a product
becomes defective or if service promises are not kept, little, if any, value is
added by the logistics. Logistical costs, once expended, cannot be reversed. In
fact, when quality fails, the logistical performance typically needs to be
reversed and then repeated. Logistics itself must perform to demanding quality
standards. The management challenge of achieving zero defect logistical
performance is magnified by the fact that logistical operations typically must be
performed across a vast geographical area at all times of the day and night. The
quality challenge is magnified by the fact that most logistical work is performed
out of a supervisor’s vision. Reworking a customer’s order as a result of
incorrect shipment or in-transit damage is far more costly than performing it
right the first time. Logistics is a prime part of developing and maintaining
continuous TQM improvement.

7. Life-Cycle support: The final logistical design objective is life-cycle

support. Few items are sold without some guarantee that the product will
perform as advertised over a specified period. In some situations. The normal
value-added inventory flow toward customers must be reversed. Product recall
is a critical competency resulting from increasingly rigid quality standards,
product expiration dating and responsibility for hazardous consequences. Return
logistics requirements also result from the increasing number of laws
prohibiting disposal and encouraging recycling of beverage containers and
packaging materials. The most significant aspect of reverse logistical operations
is the need for maximum control when a potential health liability exists (i.e., a
contaminated product). In this sense, a recall program is similar to a strategy of
maximum customer service that must be executed regardless of cost. Johnson &
Johnson’s classical response to the Tylenol crisis is an example of turning
adversity into advantage. The operational requirements of reverse logistics
range from lowest total cost, such as returning bottles for recycling, to
maximum performance solutions for critical recalls. The important point is that
sound logistical strategy cannot be formulated without careful review of reverse
logistical requirements.

42
The evolution and future of logistics

2.2 Company international

logistics strategy
As Rushton et al. (2014) note,
besides the increasing importance of
distribution, logistics
and supply chain, a growth in the
number of associated definitions has
been progressively
registered. As such, the expression
‘international logistics strategy’ may
refer to different
meanings in the literature. For
instance, the early literature on global
supply chains in the

43
‘90s, introduced such expression
when referring to decisions related to
facility location,
network design,
production/distribution
centralisation, postponement
strategies along the
supply chain (e.g., Cooper, 1993;
Schmidt and Wilhelm, 2000). Other
authors have
referred to ‘international logistics
strategy’ as the logistics strategy
supporting company
international sales of finished
products (e.g., Craze et al., 2010;
Strobe et al., 2008;
Rushton et al., 2014). This latter
connotation is coherent with the aim
of the present

44
paper, and has been hereinafter
adopted.
Although the topic of company
international logistics strategy has
been widely
tackled in the literature, a structured
and hierarchical description of its
building variables
has not been in-depth developed so
far. As an example, Strobe et al.
(2008) considered
the ‘logistics planning’ as one of the
steps of the company
internationalisation process
that includes the definition of service
levels, intended lead times, inventory
policy,
network structure, capacity
calculation, allocation of facilities
(e.g., warehouses), IT
45
integration, decisions about logistics
outsourcing, and preparation of
tenders. According
to Rushton et al. (2014), it is possible
to identify a list of key areas
representing the major
components of distribution and
logistics valid for most companies,
namely: transport
(e.g., mode of transport and load
planning), warehousing (e.g.,
number and size of
distribution depots), inventory (e.g.,
stock level), packaging (e.g., type of
unit load) and
information (e.g., forecasting). In
summary, a number of contributions
do exist but they

46
are focused on individual aspects of
the logistics strategy (e.g., Jonsson et
al., 2013;
Melacini et al., 2011), without
offering a holistic view.
For the purpose of this study, we
reviewed the literature in order to
identify the main
logistics decisions that may be
affected by the company
internationalisation choices. The
logistics variables found can be
summarised as follows:
• logistics network design
• inventory planning centralisation
level

47
 Shaping the international
logistics strategy 77

• transport planning
• level of control on logistics
flows.
The review of the contributions for
each variable is reported below. The
proposed order
attempts to reproduce the mechanism
of a typical decision-making process
for setting the

48
international logistics strategy in the
case the distribution channel and the
service level
have been already defined. First, the
company selects the trade terms with
the buyer.
Once the logistics problem is fully
defined, the company starts to design
the logistics
network in order to send the goods
from the warehouse of finished
products to the
destination points in the export areas.
In this process, the role to be
assigned to logistics
service providers (LSP) have been
taken into account. After this
strategic decision, the

49
company addresses more ‘tactical’
decisions, i.e., related to inventory
and transport
planning.
International commercial terms
(Incoterms) represent the key
indicators for the level
of control on logistics flows. They
contribute to describe the company
international
logistics strategy, as they affect the
trade cost in global supply chains
(Blanco and
Ponce Cueto, 2015). According to
Blanco and Ponce Cueto (2015), the
trade term
depends on the relationship between
the seller and the local actor (i.e.,
buyer). A strategic

50
advantage can be gained by a
company willing to facilitate the sale
of its products by
assisting the importer in the shipment
(David and Stewart, 2010). The
company
positioning on the market in terms of
internationalisation choices, sales
volume regularity
and entity is also a key aspect. Small
and beginning exporters often prefer
that the buyer
organises transport (Malfliet, 2011).
Among the key variables defining
the international logistics strategy,
the literature
(e.g., Abrahamsson et al., 2003;
Strobe et al., 2008; Tracey et al.,
2005) consistently

51
refers to the type of relationship with
LSP. Besides, the role and impact of
LSP can be
different based on the
internationalisation choice (e.g.,
Strobe et al., 2008). When a
company operates in different
markets all over the world, it is
crucial to identify properly
the suitable relationship to be
established with the local suppliers,
especially when they
provide strategic services such as
logistics activities (Li et al., 2012).
This is significant
especially in the early stage of the
internationalisation process when
LSP can have a

52
direct impact (i.e., positive or
negative) on the company successful
entry into the new
market (Sandberg and Abrahamsson,
2011).
The logistics network design is a
strategic decision involved when
shaping the
company international logistics
strategy, and has a significant impact
on the process
performance (e.g., Pero et al., 2010;
Seen, 2008). The design of global
logistics
networks refer to the number,
location and capacities of
warehouses, and material flow
through the network (e.g., Chopra
and Mind, 2004; Craze et al., 2010).
The logistics
53
network design has been addressed
by numerous studies, mainly using
either
mathematical models, heuristic
techniques, or simulation models
(Chopra and Mind,
2013; Craze et al., 2010; Meixell and
Gargeya, 2005). In their review,
Meixell and
Gargeya (2005) offer a complete
overview and classification of the
models proposed in
the literature.
Another key issue when defining the
international logistics strategy
consists in the
inventory planning centralisation
level (e.g., Melacini et al., 2011).
Although planning is

54
more critical to handle in case of
inter-organisational supply chains, it
represents an
important challenge also in internal
supply chains (Forget et al., 2008).
Specifically,

78
G
.
M
arche
t
et al.

55
demand forecasting and inventory
planning are particularly demanding
for companies
selling their products in different
foreign markets (Partial and Niemi,
1996; Rudberg and
West, 2008). In this case, a high
inventory planning centralisation
level implies that all
decisions are made by the
headquarters. Conversely, a low
centralisation level implies
that the subsidiaries are quite
autonomous. Between these two
cases, another intermediate

56
approach may be identified that
implies a certain level of
coordination (e.g., Pirttila and
Niemi, 1996; Rudberg and West,
2008). Previous contributions (e.g.,
Melacini et al.,
2011) also showed a strong
correlation between the levels of
internationalisation and
planning process centralisation: the
higher the internationalisation of
production and
procurement processes, the stronger
the need for centralising the planning
due to the
increase in logistics complexity.
Also the transport planning is a vital
part of the international logistics
strategy, and it

57
is strictly connected with the
company internationalisation
choices. Transport is a key
process in the distribution as it acts
as a physical link between customers
and suppliers
(e.g., Mason et al., 2007). Different
transport planning approaches can be
defined
depending on how the order delivery
to the export areas is managed.
Referring to the
literature, the existing approaches are
not fully described. Only individual
issues have
been studied separately in some
papers, such as the transport mode.
For example, Zeng

58
(2003) and Dallari et al. (2006)
considered three global transport
service categories:
airfreight, less than container load
(LCL) shipping, and full container
load (FCL)
shipping. A more recent study by
Craze et al. (2010) evaluated
different international
logistics strategies mainly in terms of
logistics network configuration and
transport mod
2.2 Company international
logistics strategy
As Rushton et al. (2014) note,
besides the increasing importance of
distribution, logistics
and supply chain, a growth in the
number of associated definitions has
been progressively
59
registered. As such, the expression
‘international logistics strategy’ may
refer to different
meanings in the literature. For
instance, the early literature on global
supply chains in the
‘90s, introduced such expression
when referring to decisions related to
facility location,
network design,
production/distribution
centralisation, postponement
strategies along the
supply chain (e.g., Cooper, 1993;
Schmidt and Wilhelm, 2000). Other
authors have
referred to ‘international logistics
strategy’ as the logistics strategy
supporting company

60
international sales of finished
products (e.g., Craze et al., 2010;
Strobe et al., 2008;
Rushton et al., 2014). This latter
connotation is coherent with the aim
of the present
paper, and has been hereinafter
adopted.
Although the topic of company
international logistics strategy has
been widely
tackled in the literature, a structured
and hierarchical description of its
building variables
has not been in-depth developed so
far. As an example, Strobe et al.
(2008) considered
the ‘logistics planning’ as one of the
steps of the company
internationalisation process
61
that includes the definition of service
levels, intended lead times, inventory
policy,
network structure, capacity
calculation, allocation of facilities
(e.g., warehouses), IT
integration, decisions about logistics
outsourcing, and preparation of
tenders. According
to Rushton et al. (2014), it is possible
to identify a list of key areas
representing the major
components of distribution and
logistics valid for most companies,
namely: transport
(e.g., mode of transport and load
planning), warehousing (e.g.,
number and size of

62
distribution depots), inventory (e.g.,
stock level), packaging (e.g., type of
unit load) and
information (e.g., forecasting). In
summary, a number of contributions
do exist but they
are focused on individual aspects of
the logistics strategy (e.g., Jonsson et
al., 2013;
Melacini et al., 2011), without
offering a holistic view.
For the purpose of this study, we
reviewed the literature in order to
identify the main
logistics decisions that may be
affected by the company
internationalisation choices. The
logistics variables found can be
summarised as follows:
• logistics network design
63
• inventory planning centralisation
level

Shaping the international

logistics strategy 77

• transport planning
• level of control on logistics
flows.

64
The review of the contributions for
each variable is reported below. The
proposed order
attempts to reproduce the mechanism
of a typical decision-making process
for setting the
international logistics strategy in the
case the distribution channel and the
service level
have been already defined. First, the
company selects the trade terms with
the buyer.
Once the logistics problem is fully
defined, the company starts to design
the logistics
network in order to send the goods
from the warehouse of finished
products to the

65
destination points in the export areas.
In this process, the role to be
assigned to logistics
service providers (LSP) has been
taken into account. After this
strategic decision, the
company addresses more ‘tactical’
decisions, i.e., related to inventory
and transport
planning.
International commercial terms
(Incoterms) represent the key
indicators for the level
of control on logistics flows. They
contribute to describe the company
international
logistics strategy, as they affect the
trade cost in global supply chains
(Blanco and

66
Ponce Cueto, 2015). According to
Blanco and Ponce Cueto (2015), the
trade term
depends on the relationship between
the seller and the local actor (i.e.,
buyer). A strategic
advantage can be gained by a
company willing to facilitate the sale
of its products by
assisting the importer in the shipment
(David and Stewart, 2010). The
company
positioning on the market in terms of
internationalisation choices, sales
volume regularity
and entity is also a key aspect. Small
and beginning exporters often prefer
that the buyer
organises transport (Malfliet, 2011).

67
Among the key variables defining
the international logistics strategy,
the literature
(e.g., Abrahamsson et al., 2003;
Strobe et al., 2008; Tracey et al.,
2005) consistently
refers to the type of relationship with
LSP. Besides, the role and impact of
LSP can be
different based on the
internationalisation choice (e.g.,
Strobe et al., 2008). When a
company operates in different
markets all over the world, it is
crucial to identify properly
the suitable relationship to be
established with the local suppliers,
especially when they

68
provide strategic services such as
logistics activities (Li et al., 2012).
This is significant
especially in the early stage of the
internationalisation process when
LSP can have a
direct impact (i.e., positive or
negative) on the company successful
entry into the new
market (Sandberg and Abrahamsson,
2011).
The logistics network design is a
strategic decision involved when
shaping the
company international logistics
strategy, and has a significant impact
on the process
performance (e.g., Pero et al., 2010;
Sezen, 2008). The design of global
logistics
69
networks refers to the number,
location and capacities of
warehouses, and material flow
through the network (e.g., Chopra
and Meindl, 2004; Craze et al.,
2010). The logistics
network design has been addressed
by numerous studies, mainly using
either
mathematical models, heuristic
techniques, or simulation models
(Chopra and Meindl,
2013; Craze et al., 2010; Meixell and
Gargeya, 2005). In their review,
Meixell and
Gargeya (2005) offer a complete
overview and classification of the
models proposed in
the literature.

70
Another key issue when defining the
international logistics strategy
consists in the
inventory planning centralisation
level (e.g., Melacini et al., 2011).
Although planning is
more critical to handle in case of
inter-organisational supply chains, it
represents an
important challenge also in internal
supply chains (Forget et al., 2008).
Specifically,

78
G
.
M
71
arche
t
et al.

demand forecasting and inventory

planning are particularly demanding
for companies
selling their products in different
foreign markets (Pirttila and Niemi,
1996; Rudberg and
West, 2008). In this case, a high
inventory planning centralisation
level implies that all

72
decisions are made by the
headquarters. Conversely, a low
centralisation level implies
that the subsidiaries are quite
autonomous. Between these two
cases, another intermediate
approach may be identified that
implies a certain level of
coordination (e.g., Pirttila and
Niemi, 1996; Rudberg and West,
2008). Previous contributions (e.g.,
Melacini et al.,
2011) also showed a strong
correlation between the levels of
internationalisation and
planning process centralisation: the
higher the internationalisation of
production and

73
procurement processes, the stronger
the need for centralising the planning
due to the
increase in logistics complexity.
Also the transport planning is a vital
part of the international logistics
strategy, and it
is strictly connected with the
company internationalisation
choices. Transport is a key
process in the distribution as it acts
as a physical link between customers
and suppliers
(e.g., Mason et al., 2007). Different
transport planning approaches can be
defined
depending on how the order delivery
to the export areas is managed.
Referring to the

74
literature, the existing approaches are
not fully described. Only individual
issues have
been studied separately in some
papers, such as the transport mode.
For example, Zeng
(2003) and Dallari et al. (2006)
considered three global transport
service categories:
airfreight, less than container load
(LCL) shipping, and full container
load (FCL)
shipping. A more recent study by
Craze et al. (2010) evaluated
different international
logistics strategies mainly in terms of
logistics network configuration and
transport mod
2.2 Company international
logistics strategy
75
As Rushton et al. (2014) note,
besides the increasing importance of
distribution, logistics
and supply chain, a growth in the
number of associated definitions has
been progressively
registered. As such, the expression
‘international logistics strategy’ may
refer to different
meanings in the literature. For
instance, the early literature on global
supply chains in the
‘90s, introduced such expression
when referring to decisions related to
facility location,
network design,
production/distribution
centralisation, postponement
strategies along the

76
supply chain (e.g., Cooper, 1993;
Schmidt and Wilhelm, 2000). Other
authors have
referred to ‘international logistics
strategy’ as the logistics strategy
supporting company
international sales of finished
products (e.g., Craze et al., 2010;
Strobe et al., 2008;
Rushton et al., 2014). This latter
connotation is coherent with the aim
of the present
paper, and has been hereinafter
adopted.
Although the topic of company
international logistics strategy has
been widely
tackled in the literature, a structured
and hierarchical description of its
building variables
77
has not been in-depth developed so
far. As an example, Strobe et al.
(2008) considered
the ‘logistics planning’ as one of the
steps of the company
internationalisation process
that includes the definition of service
levels, intended lead times, inventory
policy,
network structure, capacity
calculation, allocation of facilities
(e.g., warehouses), IT
integration, decisions about logistics
outsourcing, and preparation of
tenders. According
to Rushton et al. (2014), it is possible
to identify a list of key areas
representing the major

78
components of distribution and
logistics valid for most companies,
namely: transport
(e.g., mode of transport and load
planning), warehousing (e.g.,
number and size of
distribution depots), inventory (e.g.,
stock level), packaging (e.g., type of
unit load) and
information (e.g., forecasting). In
summary, a number of contributions
do exist but they
are focused on individual aspects of
the logistics strategy (e.g., Jonsson et
al., 2013;
Melacini et al., 2011), without
offering a holistic view.
For the purpose of this study, we
reviewed the literature in order to
identify the main
79
logistics decisions that may be
affected by the company
internationalisation choices. The
logistics variables found can be
summarised as follows:
• logistics network design
• inventory planning centralisation
level

Shaping the international

logistics strategy 77

80
• transport planning
• level of control on logistics
flows.
The review of the contributions for
each variable is reported below. The
proposed order
attempts to reproduce the mechanism
of a typical decision-making process
for setting the
international logistics strategy in the
case the distribution channel and the
service level
have been already defined. First, the
company selects the trade terms with
the buyer.
Once the logistics problem is fully
defined, the company starts to design
the logistics

81
network in order to send the goods
from the warehouse of finished
products to the
destination points in the export areas.
In this process, the role to be
assigned to logistics
service providers (LSP) has been
taken into account. After this
strategic decision, the
company addresses more ‘tactical’
decisions, i.e., related to inventory
and transport
planning.
International commercial terms
(Incoterms) represent the key
indicators for the level
of control on logistics flows. They
contribute to describe the company
international

82
logistics strategy, as they affect the
trade cost in global supply chains
(Blanco and
Ponce Cueto, 2015). According to
Blanco and Ponce Cueto (2015), the
trade term
depends on the relationship between
the seller and the local actor (i.e.,
buyer). A strategic
advantage can be gained by a
company willing to facilitate the sale
of its products by
assisting the importer in the shipment
(David and Stewart, 2010). The
company
positioning on the market in terms of
internationalisation choices, sales
volume regularity

83
and entity is also a key aspect. Small
and beginning exporters often prefer
that the buyer
organises transport (Malfliet, 2011).
Among the key variables defining
the international logistics strategy,
the literature
(e.g., Abrahamsson et al., 2003;
Strobe et al., 2008; Tracey et al.,
2005) consistently
refers to the type of relationship with
LSP. Besides, the role and impact of
LSP can be
different based on the
internationalisation choice (e.g.,
Strobe et al., 2008). When a
company operates in different
markets all over the world, it is
crucial to identify properly

84
the suitable relationship to be
established with the local suppliers,
especially when they
provide strategic services such as
logistics activities (Li et al., 2012).
This is significant
especially in the early stage of the
internationalisation process when
LSP can have a
direct impact (i.e., positive or
negative) on the company successful
entry into the new
market (Sandberg and Abrahamsson,
2011).
The logistics network design is a
strategic decision involved when
shaping the
company international logistics
strategy, and has a significant impact
on the process
85
performance (e.g., Pero et al., 2010;
Sezen, 2008). The design of global
logistics
networks refers to the number,
location and capacities of
warehouses, and material flow
through the network (e.g., Chopra
and Meindl, 2004; Craze et al.,
2010). The logistics
network design has been addressed
by numerous studies, mainly using
either
mathematical models, heuristic
techniques, or simulation models
(Chopra and Meindl,
2013; Craze et al., 2010; Meixell and
Gargeya, 2005). In their review,
Meixell and

86
Gargeya (2005) offer a complete
overview and classification of the
models proposed in
the literature.
Another key issue when defining the
international logistics strategy
consists in the
inventory planning centralisation
level (e.g., Melacini et al., 2011).
Although planning is
more critical to handle in case of
inter-organisational supply chains, it
represents an
important challenge also in internal
supply chains (Forget et al., 2008).
Specifically,

87
78
G
.
M
arche
t
et al.

demand forecasting and inventory

planning are particularly demanding
for companies
selling their products in different
foreign markets (Pirttila and Niemi,
1996; Rudberg and

88
West, 2008). In this case, a high
inventory planning centralisation
level implies that all
decisions are made by the
headquarters. Conversely, a low
centralisation level implies
that the subsidiaries are quite
autonomous. Between these two
cases, another intermediate
approach may be identified that
implies a certain level of
coordination (e.g., Pirttila and
Niemi, 1996; Rudberg and West,
2008). Previous contributions (e.g.,
Melacini et al.,
2011) also showed a strong
correlation between the levels of
internationalisation and

89
planning process centralisation: the
higher the internationalisation of
production and
procurement processes, the stronger
the need for centralising the planning
due to the
increase in logistics complexity.
Also the transport planning is a vital
part of the international logistics
strategy, and it
is strictly connected with the
company internationalisation
choices. Transport is a key
process in the distribution as it acts
as a physical link between customers
and suppliers
(e.g., Mason et al., 2007). Different
transport planning approaches can be
defined

90
depending on how the order delivery
to the export areas is managed.
Referring to the
literature, the existing approaches are
not fully described. Only individual
issues have
been studied separately in some
papers, such as the transport mode.
For example, Zeng
(2003) and Dallari et al. (2006)
considered three global transport
service categories:
airfreight, less than container load
(LCL) shipping, and full container
load (FCL)
shipping. A more recent study by
Craze et al. (2010) evaluated
different international

91
logistics strategies mainly in terms of
logistics network configuration and
transport mod
THE PAST
The Backdrop

Before the 1950s, logistics was thought of in military terms. It had to do with
procurement, maintenance, and transportation of military facilities, materiel,
and personnel. Although a few authors before this time began talking about
trading one cost for another, such as transportation costs with inventory costs,
and discussed the benefits to the firm of getting the right goods to the right
place at the right time, the organization within the typical firm around the
activities currently associated with logistics was fragmented. shows how a firm
might have organized key activities at that time in terms of the responsibilities
and objectives for marketing, finance, and production. This fragmentation led to
conflicts among those responsible for logistics activities with the result that,
from the firm’s perspective, costs and customer service were sub-optimized.
The reasons for this fragmentation were said to be:

 A lack of understanding of key cost trade-offs

 The inertia of traditions and conventions
 Areas other than logistics were thought to be more important

92
  The organization may have been in an evolutionary state

 Fig:1.4

Later, it was learned that there are benefits to eliminating the fragmentation
such that (1) it encourages important trade-offs to occur that can lower total
costs, (2) it focuses on an important, defined area by top management, and (3) it
sets the structure within which control can take place.

Educational courses and programs at the time were not focused on logistics or
distribution. They were mainly related to individual activities such as
transportation and purchasing. There was little attempt to integrate and balance
the activities, later to be known as logistics activities, that were in cost and/or
service conflict. Hence, there was not much of an opportunity for managers to
learn about the broader concepts of logistics.

Physical distribution begins to emerge as an area of study and practice, which is

the coordination of more than one activity associated with physically supplying
product to the marketplace. LaLonde and Dawson (LaLonde and Dawson,
1969) trace the early history and note that Arch Shaw in 1912 began to see the
two sides of marketing, where one deals with demand creation (promotion) and
the other with physical supply, and Fred Clark in 1922 identified the nature of
physical distribution and pointed out how it was different from the demand-
creating nature of marketing. Marketing as a discipline was creating interest at
this time and scholars did include distribution as a primary activity in the

93
marketing mix, however, distribution seemed to be defined more in terms of
transaction channel activities than physical distribution ones. Paul Converse
(Converse, 1954), a noted marketing professor, said in 1954 that businesses had
been paying a great deal more attention to buying and selling than to physical
distribution.

In retrospect, research that would play a pivotal role in laying the foundations
for physical distribution was a study by Lewis et al. (Lewis et al., 1956). This
study for the airline industry asked how it might better compete in hauling
freight when its costs were significantly higher than other forms of
transportation. The study pointed out that it is necessary to view shipping from a
total cost perspective and not from just a transportation cost one. That is,
although air freight cost may be high, air freight’s faster and more reliable
service can lead to lower inventory carrying costs on both ends of the shipment.
This was an expression of the total cost concept that was to underpin much of
writing and teaching to follow in the 1960s.

The first college course (Michigan State University) and textbook (Smykay et
al., 1961) appeared around 1960. Within the context of the total cost approach,
activities such as transportation, inventory control, warehousing, and facility
location were discussed. The emphasis was on a firm’s outbound movement of
goods and dealt little with inbound movements. In 1964, the scope of physical
distribution was expanded (Heskett et al., 1964) to include physical supply and
was called business logistics. Using the descriptive name of business logistics
was not only an attempt to distinguish the name from military logistics but to
focus on logistics activities that took place within the business firm. Purchasing
was not generally considered nor was production. On the other hand, there was
a similar movement by those interested in the purchasing activity. Whereas
purchasing was initially considered a buying activity, there were efforts to
expand the scope to include many of the activities familiar to physical
distribution but associated with the inbound side of the firm. This expanded
scope was embodied in such names as procurement and materials management.

Emergence of Physical Distribution and Logistics

The study and practice of physical distribution and logistics emerged in the
1960s and 1970s. Logistics costs were high. On a national level, it was
estimated that logistics cost in the U.S. accounted for 15 percent of the gross
national product (Heskett et al., 1973). Similarly, physical distribution costs of
other nations were found to be high as well. For example, in the United
Kingdom, they were 16 percent of sales (Murphy, 1972), in Japan they were
26.5 percent of sales (Kobayashi, 1973), in Australia they were 14.1 percent of
sales (Stephenson, 1975), and as of 1991 in China they were 24 percent of GDP

94
(Wang, 2006). On an individual firm level, they could be as high as 32 percent
of sales (LaLonde and Zinszer, 1976). The recognition of these high costs led
one writer to declare physical distribution as one of "the most sadly neglected,
most promising areas of American business" (Drucker, 1962). With marketing
and production being relatively mature areas of analysis, physical distribution
and logistics were the next obvious areas for managerial attention.

Physical distribution with its outbound orientation was first to emerge, since it
represents about two thirds of logistics costs and it was considered a component
of the marketing mix (product, place or physical distribution, promotion, and
price) of essential elements. Business logistics, with its broader scope that
includes inbound movement, was soon to follow. It is useful to look at what was
envisioned by early proponents of the areas to see the fit with current views and
to give some idea of future directions.

When comparing the early vision of physical distribution and logistics with the
current one for supply chain management, there is little difference. For example,
the definition in 1962 offered by Smykay et al. (Smykay et al., 1962) was:

"Physical distribution can be broadly defined as that area of business

management responsible for the movement of raw materials and finished
products and the development of movement systems."

Although physical distribution is usually associated with outbound product

movements from a firm, this definition indicates a broader concept that includes
both inbound and outbound movements. Heskett et al. (Heskett et al., 1964)
described business logistics in terms of both physical supply and physical
distribution, but they also recognized that logistics takes place throughout the
supply channel, from producer to end consumer. shows the multiple echelons of
a supply channel for flour, and Heskett et al. suggested that there needs to be
coordination of the product flows throughout the entire channel. These concepts
are similar to what is currently described as supply chain management and, at
that time, physical distribution and logistics were somewhat synonymous terms.
Although these early definitions suggest a broad scope for physical distribution
and logistics, the focus was on coordinating among the activities within the
function, with little emphasis on coordinating among the other functions within
the firm or among external channel members. This limited application of a
much broader scope probably had to do with technological limitations of
information systems at the time and the difficultly of managing across areas of
responsibility.

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 Fig:1.5

Most notably missing from early definitions was a direct reference to

purchasing and production. Although they may have been implied, they were
rarely treated in logistics education or practice.

As previously indicated, marketing considered physical distribution to be a part

of the marketing mix, however, the greatest interest seemed to be in
transactional channels while physical distribution was given short shrift. On the
other hand, production claimed logistics activities as part of the product
function. According to Timms and Pohlen (Timms and Pohlen, 1970):

"…one can conceive of production as a function directly concerned with

providing form, time and place utilities in the product."

Time and place utilities are usually referred to as physical distribution or

logistics activities. Although marketing and production were established
functions within business, and they laid claim to physical distribution, but their
lack of attention led physical distribution (logistics) to be developed as a
separate entity and as a new function within a firm’s organizational structure.

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In these early years, not only did scholars and practitioners struggle with a
definition for the field, they could not agree on a title. Some of the familiar ones
were:

 Distribution
 Physical distribution
 Logistics
 Business logistics
 Integrated logistics
 Materials management
 Value chains
 Rhocrematics, a Greek term referring to the management of material
flows.

Conclusions from the PAST

There are several lessons to be learned from the past. First, physical distribution
and logistics were envisioned to have broad responsibilities for managing
activities associated with product flow from the points of raw material
acquisition to the end consumer. Although the scope of the field was extensive,
actual management practice was generally limited to coordination of activities
within the logistics function or among those activities associated with product
flow. Boundary-spanning management was embraced but little practiced.

Second, the total cost concept served as the basis for managing certain activities
collectively. Activities such as transportation and inventory control were
collectively managed because they were in cost conflict. All those activities
associated with product flow and displaying this cost trade-off characteristic
were considered a part of the new field of physical distribution or logistics.

Third, physical distribution and logistics were embraced by both marketing and
production areas, but they gave little attention to issues of product flow. As a
result, physical distribution and logistics began to develop as an independent
function within business. This action was spurred by the recognition that
logistics costs were high and that there was an unrealized opportunity to reduce
them.

Fourth, among the areas of purchasing, production, and physical distribution,

there was little coordination, even though they had a direct effect on product
flow management. This coordination was to become a major theme in later
years.

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THE PRESENT

A new name emerges: Supply Chain Management (SCM). This name is taking

the logistics area by storm since so many in various business fields seem to
embrace it and see activities of their areas imbedded in it. The origin of the
name seems a mystery and exactly what supply chain management is, compared
with physical distribution and logistics, is being debated. Some are saying that it
is a fulfilment of the activity integration promise implied in early definitions
while others think it is a new and bold concept. Those believing that supply
chain management is evolutionary construct a diagram of the type shown
in Figure 3. The claim is that supply chain management is not new and they
recognize that the logistics pioneers had many of the ideas promoted by current
supply chain enthusiasts. For example, note what Heskett et al. said in 1964
(Heskett et al., 1964) with reference to the flour tree of Figure 2:

"Each transfer of goods from one business entity to the next requires the
coordination of demand and supply between many different institutions in the
channel, from the original grower of wheat seed to the ultimate consumer of
flour."

Fig:1.6

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Specifically, note that they refer to the entire supply channel and suggest that
coordination is needed throughout the channel. These are ideas that form the
basis for supply chain management as practiced today.

Given 40 years of background with a broad concept for logistics, what exactly is
supply chain management to its proponents? There has been an attempt to
distinguish logistics from supply chain management, declaring logistics to be a
subset of supply chain management. Recently, the Council of Supply Chain
Management Professionals (CSCMP), which is the premier organization of
supply chain practitioners, researchers, and academics, has defined supply chain
management as:

Supply Chain Management encompasses the planning and management of all

activities involved in sourcing and procurement, conversion, and all Logistics
Management activities. Importantly, it also includes coordination and
collaboration with channel partners, which can be suppliers, intermediaries,
third-party service providers, and customers. In essence, Supply Chain
Management integrates supply and demand management within and across
companies.

Whereas, CSCMP defines logistics to be:

Logistics Management is that part of SCM that plans, implements, and controls
the efficient forward and reverse flow and storage of goods, services, and
related information between the point of origin and point of consumption in
order to meet customer requirements.

In these two definitions, first note that procurement (i.e., purchasing) and
conversion (i.e., production) are now explicitly included in the scope of
managing material flows. Second, emphasis is placed on coordination,
collaboration and relationship building among channel members that are
missing from logistics management. Put another way, supply chain management
can be viewed as having three dimensions. These are activity and process
administration, Interfunctional coordination, and interorganizational
coordination. Activity and process administration is much of what logistics has
been doing. That is, managing activities such as transportation, inventories,
warehousing, and order processing that are within the responsibility of the
logistics function. Interfunctional coordination refers to collaborating and
building relationships with other functional areas in the same firm, such as with
marketing and finance. Interorganizational coordination has to do with
collaborating and coordinating product flows among channel members, i.e.,
those companies that are not owned or operated by the immediate firm.
Therefore, SCM is viewed as managing product flows across multiple

99
enterprises (see Figure 4) whereas logistics is seen as managing the product
flow activities just within the firm. This is a deviation from the view that the
early visionaries had for logistics.

Fig:1.7

A contemporary view of supply chain management is to think of it as managing

a set of processes, where a process is a group of activities relevant to achieving
a defined objective, such as filling orders. The American Marketing Association
in 2004 defined marketing in terms of processes:

"Marketing is an organizational function and a set of processes for creating,

communicating and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders."

Based on collaboration with industry leaders, Lambert et al. (Lambert et al.,

1998) defined eight key sub-processes for supply chain management. These are
(1) customer relationship management, (2) customer service management, (3)
demand management, (4) order fulfilment, (5) manufacturing flow
management, (6) supplier relationship management, (7) product development
and commercialization, and (8) returns management. Taken together, they
represent supply chain management in its entirety. These processes are to be

100
coordinated through collaboration and relationship management throughout the
various echelons of the supply channel, from initial suppliers to end consumers.

Although there is much talk about the benefits of collaboration among channel
members and expanding the scope of product flow management to include the
entire supply chain channel, to what extent is the theoretical scope of supply
chain management actually practiced? Fawcett and Magnan (Fawcett and
Magnan, 2002) conducted a survey to find out. Their results are captured
in Figure 5. In reality, few firms reach the potential of theoretical integration.
About one-half of the firms surveyed are working toward integration within the
walls of their own firms. Whether this Interfunctional integration is attributed to
the implementation of large software systems such as SAP rather than to actual
collaboration and compromise is not clear. Approximately one third of the firms
focus their integration efforts on their first-tier suppliers. Beyond that, there is
little attempt at integration. This is probably due to the inherent difficulties of
achieving effective collaboration and to the limitations brought about by
competition, such as the reluctance to share proprietary information.

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 Fig
:1.8

Conclusions from the PRESENT

A number of conclusions can be drawn from observing product flow

management at the present time. Clearly, excitement and focus are directed
toward supply chain management. First, we can say the supply chain
management is concerned with realizing the opportunities from integrated
management of product flow processes across functions and between channel
members. Although the idea is potent and the benefits obvious, the notion of
lowering costs by including more of a system in decision making is not new. It
was at least embodied in the systems approach promoted by operations
researchers in the 1940s and 1950s.

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Second, logistics is now being viewed as a subset of supply chain management.
The scope of logistics is being limited to the boundaries of the function within a
firm and is primarily concerned with activity administration, which was not the
early view. Interfunctional and interorganizational management seem to be
within the purview of supply chain management rather than logistics. Logistics,
as an identifying name, supersedes physical distribution.

Third, purchasing and production are now included within the scope of supply
chain management. As a result, SCM is responsible for 70 to 80% of the cost of
sales for many firms.

Fourth, so many functional areas of the firm are embracing supply chain
management that it is in danger of becoming so broad that it loses its identity
and focus. Some limitations and organizational subdividing may occur.

Fifth, although supply chain management promotes coordination, integration,

relationship building, and collaboration throughout the entire supply channel,
SCM currently takes place to a very limited degree. The most likely place for
SCM to occur is between the firm and its first-tier suppliers. Currently, SCM is
practiced as logistics and not the broad, theoretical scope envisioned for it.
Perhaps managers will begin to practice SCM when its benefits are better
documented and measured, and the techniques and tools needed to achieve the
benefits are refined.

THE FUTURE

Understanding the past and observing the present allows an extrapolation to

what might be in store for logistics/SCM in the future. The trend toward
increased globalization, free trade, and outsourcing all contribute to a continued
and growing interest in logistics/SCM. According to a McKinsey & Company
study,

"…by the year 2020, 80% of the goods in the world will be manufactured in a
country different from where they are consumed compared with 20% now."

There will be a tremendous shift in the movement and consumption of goods,

all of which will require ever better management of the associated supply chain
processes.

There will be a shift in strategy. In the past, the focus of logistics/SCM has been
on efficiency. As Peter Drucker (Drucker, 1962) put it, physical distribution is:

103
"The last frontier of cost economies."

The contemporary view is that SCM is a new frontier for demand generation – a
competitive weapon. Both views will be important, but the new emphasis will
be on designing and operating the supply chain to enhance the revenues of the
firm in such a way as to maximize contribution to profit. This view replaces the
often-used strategic objective of minimizing supply chain costs, subject to
meeting given customer service requirements, and it will elevate SCM in the
eyes of top management. A new objective will emerge to capture revenue
enhancement effects, which is called ROSCA. The objective of ROSCA is to
maximize return on supply chain assets. It is defined as:

where Revenue refers to the supply chain’s contribution to the sales of the

firm, Costs refers to the expenses incurred in supply chain processes,
and Assets refers to the investment made in facilities and equipment to support
the supply chain processes. Managers have long calculated the ratio of costs to
assets, or return on investment, as a measure for judging the value of strategic
alternatives. When investments are made to improve customer service, the
traditional return-on-investment understates the benefits of the strategy by
omitting its revenue enhancement possibilities. While ROSCA is an improved
measure, estimating revenue effects remains difficult and is a topic for much
needed research. A summary of some of the currently available revenue-
estimating methods is offered by Ballou (Ballou, 2006).

Collaboration and coordination will be the keys to achieving the benefits of

supply chain management. When both parties in a supply chain relationship win
equally due to their cooperative actions in the supply channel, the benefits are
likely to be realized and the relationship remains intact. In too many cases, this
does not occur and there is a dilemma that must be resolved. The conflict can be
illustrated with a simple example.

Example. Suppose that a supply chain is composed of two members – a buyer

and a seller. The buyer annually uses D =10,000 units of purchased component.
The buyer incurs an ordering cost of Sb = $100 when buying the component
from an upstream supplier. The buyer’s holding cost for one item is Hb = $10
per year. Based on the EOQ formula for optimizing order quantity, the buyer
prefers to place orders of the size:

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On the other hand, the seller produces the component to order whenever a
purchase order is received from the buyer. The setup cost for producing a batch
is Ss = $300 and the total annual setup cost (Cs) depends on
the buyer’s quantity: Cs = $300D/Qb. Obviously, the more frequently the buyer
places purchase orders, the more setup costs are incurred by the seller.

If the channel is managed as a single entity, the order quantity to minimize

channel cost is:

The cost curves for the channel members and for the supply chain are shown
in Figure 6. Note the optimal order quantities for the buyer and for the supply
chain. The supply chain cost is the combined costs of the buyer and seller.
Seller wishes the largest order size possible. Because there is a difference
between the order quantities that each member and the channel prefer, there is
said to be a cost conflict. As shown in Table 1, if the buyer dictates the purchase
order size, the annual channel cost will be $11,183. On the other hand, if the
order quantity is set at that which will minimize the combined cost of the
members, the annual channel cost can be reduced to $8,945, a potential cost
reduction of $11,183 – 8,995 = $2,238. In order to realize the cost reduction, the
buyer must agree to order 894 units at a time, which will increase his direct
annual cost from $4,472 to $5,589. Since the benefits of this larger order size
"pool" with the seller, the seller must share some of his gains ($6,711 – 3,356 =
$3,355) with the buyer in an amount equal to or greater than $5,589 – 4,472 =
$1,117. If less than this, the coalition is not likely to hold together and the buyer
will revert to his preferred purchase order quantity and the coalition is likely to
dissolve. A key question then is: What mechanisms can be used for sharing the
system-wide benefits so that both members benefit and have the incentive to
continue their cooperation?

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 Fig:1.9

Fig:2.1

A number of both formal and informal mechanisms have been identified

whereby the benefits of channel cooperation might equitably be shared among
the members (see Ballou et al., 2000). Among the formal mechanisms are price
adjustments and order quantity minimums. The seller might offer price
discounts as an incentive for the buyer to order in quantities that lower the
seller’s cost but also lower the buyer’s cost through the price reduction. The

106
seller might also set order-size minimums to encourage more desirable order
quantities.

Informal mechanisms do not distribute funds directly among channel members,

but they offer incentives indirectly to encourage cooperation. These have to do
with power and trust. Large firms may use coercive power to force other
channel members to comply with their wishes. Reward and referent power are
less straight forward and offer benefits to cooperation through such mechanisms
as training or use of a valued name, such as Intel Inside. Trust has to do with
sharing information among members so that they can be in a better position to
make decisions benefiting all channel members in the coalition.

Collaboration among supply chain members is at the heart of supply chain

management and will be the key to its future success. The essence of channel
collaboration has several identifiable features. First, it is about managing a
supply channel of vertically-related but legally separate firms. Second, it
represents an untapped opportunity because channel members often work at
cross purposes. Third, cooperation and trust are the keys to realizing the benefits
from collaboration. Fourth, the benefits may "pool’ with one or a few channel
members, thus creating the need for sharing the benefits. Fifth, redistributing the
benefits requires (1) metrics to identify and measure potential benefits,
(2) information sharing among the members to build trust, and (3) sharing
methods for a fair benefits distribution. To summarize, channel collaboration
will require (1) information sharing and a spirit of cooperation, (2) a boundary-
spanning information system (3) inter-organizational metrics, (4) a means for
benefits identification, and (5) ways for sharing the spoils of cooperation. A
particular need is for an information system that is inter-organizational in scope
and is directed toward providing relevant information so that channel members
can "see" the opportunities for supply chain improvement and can track the flow
of the benefits from cooperation.

Conclusions for the FUTURE

Without a doubt, logistics and supply chain management will continue to grow
in importance as companies continue to pursue outsourcing, expand their
international operations, and do business in a global economic environment.
Whatever the field is called that manages product flows, which at the moment is
supply chain management, the trend is set. Here are the major challenges likely
to confront SCM in the near future.

A revenue generation strategy for the supply chain will be as important as a

cost reduction one. There will be increased attempts to view supply chain
strategies as a way of generating the revenues of the firm much in the same way
it views product mix, advertising, and price as elements of its marketing
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strategy. Designing the supply chain processes that result in a level of logistics
customer service is the basis for a supply chain strategy, since logistics
customer service is related to revenue. The cost of the processes will be
managed to maximize ROSCA associated with the strategy.

Boundary-spanning benefits of SCM may be easy to identify but will be hard to

realize. Taking a broader, systems approach to supply chain decisions can
obviously identify greater cost savings and/or customer service improvements
than a narrower, individual firm perspective. Given cost and revenue
information of the channel members, the potential benefits can be calculated
and the best course of action identified. Since the benefits often accumulate
("pool") with one or a few of the members, the decision-making process is
inherently unstable. That is, the individual channel members will revert to
actions that maximize their self-interest when, in their view, the benefits of
cooperation and compromise are not fairly shared. Lack of boundary-spanning
information, trust, and communication are at the core of realizing supply chain
benefits, and these elements are difficult for logisticians who must manage
beyond the firm’s legal borders and their direct sphere of responsibility.

Coordination and collaboration, along with trust, are the most important
elements to realizing boundary-spanning opportunities. When the supply
channel is composed of multiple and legally separate members, realizing the
opportunities afforded by acting in concert requires a collaborative effort.
Relationships are forged that are built on trust. Proprietary information often
must be shared, and trust must precede the sharing. Collaboration, coordination,
and trust are key elements in SCM, but they often involve skills that logisticians
have not had to exercise to the same degree as when managing product flows
strictly within the boundaries of their own firms. New skills are required.

Information sharing among channel members is likely to continue with

advancing technology and may be called coordination, compromise, and
cooperation. Improvements in quantity, quality, and dissemination of
information throughout the supply chain are primary reasons for considering
boundary-spanning management. Too often information sharing masks as
channel partner collaboration and substitutes for true compromise. SCM is more
complicated than swapping data between companies and among the various
functional areas within a firm. In many cases, the channel partners are required
to compromise their positions regarding supply chain decisions, which is the
most difficult aspect of SCM. Future research should be directed to help
managers deal specifically with SCM issues to achieve compromise.

Boundary-spanning metrics will be needed to identify supply chain benefits and

track their location in the supply channel. There is a weakness in the accounting

108
systems needed to operate in a supply chain environment. Current corporate
accounting systems do little to track costs beyond a firm’s legal borders. It is
difficult for one channel partner to see the costs of another that are associated
with a coordinating action. Trust, an essential ingredient of collaboration, may
suffer. If the opportunities of SCM are to be exploited, a boundary-spanning
accounting system is needed that assists channel members in seeing the
economic consequences of their coordinated actions and identifies where the
benefits are going. Such a system will help identify the magnitude of supply
chain benefits as well as the extent to which benefits’ sharing is needed.

Methods of benefits sharing need better definition and refinement. Once the
benefits of supply chain cooperation are identified, actions need to be taken to
share the benefits and keep the coalition operating in a manner to continue
producing these benefits. Some methods, both formal and informal, were
previously noted; however, it is not clear which is most effective and under
which circumstances. Research will help to clarify the best choices and how
they can be applied.

Supply chain relationships are not inherently steady-state, so examples of good

supply chain coordination among a few firms will be selective and short term.
Because coalitions are fragile and the members may easily return to the state of
their self-interest when trust is broken, information is incomplete or inaccurate,
and the sharing of benefits is perceived to be or is actually unfair, there are
likely to be few examples of real supply chain cooperation spanning many
echelons in the channel. Therefore, we can expect only isolated examples where
extensive channel cooperation has occurred. There will be some selected
examples among a pair of channel partners, which is most likely to be between
a firm and its immediate suppler. Considering the difficulty of holding
relationships together, the lack of a good boundary-spanning accounting system
with appropriate metrics, and with little managerial training in supply chain
relationship building, it will be many years before the promises of SCM are
realized.

Logistics curricula transforming to a supply chain curriculum should be

expanded to include the subjects of relationship and trust building. On an
educational level, teaching supply chain management will require additional
topics not now included in a typical logistics curriculum. Boundary-spanning
management is based on relationship building, collaboration, compromise, and
coordination across legally separate firms, but these dimensions have not
historically been a central part of logistics education. Logistics educators
typically received their training in marketing, operations, and quantitative
methods. In addition, skills in organizational behaviour and psychology will be
needed. These skill sets are quite opposite, which suggests that current

109
educators are poorly equipped to deal with the new managerial dimensions
required of a supply chain environment. Yet, these additional dimensions should
be brought into logistics education if the promises of supply chain management
are to be fulfilled.

Operations, purchasing, and logistics will merge organizationally, probably

under the supply chain banner. The broad scope of supply chain management
will have an impact on organization within a firm. Whereas logistics may have
been practiced with a limited scope, SCM requires management across many
functions within the firm. In order to achieve coordination as suggested in SCM,
it may be necessary for firms to reorganize. For those firms seeking a
formalized arrangement, the organizational structure is likely to evolve to that
shown in Figure 7. Purchasing and production were often put on a par with
marketing and finance, but in the future, these functions, as well as logistics,
will be under the guidance of the supply chain manager. For those firms wishing
to achieve good coordination of product flows, they may opt for a less formal
arrangement, such as a supply chain liaison placed at the top of the organization
who has responsibility for coordinating supply chain actions across the various
functions within the firm. To coordinate among supply chain channel members,
committees composed of channel members will emerge since formal
organizational structures across legally separate firms are not likely to occur.

Fig:2.2

REFLECTION

Forty-five years have seen physical distribution/business logistics/supply chain

management go from individually managed activities that are product-flow
related to an integrated set of processes managed across multiple echelons of a

110
product supply chain. SCM has never been more important to business than it is
currently, or will be in the near future. It has the potential of
production/engineering in the industrial revolution and marketing of the 1920s
and 1930s when each of these gained prominence in business. SCM often is the
basis for a firm’s competitive strategy, which is driven by increased
outsourcing, expanding global operations, and heightened need for logistics
customer service. Not only has managing supply chain costs become more
important, as these costs are used in trade-off with production costs, but supply
chain strategy is increasingly viewed as a source for contributing to the
revenues of the firm.

Key challenges for the future will be to better estimate the revenue contributions
from the customer service levels generated by the supply chain and effectively
managing the scope of the supply channel as envisioned in supply chain
management. Because of the difficulty of estimation, too little attention has
been given to the revenue contribution that the supply chain can make to the
overall sales of the firm. It is an area of much needed research.

Proponents of SCM are making bold statements about the benefits of boundary-
spanning management but offer little as to how these benefits can actually be
realized. Businesses have yet to progress very far with boundary-spanning
management, probably because the tools and skills are not well developed. If
the promises of SCM are to be realized, an interorganizational accounting
system, appropriate metrics for defining and tracking shared benefits, and
acceptable methods for benefits sharing will need to be developed. Also, supply
chain managers will need training in collaborative techniques, relationship and
trust building, and skills for compromise. These will require major efforts by the
academic, research, and business communities, but the rewards can be
substantial.

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Development of International Logistics

Logistics services happen to be the backbone of Retail Operations. Traditional

Logistics was referred to mean transportation services by road, rail, air and
ocean freight. However, along with the evolution of International Retailing,
Logistics too grew as a discipline encompassing not only freight but a host of
logistics related activities including Origin and Destination Services,
Warehousing and Secondary Distribution etc.
Driven by ECR initiatives, the Retail industry began to change and evolve
as a process oriented, activity driven industry. New supply chain solutions
demanded setting up of consolidation centres at various locations to achieve
optimum capacity utilisation on freighters and bring down the overall
freight costs. Further improvements demanded the Logistics service operators
to manage such consolidation centres at their end and provide cross dock
operations. Hereto the warehousing operations were managed by the Retailers
in house as the operational expertise required in managing inventory and
warehouse operations were different from Logistics operations. Freight
operators had their core strength and experience in managing freight but not the
warehousing operations.
However, the new initiatives and models of supply chain gave an opportunity
for the Freight Companies to realise the potential and grow into being Logistics
Service Providers. They began to invest in setting up infrastructure in terms of
Distribution Centres and manage the operations thus providing end to end
services to the Retail industry.
As the Retail industry began to embrace IT solutions to augment its supply
chain services, the LSPs too invested into IT systems and soft wares, building
their core capabilities based on their ability to interface with the client systems
and provide faster response and visibility to transactions as well as enabling
automation of transactions. LSPs grew along with the Retail industry.
As the supply chain processes gained transparency, new process initiatives
began to evolve, where in the value-add services including packing, labelling,
building kits, sales promotion packs etc were offered in house by the LSPs. The
LSPs who could extend their competence to provide all of the required services
under one roof and service the retail giant gained immensely in terms of growth
as well as in expertise.
Over a period of time when Internationalisation of Retailing began to grow
rapidly, Logistics Provider industry too grow along. The International Retailers

112
provided an opportunity for the LSPs to service their new units set up abroad.
Thus, local LSPs began to set up international operations either independently
or by way of partnering with local LSP in other countries or buying out
Companies. The International Retailers needed to transfer and establish the
standardized processes of operations in their new locations and the LSPs too
could now offer the same standardized operations.
Over a period of time, we see a lot of innovation having taken place in the
Logistics Services. In the current times we see many of European Logistics
Service Providers having gained Multi National status and establishing
global operations through acquisitions and joint ventures. With
internationalization, they are able to develop and offer specialised and industry
specific solutions that are tailor made for the industry. Take the International
Retail industry, international LSPs offer consolidation centres at the buyer’s
country, provide specialized freight containers that come equipped with hangers
etc. They provide ironing, labelling and repacking services at the Destination so
that the garments can be delivered directly to the store. Loading of the container
is planned using software that enables the LSP to provide unit wise loading
details to the client and help provide detailed information. With RFID and new
IT solutions, they are able to provide higher value addition to the International
Retail industry today. All of these solutions help the International Retailers to
reduce the inventory holding, operational costs as well as better visibility over
all legs of supply chain.
Now days the International Retailers choose to work with one or two
Multinational Logistics Service Providers and assign specific lanes or regions to
them. By partnering with LSPs and giving them higher volumes of business,
they are able to get the LSPs to invest, build expertise and provide end to end
services across all regions and locations. Relationship management has come of
age in the International Retail Industry and International Logistics.

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Fig:2.3

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General structure and elements of logistics
Technical Data
 Technical data consists of technical or scientific information or
publications such as engineering drawings or maintainer and operator
manuals and other documents necessary to support, maintain and operate
the system.
Personnel
 The personnel element identifies and acquires personnel, both civilian
and military, with the grades and skills required to operate, support and
maintain the system throughout its lifetime, at wartime and peacetime
rates based on related considerations and other ILS elements.
Facilities
 The facilities element includes in-depth planning conducted for procuring
the semi-permanent, permanent or temporary property assets necessary to
support the system. This includes locations, utilities; real requirements,
space needs, equipment and environmental requirements.
Packaging, Handling, Storage and Transportation (PHST)
 An important element of logistics is to identify all resources, procedures,
processes, methods and design considerations to ensure all equipment,
support items and systems are properly preserved, handled, packaged and
transported correctly. This includes considering preservation
requirements, transportability, short-term storage and environmental
aspects.
Training
 The training element implements an active training program for civilians,
reserve and active-duty personnel on the procedures, techniques,
processes, equipment and training devices used to install, support and
operate the system. This includes crew and individual training, logistics
support planning and new equipment training.
Equipment Design
 The equipment design element consists of logistics-related design
parameters such as availability human factors, survivability and
reliability, meeting the resource requirements to minimize support and
maximize readiness.
Computer Resources
 The computer resources element includes identifying the facilities,
software, hardware, manpower, support tools, software development,
documentation and personnel necessary to support and operate the
computer software within the system.

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Maintenance
 Maintenance planning and analysis establish all required elements of
repair and maintenance support capabilities for restoring and maintaining
the operational equipment. This ensures all equipment achieves the
capability to perform its operational mission for the life of the system.
Supplies
 The supplies element consists of identifying all management actions,
techniques and procedures necessary to acquire, store, issue and dispose
of secondary items. This includes provisioning for initial support and
procuring and replenishing inventory parts and spares.
Support Equipment
 The support equipment element consists of identifying all fixed or mobile
equipment necessary for performing support functions, maintenance and
operation of the system. This includes maintenance equipment, automatic
test equipment, calibration equipment and other measuring devices.

Fig:2.4

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International logistics for the firm
Let’s learn more about International logistics for the firm. The globalization of
markets is generally understood as a recent phenomenon, triggered by the
economic development explosion since the World War II; however, while
international trade has certainly increased dramatically in the second half of the
last century, nations have engaged in international trade for years.

The first international traders were involved in logistics as they calculated how
many their ships, or beasts could carry, how much food and water to bring along
and how best to package the goods while in transit, decisions which parallel
exactly what a modern logistics manager does. They had to decide which
payment method was appropriate just as modern exporter must determine the
best way of ensuring security of payment.

While many aspects of international logistics have changed, the concern of

people involved in this field remains similar; they have to ensure that goods
manufactured in part of the world arrive safely at their destination.

Fig:2.5

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Chain of International Trade Logistics
There are only a few activities that are exclusively specific in the chain of
international trade logistics; however, the traditional logistics activities are
managed differently in the international environment than they are in a domestic
environment.

The environment in international logistics is quite important. While there is

obviously the issue of language and culture, the physical environment of
international logistics is quite distinct.

The decision regarding international transportation is eminently more

complicated different mode of transportation, different carriers, different
transportation documents and much longer transit times.

The number of intermediaries involved is greater. Banks insurance companies,

freight forwarders, government of the exporting and importing countries all
have different paperwork requirements

Fig:2.6

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Functions of International Logistics
(Inbound & Outbound functions)
Logistics is a total system approach in exports or imports management and
applies to the timely movement or flow of materials/products from the sources
of supply to the point of manufacture, assembly, or distribution.

It involves two categories of operations.

 Material Management: The primary area of operation is inbound flows

of materials or products. It encompasses acquisition of products,
transportation, inventory management, storage and handling of materials.
 Physical Distribution: They key are of operation is outbound flows of
material or products. It includes outbound transportation, inventory
management and proper packaging to reduce damage during transit and
storage.

Fig:2.7

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Target Function of International Logistics
Avoiding any mathematical formalization, the target (objective) function of a
system could be defined as an action or a combined set of actions devoted to
gain the for the sake of which the present system exists (was created).
Taking into account the sense and scope of the Subject of International
Logistics the target function of international logistics could be a priori defined
as minimizing logistics risks and transaction costs of international trade
(business) under some given conditions (restrictions) defined by logistically
significant marketing dimensions (variables) of the marketing environments of
such countries where the global supply chain is passing through. This definition
displays the fact that the international logistics does not exist per se, but is the
“hard and soft” of international business, universally getting into and
cooperating with other fields (disciplines) of international business (See the pic
below) and being its "framework".

Fig:2.8

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The simplest and very lapidary definitions of logistics and logistics management
say, respectively[3]: “logistics is a term describing the many functions related to
the movement of an item from the place where it was made or grown to the
place where it is used or consumed” and “logistics management is the act of
supervising the movement of goods [and also information and finance flows
that support the said movement] to the right place at the right time”. From here
it is logical to draw the following conclusion: the target function of international
logistics should be defined on the basis of nature and content of the
International Logistics Mix where the latter could be understood as a set of
arguments of this target function. A version of the said set of arguments could
be revealed referencing to the logistics mix above. Another one presenting The
World Bank’s Logistics Performance Index (LPI) is given below:

 Efficiency of the customs clearance process.

 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.
 Frequency with which shipments reach the consignee within the
scheduled or expected time
Therefore, skipping some intermediary suggestions and considerations,
the target function of international logistics management (as a completed
system) could be defined as adjusting the home country’s logistics mix to the
logistically significant dissimilarities of the host country’s dimensions
(variables) of marketing environment that are significant for transferring goods
through the frontier between these home and host countries for the purpose of
decreasing (minimizing) logistics transaction costs and risks of international
trade (business).

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International Commercial Terms (Incoterm)
Incoterms are a set of simple three letter codes which represent the different
ways international shipments may be organized. They allow sellers and buyers
from different cultures and legal systems to decide at what point the ownership
and the obligation to pay for freight, insurance and customs costs transfer from
one to the other.

Incoterms were introduced in 1936 and they have been updated six times to
reflect the developments in international trade. The latest revisions are
sometimes referred to as Incoterms 2000. The Incoterms informs the buyer what
is included in the purchase price since the costs of transportation, insurance and
customs are split between the buying and the selling parties. The Incoterms
determine the mutual responsibilities between the buyer and the seller in the
contract and does not indicate the distribution of responsibilities among the
consignor, the carrier and the consignee.

Incoterms are invaluable and a cost-saving tool. The exporter and the importer
need not undergo a lengthy negotiation about the conditions of each transaction.
Once they have agreed on a commercial term as CIF, they can sell and buy the
goods without discussing who will be responsible for the freight, cargo
insurance and other costs and risks.

Representation of Incoterms – There are thirteen Incoterms that are used by

businesses and are used in four different areas.

Group E: used where the seller does not want to arrange transport.

 EXW
– Ex Works – EXW means Ex Works and is followed by a named place,
for example EXW Dallas. EXW means the seller’s responsibility is to
make the goods available at the seller’s premises. The seller is not
responsible for loading the goods on the vehicle provided by the buyer,
who then bears the full cost involved in bringing the goods from there to
the desired destination.

Group F: used where the seller can arrange some transport within his/her own
country.

 FCA – Free Carrier – FCA means Free Carrier and is followed by a

named place, for example FCA Brownsville. FCA means the seller fulfils
its obligation to deliver when it has handed over the goods, cleared for
export, into the charge of the carrier named by the buyer at the named

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 place. If no precise point is indicated by the buyer, the seller may choose
within the place or range stipulated where the carrier shall take the goods
into its charge.

 FAS – Free Alongside Ship – FAS means Free alongside Ship and is
followed by a named port of shipment, for example FAS New York. FAS
means the seller is responsible for the cost of transporting and delivering
goods alongside a vessel in a port in his country. As the buyer has
responsibility for export clearance, it is not a practical incoterm for U.S.
exports. FAS should be used only for ocean shipments since risk and
responsibility shift from seller to buyer when the goods are placed within
the reach of the ship’s crane.

 FOB – Free on Board – FOB means Free on Board and is followed by

the named port of shipment, for example FOB Baltimore. With FOB the
goods are placed on board the ship by the seller at a port of shipment
named in the sales agreement. The risk of loss of or damage to the goods
is transferred to the buyer when the goods pass the ship’s rail, i.e., off the
dock and placed on the ship. The seller pays the cost of loading the
goods.

Group C: used where the seller can arrange and pay for most of the freight
charges up to the foreign country.

 CFR – Cost and Freight – CFR means Cost and Freight and is followed
by a named port of destination, for example CFR Sydney. CFR requires
the seller to pay the costs and freight necessary to bring the goods to the
named destination, but the risk of loss or damage to the goods, as well as
any cost increases, are transferred from the seller to the buyer when the
goods pass the ship’s rail in the port of shipment. Insurance is the buyer’s
responsibility.

 CIF – Cost, Insurance and Freight – CIF means Cost, Insurance and
Freight and is followed by a named port of destination, for example CIF
Miami. CIF is similar to CFR with the additional requirement that the
seller purchases insurance against the risk of loss or damage to goods.
The seller must pay the premium. Insurance is important in international

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 shipping, more than domestic US shipping, because U.S. laws generally
hold a common carrier to be liable for lost or damaged goods.

 CPT – Carriage Paid To – CPT means Carried Paid To and is followed

by a named place of destination, for example CPT Kansas City. CPT
means that the seller must pay the freight for the carriage of the goods to
the named destination. The risk of loss or damage to the goods and any
cost increases transfers from the seller to the buyer when the goods have
been delivered to the custody of the first carrier, and not at the ship’s rail.
 CIP – Carriage and Insurance Paid To – CIP means Carriage and
Insurance Paid To and is followed by a named place of destination, for
example CIP Boston. CIP has the same incoterm meaning as CPT, but in
addition the seller pays for the insurance against loss of damage.

Arrival (Group D): used where the seller can pay for most of the delivery
charges to the destination country

 DAF – Delivered at Frontier – DAF means Delivered at Frontier and is

followed by a named place, for example DAF El Paso. DAF means that
the seller’s responsibility is complete when the goods have arrived at the
frontier but before the customs border of the country named in the sales
contract. This buyer is responsible for the cost of the goods to clear
customs.

 DES – Delivered Ex Ship – DES means Delivered Ex Ship and is

followed by a named port of destination, for example DES Vancouver.
DES means the seller shall make the goods available to the buyer on
board the ship at the place named in the sales contract. The cost of
unloading the goods and associated customs duties is paid by the buyer.

 DEQ – Delivered Ex Quay – DEQ means Delivered Ex Quay and is

followed by a named port of destination, for example DEQ Los Angeles.
DEQ means the seller has agreed to make the goods available to the
buyer on the quay at the place named in the sales contract.

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 DDU – Delivered Duty Unpaid – DDU means Delivered Duty Unpaid
and is followed by a named place of destination, for example DDU
Topeka. The seller has to bear the costs involved in shipping the goods as
well as the costs and risks of carrying out customs formalities. The buyer
pays the duty and has to pay any additional costs caused by its failure to
clear the goods for import in time.

 DDP – Delivered Duty Paid – DDP means Delivered Duty Paid and is
followed by a named place of destination, for example DDP Bakersfield.
The seller has to pay the costs involved in shipping the goods as well as
the costs and risks of carrying out customs formalities. The seller pays the
duty and the buyer has to pay any additional costs caused by its failure to
clear the goods for import in time. DDP should not be used if the seller is
unable to obtain an import license.

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Types of Export Documents
In exports, it is quite common for cargos to require a variety of certificates
before they are permitted to be imported into the country of destination. The
purpose of a certificate is to provide pre-shipment confirmation of the status of
a particular aspect (health, value, condition, origin, etc.) of a specific cargo.

Without these certificates, the cargo will not be permitted to be imported and so
certificates play a very important role in the export process and one need to
ensure that.

 required certificates have been obtained,

 That these certificates are correct and acceptable to the importing
authorities (i.e., that your cargo complies with the requirements of the
importing authority).

It is pointless in having a certificate, which confirms that the cargo does not
comply with the import requirements; such cargo will simply not be permitted
to be imported.

The types of certificates that one may be required to obtain, include.

 Consular Invoice: Required in some countries, a consular invoice

describes the shipment of goods and shows information such as the
consignor, consignee, and value of the shipment. If required, copies are
available from the destination country’s embassy or consulate in the U.S.
The cost for this documentation can be significant and should be
discussed with the buyer.
 Commercial Invoice: A commercial invoice is a bill for the goods from
the seller to the buyer. These invoices are often used by governments to
determine the true value of goods when assessing customs duties.
Governments that use the commercial invoice to control imports will
often specify its form, content, and number of copies, language to be
used, and other characteristics.
 Certificates of Value: A Certificate of Value is intended to confirm the
value of a cargo to assist in quick clearing of the goods in the country of
destination. Often the Certificate of value is combined with a Certificate
of Origin and is referred to as a Certificate of Value and Origin (CVO). A
CVO outlines details about the labor and packing costs, royalties or
commissions (if applicable), freight charges and any overseas insurance
costs. The CVO also provides an exporter’s declaration and statement, in
the form of clauses, about the value and origin of the goods.

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 Bill of Lading: A bill of lading is a contract between the owner of the
goods and the carrier (as with domestic shipments). For vessels, there are
two types: a straight bill of lading, which is non-negotiable, and a
negotiable or shipper’s order bill of lading. The latter can be bought, sold,
or traded while the goods are in transit. The customer usually needs an
original as proof of ownership to take possession of the goods.
 Export Packing List or Cargo Manifest: Considerably more detailed and
informative than a standard domestic packing list, an export packing list
lists seller, buyer, shipper, invoice number, date of shipment, mode of
transport, carrier, and itemizes quantity, description, the type of package,
such as a box, crate, drum, or carton, the quantity of packages, total net
and gross weight (in kilograms), package marks, and dimensions, if
appropriate. Both commercial stationers and freight forwarders carry
packing list forms. A packing list may serve as conforming document. It
is not a substitute for a commercial invoice. In addition, U.S. and foreign
customs officials may use the export packing list to check the cargo.
 Health Certificate: For shipment of live animals and animal products
(processed foodstuffs, poultry, meat, fish, seafood, dairy products, and
eggs and egg products). Some countries require that health certificates be
notarized or certified by a chamber and legalized by a consulate.
 Export Declaration Form: It is a Customs form completed and submitted
by an exporter at the port of export, it is meant to serve two major
purposes: (1) to provide information on amount, nature, and value of
exports to the statistical office for compilation of foreign trade data, and
(2) to serves as export control document.

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 Fig:2.9

Cargo Insurance
The term cargo insurance, popularly known as marine insurance, applies to all
modes of transportation. The need for export (or import) cargo insurance often
differs from exporter to exporter (or importer to importer) and from
consignment to consignment.

Cargo insurance provides coverage against physical damage or loss of goods

during shipping, whether by land, sea or air. Because of the many dangers
inherent in shipping, most individuals and businesses choose to insure their
goods while they are in transit even when the insurance is not mandatory in
trade term.

Depending on the international commercial terms, either the seller (the

exporter) or the buyer (the importer) is responsible for insuring the cargo. The
seller is obligated to insure the cargo in the CIF and CIP terms. The seller may
opt not to insure the cargo at his/her own risks in the DDU and DDP terms.

The trade terms DDU and DDP are often used in the turnkey projects where the
amount at stake is large. In practice, the seller usually insures the cargo in the
DDU and DDP terms.

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Important aspects of Insurance are as follows.

 Insurance Policy and Cover Note: The insurance policy or policy is a

document of the proof of insurance coverage. The format of insurance
policy forms varies from insurer to insurer, but all essentially has the
Institute Clauses and the same information as contained in the Insurance
Application-Instructions (IAI). The policy has to be issued and signed by
an insurance company or its agent. If more than one original is issued and
is so indicated in the policy, all the originals must be presented to the
bank, unless otherwise authorized in the letter of credit (L/C). The sample
letter of credit requires “insurance policy in duplicate …” as such the
presentation of one original and one copy (both signed) will satisfy the
requirement. Unless authorized in the letter of credit (L/C), the cover note
issued by broker, which is a temporary insurance coverage pending the
later issuance of an insurance policy, is not acceptable.

 Insurance Policy and Insurance Certificate: The insurance policy,

either a specific policy or an open policy, is issued once by the insurer. In
the case of the exporter holding an open policy, he/she cannot send that
sole policy to all the buyers and for all the shipments made over a period
of time. Therefore, in lieu thereof an insurance certificate—certificate of
insurance—is issued by the exporter to each shipment. The blank
insurance certificates are supplied by the insurer pre-signed and bearing
the open policy number of the exporter. Unless otherwise stipulated in the
letter of credit (L/C), the insurance certificate issued under the open
policy is acceptable. If the L/C specifically calls for an insurance
certificate, the insurance policy is accepted in lieu thereof. In practice, the
insurance policy is often used. In the sample letter of credit, the insurance
policy is required; hence the bank will not accept the insurance
certificate.

 Open Policy: The open policy—blanket policy or floating policy—is

issued once by the insurer under contract to cover all shipments made by
the exporter over a period of time (one year usually) subject to renewal,
rather than to one shipment only. It is more often used by the large
exporter. In an open policy the exporter is required to periodically
(monthly usually) declare every shipment made to any location, covering
any type of goods, and using any means of conveyance, including
multimodal transport and transshipment, in order that the insurer may

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 calculate the insurance premiums and invoice them accordingly. The
exporter completes the insurance declaration form supplied by the insurer
and/or supplies the copy of the insurance certificates to the insurer. An
insurance declaration form typically contains the information in an
Insurance Application-Instructions (IAI).

 Specific Policy: The specific policy—voyage policy—is issued by the

insurer to cover a particular shipment or one shipment only. The specific
policy is often used in many countries. The exporter may use the
Insurance Application-Instructions (IAI) or similar form to apply for a
specific policy.

When the exporter delivers the goods, the insurable interest in such goods
transfers at the point and time where the risk shifts from the exporter to the
importer, as determined by the international commercial terms used.

The time the insurable interest transfers from the exporter to the importer is,
technically, the time the exporter endorses the specific policy or the insurance
certificate to the importer, as the case may be.

The insurance certificate bears the open policy number of the exporter and, like
in a specific policy, the claim agent at port of destination and that claim payable
at destination is also indicated.

The importer relies on the specific policy or the insurance certificate and the
supporting claims documents as proof that the goods have been insured and that
he/she has the insurable interest in the goods when filing for insurance claims
against loss or damage.

In the trade terms DDU and DDP, the exporter is responsible for the risks up to
the delivery of goods to the final point at destination (the project site or
importer’s premises usually), as such the insurable interest in the goods does not
transfer from the exporter to the importer in the shipment.

Some countries may require that the import and/or export shipments be insured
with their national insurance companies.

 Utmost Good Faith: The principle of utmost good faith is indispensable

in any insurance contract. Under the open policy the insurer usually
knows only of the shipments made by the exporter after the receipt of the
insurance declaration form and/or the copy of the insurance certificates.
Under such circumstances, a consignment may have reached the importer
in.
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 Good condition, that is, without sustaining any loss or damage, before the
insurer knows of such consignment. If the exporter knows that the
consignment has safely reached the importer and deliberately does not
declare such consignment in the insurance declaration form in order to
avoid paying the insurance premium, such action is a breach of good
faith. Consequently, the insurer may cancel the insurance policy issued to
the exporter when the exporter’s bad faith is known.

 Bad condition, that is, sustaining loss or damage, before the insurer
knows of such consignment. Whether or not the exporter knows that the
consignment has not safely reached the importer and fails to declare such
consignment in the insurance declaration form, the insurer is liable to pay
for the loss or damage out of good faith.

 Indemnity: Cargo insurance is a contract of indemnity, that is, to

compensate for the loss or damage in terms of the value of the insured
goods. The amount insured as agreed between the insurer and the assured
forms the basis of indemnity.
 Institute Clauses: The Institute Clauses of the Institute of London
Underwriters, often referred to as the London Clauses or English Clauses,
form the basis of the cargo insurance contract in many countries. In
U.S.A. and some other areas, the Institute Clauses of the American
Institute of Marine Underwriters, often referred to as the American
Institute Clauses or American Clauses, are used. The American Clauses
and the London Clauses can be different from one another. The most
common Institute Clauses include the Institute Cargo Clauses, Institute
War Clauses, Institute Strike Clauses, and Institute Air Cargo Clauses.

 Institute Strike Clauses (Cargo): The Institute Strikes, Riots and Civil
Commotions Clauses is commonly referred to as the Institute Strike
Clauses. The insurance covers the loss of or damage to the property
insured caused by strikers, locked-out workmen, or persons taking part in
labor disturbances, riots or civil commotions, and persons acting
maliciously. However, it does not cover the loss or damage proximately
caused by delay, inherent vice or nature of the property insured and the

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 loss or damage caused by hostilities, warlike operations, civil war,
revolution, rebel-lion, insurrection or civil strife arising there from.

 Institute Air Cargo Clauses (All Risks): The Institute Air Cargo
Clauses (All Risks) are used specifically in air freight. The terms and
conditions of cover closely follow the Institute Cargo Clauses (All Risks)
revised to suit air shipments. The Clauses exclude sending by Post (i.e.,
postal shipments not covered).

Trade-off analysis
Trade-off analysis explores the cost of relaxing one goal in order to achieve an
increase in another goal. A classic trade-off situation is the reduction of
sustainable wood supply resulting from retaining old-growth forests. The goal
programming framework in Patchworks is an ideal tool to conduct trade-off
analysis: it’s as easy as adjusting the weight values associated with each goal.
These weights assign the priority that each goal has relative to the others.
Simply run the Patchworks model several times with varying weight values to
map out the alternate levels of production between different targets.

With its support for scripting, Patchworks makes trade-off analysis fast and
efficient. Patchworks provide a batch modelling framework to easily assemble
parameters representing alternate management policies from a suite of simple
code components. This modelling framework provides a self-documenting
system to record modelling parameters and makes setting up and running
multiple scenarios easy and less prone to error. If datasets change and scenarios
need to be rerun, the modelling framework eliminates guesswork and saves
time.

It is a way to quantify consumer’s values associated with different product

attributes using multivariate techniques. Participants compare products to
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establish preferences and can then explain the importance of different attributes.
Also, functional brands benefit more from conjoint analysis than do fashionable
brands as the analysis relies on utility theory and consumer rationality. There
are several conjoint analysis tools.

Forms of Logistics Management

Return/Reverse Logistics

 In order to increase the sales as well as the market share, many companies
advertise that their goods will perform well over a period of time. The
customer is, therefore, led to believe that in case he buys the product of
that company, he is assured of satisfactory performance of the product.
But at the same time, it is very much obvious that the company cannot
assure the satisfactory performance of each and every of its product
which is sold in the market. Few of the products sold may not perform as
advertised over the specific period of time. This is the first type of Forms
of logistics management.
 Such products need to be brought back by the company to confirm good
customer service. Multination Companies (MNCs) to protect their market
image and to stall its competitors from grabbing its customers, recall
immediately the defective or substandard product from the market.
 Product recall is a critical competency resulting from increasingly rigid
quality standards product expiration dating responsibility for hazardous
consequences

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  The company has, therefore, to take into account the defective goods that
would be returned while framing the total logistical system network and
calculating the total cost of such a system of network. Incorporating the
goods returned in the total logistical systems network and cost is called as
Return Logistics. Return Logistics requirement’ also result from the
increasing number of laws prohibiting random scrapping and disposal on
one hand, while encouraging recycling of waste such as beverage
containers, packaging materials, etc. The most significant aspect of return
logistical operation is the need for maximum control when a potential
health liability exists. E.g.: a contaminated drug in the market is
extremely dangerous and the company has to recall all the stock of
contaminated drug.

Military Logistics

It is the art and science of planning and carrying out the movement and
maintenance of military forces. In its most comprehensive sense, it is those
aspects or military operations that deal with. This is the second type of Forms of
logistics management.

 Design, development, acquisition, storage, distribution, maintenance,

evacuation, and disposition of material,
 Evacuation, and hospitalization of personnel,
 Acquisition or construction, maintenance, operation, and disposition of
facilities.

Third Party Logistics (3PL)

 It describes businesses that provide one or many of a variety of logistics

related services. Types of services would include public warehousing,
contract warehousing, transportation management, distribution
management, freight consolidation. A 3PL provider may take over all
receiving, storage, value added, shipping, and transportation
responsibilities for a client and conduct them in the 3PL’s warehouse
using the 3PLs equipment and employees or may manage one or all of
these functions in the client’s facility using the client’s equipment, or
anything combination of the above. 3PL can be defined as the “Business
of proposing physical distribution reforms to a client and undertaking
comprehensive physical distribution services.” This is the third type of
Forms of logistics management.

The growing demand for 3PL can be attributed to both demand & supply
side factors.

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  Faced with deregulation & growing competition, transport companies are
seeking new business opportunities.
 Clients are seeking to outsource their logistics operations cut costs &
focus management resources on core businesses.

Fourth Party Logistics

 Traditionally, suppliers and big corporations have been meeting the

demands by increased inventory, speedier transportation solutions posting
on-site service engineers and many times employing a third-party service
provider. Today they need to meet increased levels of services due to e-
procurement, complete supply visibility, virtual inventory management
and requisite integrating technology. Now corporations are outsourcing
their entire set of supply chain process from a single design, make and
run integrated comprehensive supply chain solutions.
 This evolution in supply chain outsourcing is called Fourth Party
Logistics – the aim being to provide maximum overall benefit.
 Thus, a fourth party provider is a supply chain integrator that assembles
and manages the resources, capabilities and technology of its own
organization with those of complementary service provider to deliver a
comprehensive supply chain solution. This the fourth type of Forms of
logistics management.

Cost Effectiveness of Fourth Party Logistics

 Revenue growth by enhanced product quality, product availability, and

improved customer service -all facilitated by the application of leading
technology.
 Operating cost reduction can be achieved through operational
efficiencies, process enhancements and procurements. Savings will be
achieved by complete outsourcing of supply chain functions and not just
selected components.
 Fixed capital reductions will result from capital asset transfer and
enhanced asset utilization. The fourth party logistics organization will
own physical assets through freeing up the client organization to invest in
core competencies.
 Emergence of fourth party logistics is a new concept in supply chain
outsourcing. With the rapid advancements of technologies, it will be
easier to reap the benefits of fourth party logistics concept. Thus, fourth
party logistics is the future of supply chain management.

Inbound Logistics:

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 Creation of value in a conversion process heavily depends on availability
of inputs on time. Making available these inputs on time at point of use at
minimum cost is the essence of Inbound Logistics. All the activities of a
procurement performance cycle come under the scope of Inbound
Logistics.
 Scope of Inbound Logistics covers transportation during procurement
operation, storage, handling if any and overall management of inventory
of inputs. Several activities or tasks are required to facilitate an orderly
flow of materials, parts or finished inventory into a Manufacturing
complex. They are sourcing, order placement and expediting,
transportation, receiving and storage. Overall, procurement operations are
called inbound logistics. Inbound logistics have potential avenues for
reducing systems costs.
 Delivery time, size of shipment, method of transport & value of products
involved are different from those of physical distribution cycles.
Normally delivery is large as a low-cost transportation mode is chosen.
As the value of inventory is low, size of shipment is large & transit
inventory costs are low.

Fig:3.1

 Outbound Logistics

Value added goods are to be made available in the market for customers to
perceive value. Finished goods are to be distributed through the network of
warehouses and supply lines to reach the consumer through retailers’ shops
in the market. During conversion value is added to the raw materials and as a
result value of the inventory in this case is very high unlike inputs. Now the
size of shipment, modes of transport and delivery time are different as
compared to inputs. Activities of shipment, distribution performance cycle
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 come under the scope of Outbound Logistics. They are order management,
transportation, warehousing, packaging, handling etc.

Fig:3.2

Types of Logistics
There are many types of logistics. The most well-known type is sales logistics
that moves products from the producer to the consumer. In addition, there are a
number of other types of logistics, such as procurement logistics which is the
flow of raw materials and parts, production logistics which is the flow of
materials inside a factory or business, recovery logistics which is the return flow
of returns from consumers and waste, and recycling logistics which is the flow
of recyclable materials. This section describes the types and fields of logistics in
depth.
Logistics Fields
Logistics can be split into five types by field: procurement logistics, production
logistics, sales logistics, recovery logistics, and recycling logistics. Each of
these is explained in detail, but first we should learn about logistics fields and
types. For recovery logistics and recycling logistics, both types are the same up
to the recovery of goods from consumers, but recycling logistics is the type that
recycles the goods that are collected.

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 Fig:3.3

Procurement Logistics: Procuring Raw Materials and Parts

Procurement logistics is the flow of goods when the raw materials and parts
necessary for manufacturing are procured from suppliers. This field did not
attract much attention before, but now that small-lot production of a variety of
models is the main type of production, many firms are actively pursuing
production by procuring the necessary materials in only the necessary amounts
at the necessary times (the shift to just-in-time production) because it is directly
connected to reducing inventory costs.
Production Logistics: Materials Management, Distribution in Factories, Product
Management, Shipping
Production logistics is the flow of goods that includes the management of
procured parts and materials, distribution inside a factory, product management,
packaging, and shipping to warehouse. Delivery management, warehouse
dispatch management, and shipping management can be optimized and the state
of delivery vehicles can be managed by smoothly linking procurement logistics
and sales logistics described later.
Sales Logistics: Delivery from Warehouse to Wholesalers, Retailers, and
Consumers
Logistics typically refers to sales logistics. In the past this was mainly delivery
from delivery centres and logistics warehouses to distribution points such as
wholesalers and retailers. But now direct delivery also makes up a large amount
of this volume due to online shopping and e-commerce. Whether delivery
through delivery centres and logistics warehouses or direct delivery from
production sites, higher efficiency in transportation and delivery and shrinking
inventory are indispensable for delivering the necessary goods to the necessary

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people in the necessary quantities at the necessary time. This also contributes to
improving customer satisfaction.
Recovery Logistics: Recovering and Recycling Products, Containers, and
Packaging
If the flow of goods from production to consumption by procurement logistics,
production logistics, and sales logistics is described using the circulatory system
of the body, it would be said to be forward logistics. On the other hand,
recovery logistics or reverse logistics is the flow that recovers and recycles
products, containers, and packaging that have fulfilled their role. Similar to
recycling logistics described later, emphasis is being placed on this flow in
recycling-oriented societies.
Recycling Logistics: Recovering and Recycling Recyclable Products and
Containers
Typical examples of recycling logistics are recovering and recycling empty
cans, plastic bottles, and old paper. Containers, packaging, old computers, and
inkjet cartridges can also be recovered and recycled in the same manner. The
importance of recycling logistics has been increasing in recent years as
measures for the environment and to effectively utilize materials such as minor
metals.

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The Importance of International Logistics

Logistics management covers the physical movement of products as raw

materials from their point of origin to receipt by end users as a finished product.
Entrepreneurs need to understand international logistics because global
production processes and delivery activities -- encompassing all transportation
modes and storage and distribution systems -- are used more and more
frequently to get a product to a customer.

Production Inputs
The globalization of production means a company can procure or process
resources from just about anywhere on the planet. This may be efficient when a
resource either is not available locally or costs less when purchased from
international markets. Before filing for bankruptcy in 2002, Nippon Kakoh
Seishi was Japan's largest paper company; it owned forests and processing
facilities in various countries around the world to produce wood pulp -- a key
ingredient needed to create paper for its clients. For a small business, production
inputs may include outsourcing production processes or importing finished
products or raw materials from international manufacturers.

Transportation Logistics
Packing, labeling, transportation and insurance are also part of international
logistics. Sea, air, rail and interstate road systems are important aspects of
transportation logistics. The cost of transporting materials and finished goods
affects any decision about where to locate manufacturing facilities or which
supplier to use to deliver a given production input. Keep in mind that some
products cost very little to transport while others cost a great deal, and you'll
need to look at transportation logistics relevant to your business.

Customs Clearance
Foreign goods imported into the United States must be processed by the U.S.
Customs and Border Protection, a federal agency charged with the enforcement
of trade and tariff laws. Customs procedures are generally highly technical; not
properly following them can result in expensive and long delays. An importer

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may retain a customs broker to act as its agent in the entry process. A small
business exporter may work with a freight forwarder or shippers' associations or
use standard international mail delivery services, depending on specific
transportation needs.

Supply Chain
Knowledge of your product's global supply chain is vital for business planning
related to fulfillment capacity. How many orders can your fulfillment center
process in a given amount of time? How long does it take for products or raw
materials to be delivered to a given point within the global supply chain? A
business operator who does not know these answers risks making delivery
promises he cannot keep.

Fig:3.4

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The Role of International Logistics and Why
They Are So Economically Important

The Role of International Logistics and Why They Are So Economically

Important
Many people have no idea what an international logistics company does.
Usually, it is only after delving into the role of global logistics that the real
economic value gets exposed. If your business does international trading, it is to
your advantage to learn about the economic importance of international
logistics.

As you gain insight into the importance of logistics in international trade, it will
become clear that a company that provides these services will significantly
benefit your business.

The Role of Logistics in International Business

While transporting cargo is one of the most vital aspects of international trade, it
is only the means to an end. A logistics company makes sure your goods get to
their designated location in another country. To accomplish that, it all starts
with giving the potential customer a quote, followed by multiple decisions and
actions.

A reputable logistics company identifies the appropriate mode of transportation

based on the cargo and then makes the necessary arrangements on your behalf.
It monitors your shipment throughout the journey. If needed, it can set up third-
party warehousing. Through all this, the company adheres to international laws
to prevent a delayed delivery.

The importance of logistics in international trade is undeniable. While working

on your behalf, the company ships your cargo and sees that it arrives on time
and without damage.
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The Significance of International Transport

A respected company that provides international transport services plays a

major role in moving goods from one country to another. For success, it relies
on four elements crucial to the movement of cargo.

Integrity – By far, the most critical aspect of international shipping is the

integrity of the logistics company. With that, you have confidence in its
connections with third parties and know it will keep you informed of progress.
Integrity also means the logistics company will meet all contractual
requirements.
Pedigree – A respected logistics shipping company understands and follows all
customs formalities on both the front and back end of the shipping process.
Chain of Custody – With a chain of command, the logistics company knows
who physically handled your cargo through each phase. If your shipment gets
delayed or goods get damaged, it can identify the responsible party.
Tracking and Tracing – By tracking and tracing your shipment, the logistics
company can see where your cargo is in real-time. Not only does that help
spearhead any potential issues that might trigger a delay, it also allows the
company to keep you updated .
Logistics play a crucial role in today’s economy. Improved trade logistics
infrastructures such as roads & highways, ports, railways, airports including dry
ports, warehousing infrastructure and labs & testing facilities are necessary for
sustainable and balanced economic development of all parts of the country.
Logistics is the management of transporting goods from the point of origin to
the point of consumption in order to meet customer’s requirements. In short,
logistics is all about transporting the right product, to the right customer, in the
right condition & quantity and at the right place, at the right time and at the
right cost.

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 The success of any business or economy of the country in global markets is also
depending on the importance of trade logistics solutions.
Let’s discuss 7 contemporary trends that can be identified
regarding the importance of logistics in global industry.

·         Generation of Demand

The demand of any product is improved significantly from increased mobility,

unobstructed movement of products & services and access to better logistics
infrastructure. This is because enhanced trade and logistics infrastructure create
place, time and form utilities for the customers & users. Both customers and
users can be serviced at any time and at any place. Thus, improved international
logistics infrastructure helps in increasing the overall sales of the company’s
products.

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·         

 Cost Reduction in Doing Business

Improved logistical infrastructure helps in keeping cost of business at the lower

side as transportation of products from one place to another becomes almost
uninterrupted due to better ports, railway network, roads and civil aviation
infrastructure.
For example, Due to better road connectivity in China, a truck can travel 1,300
km into this country in about 74 hours. And the same distance, which is
equivalent to distance between Delhi-Kolkata, is covered in about 144 hours in
India. This delay not only extends trade cycle, but the quality of certain goods
gets poor and fetches lower prices in markets.

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 Tapping Clients in the World

Improved global logistics services from top logistics companies and better
transportation are important for the movement of goods and services from one
region to another. This helps companies to have a tap on the customers in every
nook and corner of the world.

For example, Indian industry has many potential fields such as electronics,
engineering, chip designing, auto components, etc. It can contribute to the
world’s markets only if the country has improved trade logistics infrastructure
and networking systems; otherwise, the business opportunities can be outpaced
by the nation’s rivals from other developed countries.

Hence, any country needs to have quality logistics infrastructure to tap clients
all over the world.  

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·         Ensuring Rapid Economic Growth

In the development process of any country, growth in the economy plays a vital
role. This is possible from the expansion in trade & logistics infrastructure that
create demand in economic system for products such as iron & steel, cement
and manpower.

For example, India has to make its logistical infrastructure better, which will not
only grow its economy but also help its companies to accomplish a sustained
superior performance in international markets through enhanced trade supply
chain process.

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·         Bridging Gap between Demand and Supply

How to bridge gaps between demand and supply of a product? This is one of the
major challenges that any company faces in international markets at all levels
from sourcing of raw materials to work in progress to distribution to customers.
So, better transporting goods from one place to another and timely supply of
products to meet the demand will fill the gap between demand and supply of a
product.

For example, China with main economic clusters on the east coast results to
transporting commodities at far-away regions in the western and remote
northern parts of the country. This creates the problem of demand and supply in
the country’s economic system. Better connectivity from road, rail network,
airstrips and sea help companies to distribute their resources between places
where there are abundant resources and where there is scare.  
  

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·         Strategic Infrastructure for Global Integration

Trade logistic infrastructure and transportation play an important role in

conditions that affect regional, national and international economic entities of
companies in accessing global markets.

For example, Nepali carpet exporters transport their goods towards the Nepal
border by trucks that are unloaded for customs clearance at Birgunj in India.
The products are again loaded on Indian trucks to move towards Kolkata by
road transport. The shipment is then unloaded again for loading on ship and
transshipped to Singapore.

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·         Ensuring Critical Supplies on Time

An efficient logistics system in international trade operations helps companies

in making timely supply of products to their international buyers. Due to
complex functionality of logistic system and long distance involved between
two countries, the problem of safety, care and timing of shipment often cause
nightmares to suppliers, particularly in case of perishable & high value products
and goods with expiry date restrictions. Such products include newspapers,
flowers and marine products.

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Indian Logistics Industry: Current Scenario
and Future Outlook

Logistics is regarded as the backbone of the economy, providing efficient and

cost-effective flow of goods on which other commercial sectors depend.
Logistic industry in India is evolving rapidly, it is the interplay of infrastructure,
technology and new types of service providers, which defines whether the
logistic industry is able to help its customers reduce their costs in logistic sector
and provide effective services.
Despite of the weak economic sentiments, the logistics industry continues to
witness growth due to the growth in retail, e-commerce and manufacturing
sectors. The Global Logistics sector was expected to grow 10-15% in the period
2013-14. Logistics industry is expected to reach over USD 2 billion by 2019.
Rise of e-commerce logistics and increased domestic consumption will lead the
way for the industry in the coming years. With a promise of growth and
improvements, the service-oriented logistics industry is ready to expand beyond
the horizons in the latter half of this decade.

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Recent scenario

The recent Indian logistics sector comprises of inbound and outbound segments
of the manufacturing and service supply chains. Of late, the logistics
infrastructure has gained a lot of attention both from business industry as well
as policy makers. The role of managing this infrastructure, to effectively
compete has been slightly under-emphasized. Inadequate logistics infrastructure
has an effect of creating bottlenecks in the growth of an economy. The logistics
management regimen has the capability of overcoming the disadvantages of the
infrastructure in the short run while providing cutting edge competitiveness in
the long term. There exist several challenges and opportunities for logistics
sector in the Indian economy.

Challenges faced by the recent logistics industry in India

The most essential challenge faced by the industry today is insufficient

integration of transport networks, information technology and warehousing &
distribution facilities. Regulations exist at a number of different tiers, is
imposed by national, regional and local authorities. However, the regulations
differ from city to city, hindering the creation of national networks.
Trained Manpower is essential both for the third-party logistics sector as well as
the manufacturing and retailing sectors, which is very weak at a practical level,
i.e., IT, driving and warehouse as well as at a higher strategic level. The
disorganized nature of the logistics sector in India, its perception as a
manpower-heavy industry and lack of adequate training institutions has led to a
shortfall in skilled management and client service personnel. There is a lack of
IT standard, equipment and poor systems integration.
Poor facilities and management are the reason for high levels of loss, damage
and deterioration of stock, mainly in the perishables sector. Part of the problem
is insufficient specialist equipment, i.e., proper refrigerated storage and
containers, but it is also partly down to lack of training. The practitioners and
the academicians are now aware of the importance of logistics and supply chain;
however, the field is still under penetrated as far as research is concerned. It is
essential to prioritize research and development so that the weaknesses in the
industry can be taken care of and improved.

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Solutions to some of the challenges

Infrastructure is the backbone of every country’s growth and prosperity and for
the logistics industry to flourish special emphasis has to be on building world-
class road networks, integrated rail corridors, modern cargo facilities at airports
and creation of logistics parks which need to be given a status equivalent to
Special Economic Zones.
It is necessary to realize that the benefits which can beastly be practiced in
logistics industry can be brought about by the companies by establishing
training intuitions, so that there is improvement in the overall service quality of
the sector. Good storage and Warehousing facilities are important for the
growth of the logistics industry. With the increase in the transportation of
perishable products, the logistics agencies need to give a lot of importance to
enhancing the Warehousing facilities.
Warehousing is required to go to the next level taking into account the changing
dynamics of JIT manufacturing, global procurement and new models of sales
and distribution. Emphasis on research and development is potent mainly
because it encourages the use of indigenous technology which can make the
industry cost competitive and can also bring about improvement in services
thereby using better, effective and efficient services. Particular focus has to be
on research in process excellence which can help to eliminate inefficiencies and
bring Indian logistics on par with global practices.

Future prospects

The logistics firms are moving from a traditional setup to the integration of IT
and technology to their operations to reduce the costs incurred as well as to
meet the service demands. The growth of the Indian logistics sector depends
upon its soft infrastructure like education, training and policy framework as
much as the hard infrastructure.
To support India’s fast paced economy growth of logistics industry is very
essential. It is estimated that the Indian logistics industry will continue to show
robust growth of 10-15% annually, leading the pace of growth of the economy
at large.
The global economic outlook, indeed that of India is expected to significantly
improve as India Inc begins to tackle the economic downturn. With a new
government many policies are expected to be implemented which will give a
fresh impetus to India’s growth engine particularly in the corporate and SME
sector which in turn will expand demand for the logistics sector.

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With the implementation of GST, the logistics companies, which are currently
forced to set up many small warehouses across multiple cities can set up just a
few, big warehouses region wise and can follow the hub-and-spoke model for
freight movement from the warehouses to the different manufacturing plants,
wholesale outlets, retail outlets and the various POS. This growth is backed by
the boom in the e-commerce sector and expansionary policies of the FMCG
firms.
This has increased the service geography of the logistics firms but they also
have to meet the demands of quick delivery and tight service level agreements.
The industry has moved from being just a service provider to the position which
provides end to end supply chain solutions to their customers. Thus, all this has
paved the way for further growth of Logistics and Warehousing industry in the
coming years.

Fig:3.5

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Case Study

RedSeer and Shadowfax roll out first edition of e-commerce Logistics

Index RSLI
Amazon, Ajio, Dmart, Zomato, Udaan, Xiaomi and Big Basket have emerged as
the leaders in the newly launched RedSeer Shadowfax Logistics Index (RSLI)
report which provides a definitive view of the eCommerce sector’s quarterly
performance on supply chain and logistics and indices them across parameters
of growth, performance, efficiency, customer and merchant experience.

The eCommerce sectors covered in the RSLI include horizontal, vertical, omni-
channel, direct-consumer, hyperlocal (FoodTech, eGrocery etc.) and eB2B.

In the horizontal retailers’ segment, Amazon led the segment but both Amazon
and Flipkart were fairly close on all the parameters. However, Meesho stood out
in terms of growth and reverse shipment experience.

Fig:3.6

155
AJIO led in the vertical segment while Dmart led in the omnichannel space. 
Xiaomi led in the D2C segment, while Big Basket led in the eGrocery
(Hyperlocal) segment, Zomato led the FoodTech (hyperlocal) segment and
Udaan in the eB2B space.

Methodology

The RedSeer Shadowfax Logistics Index is built on a framework of four pillars

which is further measured on 15 metrics. The four pillars are growth index,
performance and efficiency index, merchant experience index and customer
experience index.

The study’s methodology took a multi-pronged approach towards building the

index which includes expert interactions, customer surveys, competitive
intelligence among others followed by data analysis. The scores on a standard
scale of 0-100 at parameter level were then multiplied with the weightages to
arrive at the final index score.

Introduction to Indices:

 Growth Index: eCommerce horizontals dominated in growth during

the quarter. The sector saw 100%+ growth due to COVID recovery
and pent-up demand.

 Performance Index: Omnichannel retailers dominated in performance

and efficiency due to their low cost of fulfilment. Their turn-around
time for delivery is also lower as they are also able to fulfil the orders
from local stores. Hyperlocal brands and vertical platforms had high
costs of fulfilment.

 Customer Experience Index: Horizontal and vertical sectors led in

customer experience across logistics parameters reflecting in their
higher NPS. eB2B lagged in customer experience due to lower
customer satisfaction on ease of shipment returns and lower NPS. 

 Merchant Customer Index: eB2B platforms have high merchant

satisfaction as they have enabled significant reach for the merchants,
resulting in higher NPS.

Commenting on the launch, Abhishek Bansal, Co-founder and CEO,

Shadowfax said, “Logistics is emerging as the bellwether sector indicating the
economic recovery and fiscal wellbeing of India. The pandemic, while it has
presented a multitude of challenges, has also presented an unprecedented

156
opportunity for the sector. Many critical sectors including e-commerce and
retail are staging a recovery, owing to the innovation in logistics. At
Shadowfax, our proprietary API enables and empowers our partners to manage
their logistics requirements efficiently and effectively. We strongly believe that
speed and criticality at doorstep would drive the next revolution in eCommerce
logistics. Both these factors play heavily into the customer’s decision making,
platform stickiness and an enhanced customer experience.”

“To further iterate the crucial role logistics plays in empowering

enterprise, we are launching the RedSeer Shadowfax Logistics Index. This
one-of-a-kind index will objectively capture emerging trends in the logistics
sector and provide insights that will drive innovation shaping the future of
the e-commerce logistics industry.”

~Abhishek Bansal, Co-founder and CEO, Shadowfax

“We are excited to partner with RedSeer for the launch of the index as they
bring unmatched experience and expertise in the domain. Through our
association, we aim to unlock new opportunities in the Indian e-commerce
logistics market and provide a comprehensive analysis of sector defining trends.
The index will help uncover opportunity areas that will go a long way in
propelling the logistics sector to a higher growth trajectory”, he further added.

Commenting on the launch of the report, Anil Kumar, Co-Founder and

CEO of RedSeer Consulting said, “The RSLI report dives to provide an
exhaustive understanding of the sector. This is the first time that such a
comprehensive study has been undertaken and so many fragments have been
looked upon to give an overview of the logistics sector.

Logistics has been one of the key reasons for the success of e-commerce in
India. This study will help the ecosystem get a more nuanced understanding of
the key success levers for ecommerce logistics and how it varies across various
ecommerce sectors. In the report, we have also identified emerging trends in the
logistics space along with the key ecommerce leaders who are leading on
growth, efficiency and customer experience.”

He further adds that with both RedSeer and Shadowfax capabilities, the joint
study identifies the trends and the scope in the logistics sector and, more
importantly, looks into areas where the sectors and players can perform better.

Insights from Sectors and Players:

Horizontal players scored highest in the growth and scale index followed by
D2C, hyperlocal then vertical. However, customer satisfaction on logistics
experience has been highest by vertical platforms, followed by
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horizontal, omnichannel, hyperlocal, D2C and eRTM, and eB2B. But, eB2B as
a sector overall, also witnessed very good seller satisfaction as most of the
sellers were using the platform for the first time.

The report cites that one of the reasons for higher customer and merchant
satisfaction for horizontal and vertical sectors is due to their ability to leverage
their captive logistics and extensive usage of the capabilities of new age
diversified third party logistics.

Overall Shipments Growth

eCommerce platforms shipped ~2.5 billion shipments in FY2020 growing at

~50%+ CAGR in the last 3 years. However, the report cites that shipment
volume is expected to grow at ~30-35% CAGR for next5 years.

Some of the key drivers of growth for eCommerce are the latent demand in
Tier-2+ cities, enablement of logistics networks, infrastructure built by
eCommerce platforms (large horizontals), and new age third-party logistics
players in the last 3-4 years.

About the Index: RedSeer-Shadowfax Logistics Index (RSLI) is a quarterly

comprehensive assessment report of eCommerce logistics in six sectors. This
index covers 40 representative eCommerce platforms across four indices and 15
parameters.

Shadowfax, India’s largest crowdsourced logistics platform, was established in

2015 with the vision of enabling commerce by empowering everyone,
everywhere. Their plug-and-play yet immersive APIs seamlessly bridges the
logistical gap between businesses and customers within minutes.

RedSeer is a leader in the Internet and new age advisory, with over 200
consultants across 5 offices across the breadth of the Internet and investment
industry in India, Middle East, and South East Asia, emerging as the largest
home-grown regional consulting firm.

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Advantages of International Logistics

Adding global logistics to your supply and fulfilment chain is no easy task! It
takes a lot of research, planning and communication to be a success for your
business.
So, what are the advantages of global logistics that make it worthwhile?

 Competitive pricing

It goes without saying that some of the world’s biggest eCommerce businesses
have been relying on global logistics and supply chains for many years. This is
because, despite additional transportation costs, they can still manufacture
goods for less abroad.
The result is an extremely competitive landscape, with those who have the
cheapest supplies available in the largest volumes dominating the markets. With
low costs and high revenue, they often sweeten the deal for customers by
offering extras such as free delivery and expedited shipping options.
This sometimes leaves the small to medium sized eCommerce stores struggling
to keep up. If your competitors are sourcing products from overseas at a cheaper
cost than you, there is only so much you can do to win over price-focussed
customers.
So, if you can benefit from mastering global logistics, it could be your key to
staying competitive.

 Wider product ranges

However, if you are finding that your domestic market is actually getting
swamped by similar products, it might not be worth getting drawn into a war of
competitive pricing. Rather, a global supply chain can help you bring more
innovative products to the market.
There are plenty of niches that eCommerce stores can explore. If you fulfil
beauty and cosmetics orders, it could be that you make the most of the
popularity of Asian skincare products that are unique to the UK market.
Or, if you sell craft beers for example, you could look at importing lesser-heard
of brews to your market.
See our guide on what to consider when importing goods to the UK for more
about this.

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  Fulfil larger scale orders

Another advantage of global logistics is that it opens up the ability to fulfil a

larger volume of orders.
This could be the case for your eCommerce business if you often struggle to
fulfil orders due to stock issues. If supply seems to be scarce in your own
country, it’s worth seeing if you can source more abroad. There’s a chance it
could cost more, but if demand is high enough, it might still be worth your
while.

 Reach new marketplaces

Global logistics isn’t just about your supply chain, either. Selling your products
internationally can be a clear benefit to going global, allowing you to tap into a
whole new audience.
Of course, you need to do plenty of research first, as this could be a costly
experiment if it goes wrong. There are also a few different strategies you could
adopt – whether you ship orders out internationally from your own warehouse,
or invest in an overseas warehouse in your new market.

 A better use of the distribution network

When you have a good logistics system, with different logistics operators, you
can optimize the times, along with the distribution chain. This means that there
are different companies dedicated to logistics and distribution that are
fundamental at a national and international level.

 Costs reduction

This is possible thanks to the different globalized distribution systems, since

they reduce transport costs.

 A more efficient logistic chain

160
If it is possible to carry out a more efficient logistic management, getting to
improve both the final customer satisfaction and the service.

 Transportation and express delivery

Today more than ever, systems that allow urgent transport are being
implemented. In this way, orders can reach their final destination in much less
time than a few years ago.

 Information technology

Technology is helping to evolve the sector itself, improving times and

processes.

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Disadvantages of International Logistics

When executed well, a global supply chain can lower production costs and give
you a real competitive advantage. But, as with most things, there can be
downsides too. Consider some of the disadvantages global logistics could pose
to your business…

 Time and resources

Global logistics take time to manage properly. Take your eye off the ball, and
costs could begin to spiral and communication can break down – ultimately
leading to a failure to fulfil your orders.
If you don’t have someone to take ownership of your global supply chain,
consider working with a third-party logistics provider who can give you the
support you need. Whether you need help with international freight forwarding
or finding the best value couriers to fulfil overseas orders, choose one that suits
your needs best. We have a guide on how to choose the right order fulfilment
partner with some helpful advice.

 Impact of global events

One of the biggest disadvantages of a global supply chain is the impact global
events can have on your fulfilment process.
Never has this been more evident than during the Covid-19 pandemic. Where a
factory closed in one country, eCommerce businesses across the globe felt the
impact as their supply chain dried up almost overnight. You can always
evaluate the risk factors present in every country in your supply chain, but
unexpected events can still occur, such as sudden natural disasters or economic
crashes.
For this reason, it has been predicted that businesses will be looking to diversify
their global supply chain into multiple countries to help protect their
eCommerce business from these kinds of issues.

162
  Communication
Technology has made communication easier than ever before. Emails and video
calls are now standard, reducing the problems that were once caused by
different time zones and languages.
But, even in today’s age, communication can still be a major problem when it
comes to global logistics. One missed email or a misunderstanding on a call and
serious problems or delays can happen. It can be difficult to nurture working
relationships in this way.
In addition, the distance between yourself and your manufacturer or supplier
might make you feel slightly out of the loop when it comes to the details and
quality control. A visit to the factory becomes costlier and more time
consuming with a global supply chain. Plus, if any goods arrive faulty, you will
have a longer wait on your hands to receive any replacements.

 Reputation

Finally, it is worth considering the effect your global supply chain might have
on your reputation. While some customers value getting their orders fast and
cheap, others want to know they are ethically or sustainably sourced with a low
carbon footprint.
You will also need to ensure the manufacturers in your global supply chain
meet your standards – both in the quality they offer and how they offer it. Be
confident that the working conditions and wages they pay are fair and don’t
break any laws.
Make sure you have a good understanding of your customer base and what it is
they value about your business before making any decisions that could damage
your reputation with them.

 EVER CHANGING CUSTOMER NEEDS

The era of one fits all type of service providing has ended. Nowadays, logistics
solutions must be tailored to each customer. Full transparency of orders,
visibility from raw material stage to final goods sale, and reverse logistics have

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almost become standard for some commodity groups. With too many variables
in global logistics and many different parties getting involved, keeping above
level of service might be challenging at times.

 ON TIME DELIVERY
The situation in the US West Coast ports over the past 10 months has been
nightmare for all parties involved, due to the work slowdowns. Vessels that
usually takes about two weeks to arrive from Asia wouldn’t discharge for
almost a month. At some point, the average container picks up time from the
terminal was 15 days. This is just one small example of how it becomes more
and more challenging to keep on time delivery rates high. A strike in India, war
risk in Middle east, piracy in Somalia and even Chinese New Year Holiday are
all contributing factors to this problem one way or another. As we become more
and more interconnected, we will see these problems will increase in the future

 INFRASTRUCTURE
In the age of mega alliances, one major problem stands out: the infrastructure.
With thousands of vessels already serving the major trade lanes around the
globe, the problem of lack of infrastructure has become clearer recently. Most
of the terminals are still trying to complete their set up to accept such large
vessels and service them. This is causing congestion problems at some
terminals. Also, Panama Canal expansion is still underway and although it’s
expected to be completed by next year, we will still see some issues in the
beginning. Although cost effective, less carbon emission and makes more
economical sense for the steam ship lines. Without the infrastructure to
accommodate these vessels, we will see the congestion issues to continue.
Infrastructure problems, especially in developing countries, pose a serious
problem in general. The container handling from Asia to US increased from
115.7million teus to 405 million teus between years 2000 and 2014. This
increase is expected to continue in the coming years, especially after the free
trade agreements being worked on are put into effect. Although the most
sophisticated one, China is still struggling with keeping up the increased
demand. Indian road conditions, south east Asian weather-related problems, are
all contributing to Infrastructure problems.

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CAPACITY
Overcapacity in ocean shipping and tightening capacity in domestic shipping in
the US are both affecting the logistics world in a different way. Various studies
were conducted by Drewry and Alphaliner. They found that freight rates are on
continuous pressure due to large vessel deliveries. Lack of demand and
oversupply was one of the biggest problems in the past few years. The three
largest container carriers — Maersk, MSC and CMA CGM — have on order
capacity equal to 15.6 percent of their current combined fleet; the next 18
largest carriers have orders equal to 19.8 percent of their existing fleet.
East coast shipments from Asia still under space pressure which has driven the
rates to the highest levels in years, however overcapacity for west coast still
remains as an issue. When it comes to domestics shipping, there is tightening
capacity problems. As per the latest study, there are around 30,000 trucker
shortages in the US. The industry is almost at 100-percent active truck
utilization. This is driving the trucking rates higher. Also, the aging workforce,
increased regulations and increased cost pressure are negatively affecting the
flow of cargo domestically. The recent port congestion in west coast and harsh
winter conditions in the past few years in east and Midwest of the US have
made everything worse.

SECURITY
Security is growing concern in logistics industry due to goods are being passed
from provider to provider. Shippers book the cargo with local truckers in origin,
who deliveries the cargo to local warehouse for handling. The warehouses then
load the cargo to trucks which deliver the containers to ports. When the
shipment arrives to its final destination, it has passed through seven or eight
different sets of hands. Unless everyone involved in this process does their due
diligence, security becomes a problem. When any party (from shippers to local
warehouses to truckers that handle the deliveries) breaks the procedures, it is
only a matter of time before something seriously negative will happen. It is
important to work with service providers that have secure supply chain
processes, that have security places in place and that participate government
security programs such as C-TPAT or AEO.

165
Conclusions

In the above text we discuss that what are the logistics matrices and how these
matrices are used to enhance the performance of the organization. Regarding
these performance indicators we also do some literature review. We also discuss
the tools of performance measurement. We also put some light on the
importance of performance management. After all we relate this whole process
with a practical case study of Sainsbury. After all we come to the conclusion
that by recognizing the performance matrices an organization can enhance its
performance and achieve good customer satisfaction and market place.

1. The functional units of the business organization (wholesale enterprises)

involved in the management of the flow of flows have local goals and
objectives (interests).

2. The objectives of the company's services are often contradictory, mutually

exclusive, and therefore are a source of emergence within organizational, cross-
functional conflicts.

3. Persecution of organizational units exclusively by their local goals leads to

increased inter-functional conflicts and serious deviations from the company's
strategic course and objectives.

4. One of the main tasks of the logistics service in the company is to prevent
and resolve cross-functional conflicts by effectively coordinating the activities
of the organizational units.

5. The logistics service as a link with integrated and coordinating potential at

almost all levels of the organizational hierarchy and realizing the process flow
management principle has real opportunities and tools for coordinating the local

166
goals of the company's divisions and the global, systemic goals of the
organization.

167
ANNEXURE

Questionnaire-

1)What do you understand by globalization?

Ans: Globalization means integrating the economy of a country with the
economies of other countries under conditions of free flow of trade, capital and
movement of persons across borders. It includes
(i) Increase in foreign trade
(ii) Export and import of techniques of production.
(iii) Flow of capital and finance from one country to another
(iv) Migration of people from one country to another.

2)What is non – tariff trade barrier?

Ans: A nontariff barrier is a way to restrict trade using trade barriers in a form
other than a tariff. Nontariff barriers include quotas, embargoes, sanctions, and
levies. As part of their political or economic strategy, some countries frequently
use nontariff barriers to restrict the amount of trade they conduct with other
countries.

3). What is International Trade?

Ans: International Trade is the process of focusing the resources & objectives of
an organization on global market opportunities & threats.

4)What is comparative advantage?

Ans: Comparative advantage is a situation in which a person or country is more
efficient at producing a good in comparison with another person or country.
5) What are Private Barriers?

168
Ans: Private barriers are certain business practices or arrangements between
or among affiliated firms. Private barriers are not unique to Asia. Certainly,
private barriers will be the next significant challenge.

6) What is Market Segmentation?

Ans: Market segmentation is a concept to which marketers and academics like
to pay a great deal of attention. All conceivable possibilities for segmenting
the US market have been thoroughly studied.

7)Write the benefits of Globalization?

Ans: Contribution to the developing economy. Increased productivity.
Change in living standards. Increased competition.
Innovative ideas to abroad as well as domestic opportunities.

8)Define shipping bill.

Ans: Shipping bill refers to the documents required for the export of goods.
Under the basis of this document, the customs officer gives permission to export
the goods.

9)What are the responsibilities of a logistician?

Ans:
• Manage the supply chain
• Transportation and storage of material
• Transportation management

10)Explain what is blanket way bill?

Ans: A way bill which covers two or more consignment of freight is referred as
blanket way bill.

169
BIBLIOGRAPHY

 Belz, F-M. and Peattie, K. (2009), Sustainability Marketing, Glasgow:

Wiley and Sons.
 David, F. R. (1986), Fundamentals of Strategic Management,
Englewood Cliffs, NJ: Prentice-Hall.
 De Mooij, M. (1998), Global Marketing and Advertising:
Understanding Cultural Paradoxes, Thousand Oaks, CA: Sage.
 Doyle, P. (1995), Marketing in the new millennium, European Journal
of Marketing, 29(12), 23–41.
 Svensson, G. (2002), Beyond global marketing and the globalization of
marketing activities, Management Decision, 40(6), 574–83.
 Perry, A. C. (1999), ‘International versus domestic marketing: four
conceptual perspectives’, European Journal of Marketing, 24(6), 41–54.
 Sanchez, R. (2003), Knowledge Management and Organizational
Competence, Oxford: Oxford University Press.
 Sanderson, S. M. (1998), New approaches to strategy: new ways of
thinking for the millennium, Management Decision, 36(1), 9–13.

170
Reference 

www.managementstudyguide.com/international-logistics-and-retail
www.transglobeacademy.com/evolution-of-logistics
www.vskills.in/certification/tutorial/trade-off-analysis
www.managementstudyguide.com/international-logistics.htm
www.logisticsinsider.in/category/case-studies
www.google.com
www.investopedia.com
www.wikipedia.org

171
 STUDENT UNDERTAKING
CERTIFICATE OF ORIGINALITY

I Mr. SURAJ JAGANNATH PATIL (1828100700) of BBA Sem IV

would
like to be declare that the project entitles “International Logistics”
submitted to Bharati Vidyapeeth University school of Distance
Education, Pune in partial fulfillment of the requirement for the award of
degree.
It is original work carried out by me under the guidance of Prof.
PRIYETA PRIYADARSHINI
All respected guides, faculty members and other sources have been
properly
acknowledgement and report contain no plagiarism.
To the best of my knowledge and belief the matter embodied in this
project is a
genuine work done by me and it has been neither submitted for assessment
to the
university nor to any other University for the fulfillment of the
requirement of the
course of study.

SURAJ JAGANNATH PATIL

1. As Rushton et al. (2014) note, besides the increasing importance of

distribution, logistics
2. and supply chain, a growth in the number of associated definitions has
been progressively

172
3. registered. As such, the expression ‘international logistics strategy’ may
refer to different
4. meanings in the literature. For instance, the early literature on global
supply chains in the
5. ‘90s, introduced such expression when referring to decisions related to
facility location,
6. network design, production/distribution centralisation, postponement
strategies along the
7. supply chain (e.g., Cooper, 1993; Schmidt and Wilhelm, 2000). Other
authors have
8. referred to ‘international logistics strategy’ as the logistics strategy
supporting company
9. international sales of finished products (e.g., Craze et al., 2010; Strobe et
al., 2008;
10.Rushton et al., 2014). This latter connotation is coherent with the aim of
the present
11.paper, and has been hereinafter adopted.
12.Although the topic of company international logistics strategy has been
widely
13.tackled in the literature, a structured and hierarchical description of its
building variables
14.has not been in-depth developed so far. As an example, Strobe et al.
(2008) considered
15.the ‘logistics planning’ as one of the steps of the company
internationalisation process
16.that includes the definition of service levels, intended lead times,
inventory policy,
17.network structure, capacity calculation, allocation of facilities (e.g.,
warehouses), IT
18.integration, decisions about logistics outsourcing, and preparation of
tenders. According
19.to Rushton et al. (2014), it is possible to identify a list of key areas
representing the major
20.components of distribution and logistics valid for most companies,
namely: transport
21.(e.g., mode of transport and load planning), warehousing (e.g., number
and size of
22.distribution depots), inventory (e.g., stock level), packaging (e.g., type of
unit load) and
23.information (e.g., forecasting). In summary, a number of contributions do
exist but they
24.are focused on individual aspects of the logistics strategy (e.g., Jonsson
et al., 2013;

173
25.Melacini et al., 2011), without offering a holistic view.
26.For the purpose of this study, we reviewed the literature in order to
identify the main
27.logistics decisions that may be affected by the company
internationalisation choices. The
28.logistics variables found can be summarised as follows:
29.• logistics network design
30.• inventory planning centralisation leve
31.As Rushton et al. (2014) note, besides the increasing importance of
distribution, logistics
32.and supply chain, a growth in the number of associated definitions has
been progressively
33.registered. As such, the expression ‘international logistics strategy’ may
refer to different
34.meanings in the literature. For instance, the early literature on global
supply chains in the
35.‘90s, introduced such expression when referring to decisions related to
facility location,
36.network design, production/distribution centralisation, postponement
strategies along the
37.supply chain (e.g., Cooper, 1993; Schmidt and Wilhelm, 2000). Other
authors have
38.referred to ‘international logistics strategy’ as the logistics strategy
supporting company
39.international sales of finished products (e.g., Craze et al., 2010; Strobe et
al., 2008;
40.Rushton et al., 2014). This latter connotation is coherent with the aim of
the present
41.paper, and has been hereinafter adopted.
42.Although the topic of company international logistics strategy has been
widely
43.tackled in the literature, a structured and hierarchical description of its
building variables
44.has not been in-depth developed so far. As an example, Strobe et al.
(2008) considered
45.the ‘logistics planning’ as one of the steps of the company
internationalisation process
46.that includes the definition of service levels, intended lead times,
inventory policy,
47.network structure, capacity calculation, allocation of facilities (e.g.,
warehouses), IT
48.integration, decisions about logistics outsourcing, and preparation of
tenders. According

174
49.to Rushton et al. (2014), it is possible to identify a list of key areas
representing the major
50.components of distribution and logistics valid for most companies,
namely: transport
51.(e.g., mode of transport and load planning), warehousing (e.g., number
and size of
52.distribution depots), inventory (e.g., stock level), packaging (e.g., type of
unit load) and
53.information (e.g., forecasting). In summary, a number of contributions do
exist but they
54.are focused on individual aspects of the logistics strategy (e.g., Jonsson
et al., 2013;
55.Melacini et al., 2011), without offering a holistic view.
56.For the purpose of this study, we reviewed the literature in order to
identify the main
57.logistics decisions that may be affected by the company
internationalisation choices. The
58.logistics variables found can be summarised as follows:
59.• logistics network design
60.• inventory planning centralisation leve
61.As Rushton et al. (2014) note, besides the increasing importance of
distribution, logistics
62.and supply chain, a growth in the number of associated definitions has
been progressively
63.registered. As such, the expression ‘international logistics strategy’ may
refer to different
64.meanings in the literature. For instance, the early literature on global
supply chains in the
65.‘90s, introduced such expression when referring to decisions related to
facility location,
66.network design, production/distribution centralisation, postponement
strategies along the
67.supply chain (e.g., Cooper, 1993; Schmidt and Wilhelm, 2000). Other
authors have
68.referred to ‘international logistics strategy’ as the logistics strategy
supporting company
69.international sales of finished products (e.g., Craze et al., 2010; Strobe et
al., 2008;
70.Rushton et al., 2014). This latter connotation is coherent with the aim of
the present
71.paper, and has been hereinafter adopted
72.As Rushton et al. (2014) note, besides the increasing importance of
distribution, logistics

175
73.and supply chain, a growth in the number of associated definitions has
been progressively
74.registered. As such, the expression ‘international logistics strategy’ may
refer to different
75.meanings in the literature. For instance, the early literature on global
supply chains in the
76.‘90s, introduced such expression when referring to decisions related to
facility location,
77.network design, production/distribution centralisation, postponement
strategies along the
78.supply chain (e.g., Cooper, 1993; Schmidt and Wilhelm, 2000). Other
authors have
79.referred to ‘international logistics strategy’ as the logistics strategy
supporting company
80.international sales of finished products (e.g., Craze et al., 2010; Strobe et
al., 2008;
81.Rushton et al., 2014). This latter connotation is coherent with the aim of
the present
82.paper, and has been hereinafter adopted
83.As Rushton et al. (2014) note, besides the increasing importance of
distribution, logistics
84.and supply chain, a growth in the number of associated definitions has
been progressively
85. registe

176