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This article explores the historical development of international logistics and supply chain management, including the definition of logistics and supply chain management, the elements of international logistics, and the economic importance of logistics. It also discusses the shift towards speed and customer satisfaction in international logistics, as well as the adoption of Just-In-Time, MRP, and MRP II systems. Additionally, it examines the relationship between logistics and supply chain management.
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International Supply Chain Management Anthony Ross, PhD Associate Prof. SCM Donald Gordon International Scholar, University of Capetown, South Africa
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Definition of Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
HistoricalDevelopment of International Logistics Framework • The term “Logistics” is based on the physical movement of goods. • The modern interpretation of the term “logistics” has its origins in the military. • Business logistics include all the activities related to the physical movement of goods (upstream and downstream) and related paperwork.
Historical Development of International Logistics The Early, "Slow" Days • Very early international logisticians were traders who bought and sold goods internationally (Silk Road, for example). • As trade expanded, international logistics grew. • In the early days, international logisticians were concerned about making sure that the goods arrived in good condition and at the lowest possible cost.
HistoricalDevelopment of International Logistics The Move Toward Speed • The advent of containers in ocean trades (mostly 1960s and 1970s) lowered transit times substantially. • International air shipments became an increasing percentage of all shipments in the 1980s: • the number of destinations served by airlines grew. • air shipments became increasingly cost competitive with surface alternatives.
Historical Development of International Logistics The Emphasis on Customer Satisfaction • In the 1980s, with very high interest rates, companies shifted their emphasis to inventory reductions. • International logisticians became ever more focused on transit times in order to minimize inventory costs, raising the expectations of customers. • Fast delivery times facilitated the adoption of different inventory management techniques: • Just-In-Time • MRP • MRP II
Historical Development of International Logistics The Emphasis on Customer Satisfaction • Just-In-Time A management philosophy that consists of planning the manufacturing and shipment of goods in such a way that they are produced and delivered just before they are needed in the next step of the assembly process. In the US, JIT is often accomplished with the adoption of MRP and MRP II systems.
Historical Development of International Logistics The Emphasis on Customer Satisfaction • Materials Requirement Planning (MRP) A computer-based management tool that allows a manufacturing firm to determine what to produce, and in which quantity, in function of what it sells to its customers. • Manufacturing Resources Planning (MRP II) A computer-based management tool that uses MRP at its core, and that includes other functions in the firm, such as finance and marketing.
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
Definition of Logistics and Supply Chain Management Logistics “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.”
Definition of Logistics and Supply Chain Management 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.
Definition of Logistics and Supply Chain Management Three views on the relationship between logistics and SCM
Definition of Logistics and Supply Chain Management Supply Chain Management • Supply Chain Management includes more activities than Logistics Management: the “Inclusionist” viewpoint prevails.
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
Definition of International Logistics International Logistics • The process of planning, implementing, and controlling the flow and storage of goods, services, and related information from a point of origin to a point of consumption located in a different country.
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
Definition ofInternational Supply Chain Management International Supply Chain Management • Supply Chain Management is inherently global, with firms buying from foreign suppliers or selling to foreign customers, but domestic logistics activities and international logistics activities are distinct and managed differently.
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
Elements of International Logistics International Logistics’ Characteristics: • The environment in which international logisticians operate is quite different from the domestic environment. • The decisions regarding international transportation are eminently more complicated. • The number of intermediaries involved is greater . • The inherent risks and hazards of international transportation are much more significant.
Elements of International Logistics International Logistics’ Characteristics: • International insurance is much more complex. • International means of payment are more involved. • Terms of trade are much more complicated. • The crossing of borders represents specific challenges. • Inventory is managed differently.
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
The Economic Importance of Logistics Logistics as a Percentage of U.S. Gross Domestic Product
International Supply Chain Management Historical Development of International Logistics Definition of Logistics and Supply Chain Management Definition of International Logistics Definition of International Supply Chain Management Elements of International Logistics The Economic Importance of Logistics The Economic Importance of International Logistics
The Economic Importance of International Logistics • The costs of International Logistics represent about 15% of the total volume of the international trade; that is about US$ 1.5 trillion world-wide. • In addition, International logistics generate approximately US $500 billion in additional government revenues (Customs duty).
