International logistics06/09/2022 1 By indiafreenotes
Logistics refers to the services or activities required for the management of physical movement of goods from the source of origin to the source of destination. It involves transaction channel, distribution channel and communication channel for faster and efficient provision of logistics services. International Logistics, therefore, refers to the integration and management of activities including inventory databases and shipping schedules, material handling, production, packaging, inventory, transportation, distribution, storage, and security for the resources of organizational supply chains beyond the political boundaries of the nations involved in the global trade.
With the advent of liberalization and globalization of world trade, international logistics is becoming more and more important to maintain the efficient, effectiveness and value addition in the international trading activities. In this highly competitive world trade market, the business entities need to take deep insights into global trade scenario and also required to think globally with an aim to manage its supply chain network. All this is possible with the adoption and application of international logistics at wider level by these companies. In addition, international logistics are extremely important to achieve the marketing and overall broader objectives of a firm.
Objectives of International Logistics
The basic objective which a company tries to achieve through using the logistics at global level or even at national level is to maintain the ensured flow of goods & services from seller to the buyer with the following:
- Right product
- Right quantities and assortments
- Right places
- Right time
- Right cost/price
- Right condition
Scope of International Logistics
With the continuously expanding scope of international logistics, a number of activities and services are now included in the periphery of the concept. However, following areas are majorly considered as a part & parcel of international logistics:
- Forecasting Customer Demands
- Strengthening Communication Channels
- Maintaining Distribution Channels
- Controlling Inventory Requirements
- Handling Material Requirements
- Processing Orders
- Selecting Location for Plant & Warehouse
- Procuring Raw Materials
- Managing Packing & Packaging Requirements
- Regulating Traffic & Transportation
- Creating Time & Place Utilities
- Movement Consolidation
- Handling Reverse Logistics
- Maintenance of Customer Service & Support
Elements of International Logistics
Storage and Warehousing
This is the second element which involves assorting products in order to create time utility. The major objective of the storage & warehousing activities is to make proper arrangements for the placement of goods, providing storage facility to store them, consolidating them with other similar products, splitting up them into smaller quantities and building up assortment of products. Generally, more the number of warehouses a firm has, the lesser would be the time taken in serving customers at different locations. However, this would result in increased storage & warehousing cost. Therefore, the firm has to maintain a balance between the cost of warehousing and the level of customer service.
Processing Customer Orders
The first element of the international logistics system is the processing of orders of the customers. With an aim to provide faster customer service, the orders received from customers need to be processed within the least possible time. This element comprises of the activities like, receiving the order, recording the order, filling the order, and assembling all such orders for transportation, etc. The company and the customers will be benefited when these steps are carried out quickly and accurately. The error committed at this stage, generally, can prove to be very costly. To say, if a wrong product or the same product with different specifications is supplied to the customer, it may lead to cancellation of the original order which will increase the cost of reverse logistics and can also harm the company’s goodwill at the same time.
Similarly, if the order is not executed within a reasonable time, it may lead to serious consequences. Further, the high speed data processing techniques are presently available leading for the rapid processing of the orders.
The information monitoring element of international logistics system requires the logistics’ handling personnel continuously updated information about inventory, transportation and warehousing. For instance, with respect to inventory, the information about the present stock position at each location, future commitment and replenishment capabilities are required on an ongoing basis. In the same manner, before choosing a carrier, the information about the availability of relevant modes of transportation, their costs, services and suitability for a particular product is needed. In case of warehousing activities, the information with respect to space utilization, work schedules, unit load performance, etc., is required. For receiving all this information, an efficient management information system would be of immense use in controlling costs, improving services and determining the overall effectiveness of distribution.
Further, it is difficult to correctly assess the cost of physical distribution operations. However, if the correct information is available, it can be analyzed & processed systematically and a great deal of saving can be ensured.
The element of transportation consists of moving goods from points of production and sale to points of consumption in the quantities required at times needed and at a reasonable cost. The transportation system increases time and place utilities to the goods handled and therefore, increases their economic value. With an aim to achieve these goals, transportation facilities must be adequate, regular, dependable and equitable in terms of costs and benefits of the facilities and service provided.
The support facilities element of international logistics system is comprised of a number of planning activities which are, usually, directed toward ensuring that all required permanent or transitory operating and support facilities, including training, field and depot maintenance, storage, operational, and testing are available concurrently with system fielding. Planning must be comprehensive and include the need for expansion, diversification and modification of the existing facilities as well as creating new facilities. It also takes research & developmental activities under its purview with an aim to define and establish impacts on life cycle cost, funding requirements, facility locations and improvements, space requirements, environmental impacts, duration or frequency of use, safety & security requirements and health standards, and security restrictions. Furthermore, it also includes any utility requirements, for both fixed and mobile facilities, with thrust on containing requirements of scarcely available resources.