MGT 586 Strategic Logistics Management

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MGT 586 Strategic Logistics Management

• Articles
• Review
• Chapter 13 Global Logistics
• Factors That Influence International Supply
  Chain Strategies
• 1. Market potential
• 2. Geographic diversification
• 3. Excess production capacity and the
  advantages of a low-cost position due to
  experience-curve economies and economies of
  scale
• 4. Products near the end of their life cycle in
  the domestic market that could generate growth in
  international markets
• 5. Source of new products and ideas
• 6. Foreign competition in the domestic market
• 7. Raw material, component parts, assemblies in
  foreign countries

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MGT 586 Strategic Logistics Management (Review
Ch. 13 cont.)

• Organizational options in the International
  Marketplace
• Exporting
• Licensing
• Joint Ventures
• Ownership
• Importing
• Countertrade

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MGT 586 Strategic Logistics Management (Review
Ch. 13 cont.)

• Forms of Counter trade
• Barter goods of equal value exchanged
• Buyback selling firm provides plant and
  equipment and agrees to buy back a certain
  portion of the output
• Compensation when barter is employed but
  there is a specific ratio of values set by the
  parties
• Counter purchase buyback but with more cash
  and less volume of goods flowing back to the
  multinational company over shorter time periods,
  may include goods not related to the original
  deal
• Switch uses at least one party outside the
  host country to facilitate the trade

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MGT 586 Strategic Logistics Management (Review
Ch. 13 cont.)

• Reasons for Countertrade
• Expand or maintain foreign markets
• Increase sales
• Sidestep liquidity problems
• Repatriate blocked funds
• Clean up bad debt situations
• Build customer relationships
• Keep from losing markets to competitors
• Gain foreign contracts for future sales
• Find lower-cost purchasing sources

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MGT 586 Strategic Logistics Management (Review
Ch. 13 cont.)

• Things to Consider With Global Logistics
• May be difficult to increase prices and control
  expenses
• Slow growth rates in host country
• Development of trading blocs
• Examples Table 13-4 pg 528 of text
• Changing views of the deal
• Inflation
• Technology
• Infrastructure
• Social and Cultural Trends Middle East and Oil

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MGT 586 Strategic Logistics Management (Review
Ch. 13 cont.)

• Important Questions Logistic Managers Must Be
  Prepared to
• Address
• What specific supply chain, corporate and/or
  logistic strategies are affected by the political
  environment?
• What are the financial impacts (costs) of trends
  and changes occurring or anticipated in the
  political-legal environment?
• What opportunities exist for the organization as
  a result of the trends and changes in the
  political-legal environment?

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MGT 586 Strategic Logistics Management Chapter
14 Global Logistics Strategies

• 1.What are the controllable factors that affect
  global logistic activities?
• 2. What are the organization, financial, and
  managerial issues related to global logistics?
• 3. How do Maquiladoras operate?

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MGT 586 Strategic Logistics Management

• Controllable Elements
• Customer Service Levels
• Inventory
• Transportation
• Warehousing

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MGT 586 Strategic Logistics Management

• Global Market Opportunities
• Three major regions where bulk of world economic
  activity takes place
• 1. North America
• 2. Pacific Rim/China
• 3. Western Europe
• Eastern Europe/Russia Not a major region but
  will discuss

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MGT 586 Strategic Logistics Management

• NAFTA (North American Free Trade Agmt)
• Created an North American common market with
  Canada, Mexico and US.
• US/Mexico trade 150 Billion (75 Billion
  from Mexico to US)
• Side bar 1999 Mexico surpassed Japan as
  Californias top export market gt14 billions
• US/Canada trade 320 Billion (170 Billion
  from Canada to US

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MGT 586 Strategic Logistics Management

• What NAFTA Did
• Eliminated tariffis and non-tariff barriers in
  2004
• Enhanced carriers ability to operate across
  borders
• Liberalized foreign investment, particularly in
  Mexico
• Standardized customs initiatives, local content
  rules and packaging and labeling requirements.

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MGT 586 Strategic Logistics Management

• Pacific Rim
• Supply Chains are complex, but manageable.
• Estimates are that for every 1billion in
  imports from China, 150 million could be saved
  through more efficient SCM.
• Major Hubs in Asia
• Singapore
• Serves SEA and India and Pakistan
• Hong Kong
• Serves North Asia
• Tokyo
• Serves Japan

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MGT 586 Strategic Logistics Management

• China
• Logistics are challenging in China
• Changes in distribution channels are
  coming about, but very slowly.
• Patience is more than a virtue when
  dealing in China, it is a necessity. Payback
  times are very long.

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MGT 586 Strategic Logistics Management

• Japan/South Korea/Australia
• Markets are sophisticated
• Good logistical options
• Good warehousing, transportation, and
  information systems
• See Email Handout for Extra Credit

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MGT 586 Strategic Logistics Management

• Western Europe
• The EU formed in 1992 unified common market
• Resulted in
• Centralization of distribution centers
• Kodak has one logistics network to service
  Scandinavian and Baltic Region
• Increasing partnerships
• Strategic Alliances
• More outsourcing
• Development of Pan European transportation
  networks
• Restructuring of Logistics management
• Removal of many customers procedures including
  labeling and packaging

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MGT 586 Strategic Logistics Management

• Eastern Europe
• Commonwealth of Independent States (CIS)
• Estonia, Latvia, Lithuania, Belarus, Moldovia,
  Ukraine, Armenia, Azerbiajan, Georgia,
  Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan,
  Uzbekistan, Russia. (See map next slide)

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MGT 586 Strategic Logistics Management
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MGT 586 Strategic Logistics Management

• Eastern Europe
• Investment has grown, but not as fast as expected
• Political instability
• Other factors to consider
• Degree of debt
• Development of banking system
• Skill and Quality Level of workers
• Infrastructure condition roads, rail, seaports,
  airports
• Profit repatriation regulations

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MGT 586 Strategic Logistics Management

• MAQUILADORA OPERATIONS
• Manufacturing in Mexico costs about 1/3 of US
  cost
• Types of Maquiladora Operations
• 1. Manufacturer-Owned and Operated
• Investing company owns the subsidiary
  and assumes all legal and financial risks.
• 2. Shelter Operations
• A maquila provides building labor, does
  border transfers, assumes overhead
  responsibility, insurance, etc. for a flat
  fee
• 3. Contract Manufacturing and Assembly
• Existing companies in Mexico that produce
  turn- key products with materials from
  investing company.

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MGT 586 Strategic Logistics Management

• Preview For Next Week
• Chapter 15 Organizing for Effective Logistics
• Chapter 16 Financial Control of Logistics
  Performance
• Chapter 17 Measuring and Selling the Value of
  Logistics
• Chapter 18 The Strategic Logistic Plan