International%20Distribution%20Systems

1
International Distribution Systems
2
In International Distribution

• The firm sells to its customers
• directly through its own sales force
• indirectly through independent intermediaries
• indirectly through an outside distribution system
  with regional or global coverage

3
International Distribution Systems

• I. Problems in International Distribution
• 1) More stringent legal restrictions
• 2) Goods must be transferred further
• 3) May be difficult to get product to the
  consumer (infrastructure issues)

4
Intermediaries

• Sources for Finding Intermediaries
• Distributor inquires
• Governmental agencies
• Commerce Departments Trade Opportunities Program
• U.S. Exporters Yellow Pages
• Private sources
• Trade directories
• Screening Intermediaries
• Performance
• Professionalism

5
Selection of Intermediaries

• Agents
• Foreign (Direct)
• Brokers
• Manufacturers Reps
• Factors
• Managing agents
• Purchasing Agents
• Domestic (Indirect)
• Brokers
• Export Agents
• EMCs
• Webb-Pomerene
• Commission agents

• Distributors
• Foreign (Direct)
• Distributors/dealers
• Import jobbers
• Wholesalers/retailers
• Domestic (Indirect)
• Domestic wholesalers
• EMCs
• ETCs
• Complementary marketers

6
International Distribution Systems

• II. Moving the Product Overseas
• 1) Ocean shipping
• 2) Air freight
• III. Types of Middlemen
• 1) Freight forwarders
• 2) Trading Companies
• 3) Export Management Cos.

7
Real Physical Distribution Costs Between Air and
Ocean Freight - Singapore to the United States
In this example, 44,000 peripheral boards worth
7.7 million are shipped from a Singapore plant
to the U.S. West Coast. Cost of capital to
finance inventories is 10 percent annually
2,109 per day to finance 7.7 million. Transpor
t costs 31,790 127,160 (in transit 21
days) (in transit 3 days) In-transit inventory
financing costs 44,289 6,328 Total
transportation costs 76,079
133,487 Warehousing inventory costs (60 days
_at_2,109/day) Singapore and U.S.
126,540 Warehouse rent 6,500 Real physical
distribution costs 209,119 133,487
15-15
Ocean Air
SOURCE Adapted from "Air and Adaptec'c
Competitive Strategy,
International Business, September 1993, p.44.
Irwin/McGraw-Hill
8
International Distribution Systems

• III. Types of Middlemen (Cont.)
• 4) Piggybacking
• 5) Domestic export middlemen
• IV. Choosing a Middleman

9
International Logistics

• V. International Logistics - the designing and
  managing of a system that controls the flow of
  materials into, through, and out of the
  international corporation.
• Major decision areas
• locating plants and warehouses choice of
  transportation mode managing inventory
  packaging.

10
The Impact of International Logistics

• Logistical costs are 10 to 30 of the total
  landed cost of an international order.
• Factors necessary for the use of logistics as a
  competitive tool
• Close collaboration with suppliers and customers
• Technologically advanced information processing
  and communication exchange capabilities
• An integrated business infrastructure

11
International Transportation Issues

• Transportation infrastructure
• Roads, rail lines, airports, seaports, pipelines
• Availability of transportation modes
• Overland shipping, ocean shipping, air shipping
• Choice of modes
• Transit time, predictability, cost, noneconomic
  factors
• Noneconomic Factors
• Government involvement, the UNCTAD and the
  40/40/20 concept

12
International Logistics

• VI. Inventory Management Considerations
• - Carrying costs
• - Order cycle time
• - Order cycle consistency
• - Difficulty in applying service rules

13
International Inventory Issues

• Inventory carrying costs can be up to 25 of the
  value of an inventory
• Just-in-Time policies minimize inventory volume
  by making it available when needed.
• Inventories assist in the movement of products.
• Factors in deciding on the level of inventory to
  maintain
• Order cycle time
• Desired level of customer service
• Use of Inventory as a strategic tool

14
Order Cycle Time

• The total time that passes between the placement
  of an order and the receipt of the merchandise.
• Length of the total order cycle
• Longer cycle in international marketing than
  domestic
• Consistency of the order cycle
• More complicated delivery mode reduces
  consistency
• Altering cycle times
• Change transportation methods
• Change inventory locations
• Change ordering process