International Logistics Management.pdf

UNIT-I

[Marketing Logistics: Concept, objectives and scope; System elements; Relevance

of logistics in international marketing; International supply chain management and

logistics; Transportation activity–internal transportation, inter-state goods

movement; Concept of customer service.]

Learning objective:

After reading this chapter you should be able to understand the following

•

Marketing logistics concept, objective, scope and its elements

•

Interface between international marketing and logistics & supply chain

management.

•

Role of transport in logistics.

•

Concept of customer service.

INTERNATIONAL LOGISTICS

Introduction: LOGISTICS

International marketing is becoming more important to companies as the world

shifts from distinct national markets to linked global markets. Globalization brings

homogenization of consumer needs, liberalization of trade, and competitive

advantages of operating in global markets. Companies are forced to think and act

globally in order to survive in such a dynamic environment. All these elements have

a deep impact on the development and the positioning of companies on international

marketplaces where competition is cruel. Furthermore, another significant change

concerns the customers since they are more demanding in term of quality, lead time

and order fulfilment. In this context, firms must be more and more flexible and

reactive to anticipate and to adapt to such changes. This quest for flexibility and

reactivity affects the conception and the management of firms and more generally

their logistic systems and contributes to the development of partnership relations, to

the emergence of mergers or strategic alliances between companies. As a result, a

firm can no longer be considered as an isolated entity but as a component of a wider

supply network.

International Firms have begun to implement various strategies in order to remain

competitive in world market. Logistics is one of the key areas in the process of

international marketing as the delivery of goods to the buyer is as important as any

other activity in business and marketing. Quite often, the most crucial part in

International trade is the timely delivery of goods at a reasonable cost by the

exporter to the importer. In fact, the prospective buyer may be willing to pay even

higher price for timely supplies. The emergence of logistics as an integrative

activity, with the movement of raw materials from their sources of supply to the

production line and ending with the movement of finished goods to the customer

has gained special importance. Earlier on, all the functions comprising logistics

were not viewed as components of a single system. But, with emergence of logistic

as an important part of corporate strategy due to certain developments in the field of

international marketing has gained special significance. Before discussing the

various aspects of logistics, let us look at its definition:

According to Council of logistics management:

“Logistics is the process of planning, implementing and controlling the

efficient, effective flow and storage of goods, services and related information

from point of origin to point of consumption for the purpose of conforming the

customer requirement”.

This definition clearly points out the inherent nature of logistics and it conveys

that Logistics is concerned with getting products and services where they are

needed whenever they are desired. In trade Logistics has been performed since the

beginning of civilization: it’s hardly new. However implementing best practice of

logistics has become one of the most exciting and challenging operational areas of

business and public sector management. Logistics is unique, it never stops!

Logistics is happening around the globe 24 hours a days Seven days a week during

fifty-two weeks a year. Few areas of business involve the complexity or span the

geography typical of logistics.

I - CONCEPT OF INTERNATIONAL MARKETING LOGISTICS

Word, ’Logistics’ is derived from French word ‘loger’, which means art of war

pertaining to movement and supply of armies. Basically a military concept, it is

now commonly applied to marketing management. Fighting a war requires the

setting of an object, and to achieve this objective meticulous planning is needed so

that the troops are properly deployed and the supply line consisting, interalia,

weaponary, food, medical assistance, etc. is maintained. Similarly, the plan should

be each that there is a minimum loss of men and material while, at the same time, it

is capable of being altered if the need arises. As in the case of fighting a war in the

battle-field, the marketing managers also need a suitable logistics plan that is

capable of satisfying the company objective of meeting profitably the demand of the

targeted customers.

From the point of view of management, marketing logistics or physical distribution

has been described as ‘planning, implementing and controlling the process of

physical flows of materials and final products from the point of origin to the point

of use in order to meet customer’s needs at a profit. As a concept it means the art of

managing the flow of raw materials and finished goods from the source of supply to

their users. In other words, primarily it involves efficient management of goods

from the end of product line to the consumers and in some cases, include the

movement of raw materials from the source of supply to the beginning of the

production line. These activities include transportation warehousing, inventory

control, order processing and information monitoring. These activities are

considered primary to the effective management of logistics because they either

contribute most to the total cost of logistics or they are essential to effective

completion of the logistics task. However, the firms must carry out these activities

as essential part of providing customer with the goods and services they desire.

ii) - SIGNIFIGANCE OF MARKETING LOGISTICS

The important of a logistics systems lies in the fact that it leads to ultimate

consummation of the sales contract. The buyer is not interested in the promises of

the seller that he can supply goods at competitive price but that he actually does so.

Delivery according to the contract is essential to fulfilling the commercial and legal

requirements. In the event of failure to comply with the stipulated supply of period,

the seller may not only get his sale amount back, but may also be legally penalized,

if the sales contract so specifies. There is no doubt that better delivery schedule is a

good promotional strategy when buyers are reluctant to invest in warehousing and

keeping higher level of inventories. Similarly, better and/or timely delivery helps in

getting repeat orders through creation of goodwill for the supplier.

Thus, as effective logistics system contributes immensely to the achievements of the

business and marketing objectives of a firm. It creates time and place utilities in the

products and thereby helps in maximizing the value satisfaction to consumers. By

ensuring quick deliveries in minimum time and cost, it relieves the customers of

holding excess inventories. It also brings down the cost of carrying inventory,

material handling, transportation and other related activities of distribution. In

nutshell, an efficient system of physical distribution/logistics has a great potential

for improving customer service and reducing costs.

Logistics has gained importance due to the following trends

•

Raise in transportation cost.

•

Production efficiency is reaching a peak

•

Fundamental change in inventory philosophy

•

Product line proliferated

•

Computer technology

•

Increased use or computers

•

Increased public concern of products Growth of several new, large retail

chains or mass merchandise with large demands & very sophisticated

logistics services, by pass traditional channel & distribution.

•

Reduction in economic regulation

•

Growing power of retailers

•

Globalization

As a result of these developments, the decision maker has a number of

choices to work out the most ideal marketing logistics system. Essentially, this

system implies that people at all levels of management think and act in terms of

integrated capabilities and adoption of a total approach to achieve pre-determined

logistics objectives.

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