International Logistics: Transportation, Inventory, and LPI Analysis

This report provides a comprehensive overview of international logistics, encompassing macroenvironmental influences, documentation, terms of sale, and payment methods. It delves into the roles of international trade specialists like freight forwarders and NVOCCs, while also examining transportation considerations such as ocean shipping, airfreight, and surface transportation. The report further analyzes international trade inventories, highlighting the importance of safety stocks and the complexities of inventory valuation. Finally, it introduces the Logistics Performance Index (LPI) as a valuable tool for assessing a country's logistical capabilities across six dimensions, including customs efficiency, infrastructure quality, and timeliness of shipments.

eek 11- International Logistics Lesson
International Logistics
What’s Included:
Review: This module
Learning Objectives:
• To understand macroenvironmental influences on international logistics
• To examine documentation as well as terms of sale and methods of payme
international shipments
• To distinguish among the unique activities of international trade specialists
• To examine transportation and inventory considerations in international dist
• To introduce you to the Logistics Performance Index
Presentations: Power Point Presentation or video provides overview of this week's
helps you understand the terms and theories in graphic representations.
Read:
• Lecture Notes and eReadings
What is International Logistics?
International logistics are logistics activities
associated with goods that are sold across
national boundaries.
What is Macroenvironmental
Influences?

Macroenvironmental influences refer to the
uncontrollable forces and conditions facing an
organization and include cultural, demographic,
economic, natural, political, and technological factors.
Source:
http://www.marketingpower.com/_layouts/Dictionary.aspx?
dLetter=M.
Political factors
• Political restrictions on international trade can take a
variety of forms
Many nations ban certain types of shipments that might
jeopardize their national security. Likewise, individual
nations may band together to pressure another country
from being an active supplier of materials that could be
used to build nuclear weapons. Some nations restrict the
outflow of currency because a nation’s economy will suffer
if it imports more than it exports over a long term.
• Tariffs
▪ Nontariff barriers
▪ Import quota
▪ Embargoes
• Degree of federal government in cross-border trade
▪ Balance of payments
▪ Subsidies
▪ Cargo preference rules
Economic factors
1 Currency fluctuations
2 Market size
3 Income

4 Infrastructure
5 Economic integration
Cultural factors
1 Religion
2 Values
3 Rituals
4 Beliefs
5 Languages
Symbols used for packing export shipments
With respect to language, cargo handlers may not be able to read
and understand the language of the exporting country, and it
would not be unusual for cargo handlers in some countries to be
illiterate. Hence, cautionary symbols, rather than writing, must be
used. A shipper’s mark, which looks like a cattle brand, is used in
areas where dockworkers cannot read but need a method to keep
documents and shipments together.
International Documentation
• Flow of documentation is as much a part of the main
logistical flow as the flow of product
• Domestic shipments typically only require several
pieces of documentation
• Export shipments typically require approximately 10
pieces of documentation
• Cross-border trades can require more than 100
separate documents
• Necessary documents are required at the point of importation
• Commonly used documents include:

◦ Certificate of origin
▪ A certificate of origin specifies the country (ies) in which
a product is manufactured and can be required by
governments for control purposes or by an exporter to
verify the location of manufacture.
◦ Commercial invoice
▪ A commercial invoice is similar in nature to a domestic
bill of lading in the sense that a commercial invoice
summarizes the entire transaction and contains (should
contain) key information to include a description of the
goods, the terms of sale and payment, the shipment
quantity, the method of shipment, and so on.
◦ Shipper’s export declaration (SED)
▪ A shipper’s export declaration contains relevant
export transaction data such as the transportation
mode(s), transaction participants, and description
of what is being exported.
• Shipper’s letter of instruction (SLI)
Terms of Sale
• Terms of sale involves:
◦ Parties working within the negotiations channel
◦ Looking at the possible logistics channels
◦ Determining when and where to transfer the following
between buyer and seller:
▪ Physical goods
▪ Payment for the goods, freight charges, and
insurance for the in-transit goods
▪ Legal title to the goods
▪ Required documentation
▪ Responsibility for controlling or caring for the

goods in transit, i.e. livestock
◦ Terms of sale for international shipments are commonly
referred to as Incoterms.
▪ Use is not mandatory, but generally accepted by legal
authorities, buyers, and sellers worldwide
▪ Begin with the letters C,D, E, or F
Terms of Sale Incoterms 2000
EX-Works (EXW) CIP (Carriage and Insurance Paid T
FCA (Free Carrier) DES (Delivered Ex Ship)
FAS (Free Alongside Ship) DEQ (Delivered Ex Quay)
FOB (Free on Board) DAF (Delivered at Frontier)
CFR (Cost and Freight) DDP (Delivered Duty Paid)
CPT (Carriage Paid To) DDU (Delivered Duty Unpaid)
CIF (Cost, Insurance, and Freight)
Methods of Payment
Methods of payment refer to the manner by which a
seller will be paid by a buyer.
• Much more challenging in international logistics vs.
domestic logistics
• Four methods of payment include:
1 Cash in advance - Cash in advance is of minimal risk to
the seller, but it is the riskiest for the buyer.
2 Letters of credit
3 Bills of exchange
4 Open account- The open account involves tremendous
potential risk for the seller and minimal risk for the

buyer.
5 Should be established at the time that a shipment price is
decided upon
6 Can be influenced by key factors such as
▪ the country the product is to be sold in
▪ the seller’s assessment of buyer risk
International Trade Specialists
International Freight Forwarders specialize in handling
either vessel shipments or air shipments.
Principle functions of International Freight Forwarders
include:
1 Advising on acceptance of letters of credit
2 Booking space on carriers
3 Preparing an export declaration
4 Preparing an air waybill or bill of lading
5 Obtaining consular documents
6 Arranging for Insurance
7 Preparing and sending shipping notices and documents
8 Serving as general consultant on export matters
Nonvessel-operating common carrier (NVOCC)
An NVOCC (non-vessel operating common carrier) is often
confused with an international freight forwarder. Although both
NVOCCs and international freight forwarders must be licensed by
the Federal Maritime Commission, NVOCCs are common carriers
and thus have common carrier obligations to serve and deliver,
among others. NVOCCs consolidate freight from different
shippers and leverage this volume to negotiate favorable
transportation rates from ocean carriers. From the shipper’s
perspective, an NVOCC is a carrier; from an ocean carrier’s

perspective, an NVOCC is a shipper.
Export management company (EMC)
Export packers
One function of export packing is to allow goods to move easily
through customs. For a country assessing duties on the weight of
both the item and its container, this means selecting lightweight
packing materials. The second purpose of export packing is to
protect products in what almost always is a more difficult journey
than they would experience if they were destined for domestic
consignees.
Transportation Considerations in International
Logistics
Ocean shipping
• Approximately 60% of cross-border shipments move
by water transportation
• Another example of the important of water transportation in
international trade involves the world’s busiest container
ports; eight of the 10 busiest container ports are located in
Asia, with 6 of the ports located in China.
• Variety of ship types include:
1 Dry-bulk
2 Dry cargo
3 Liquid bulk
4 Parcel tanker

5 Containerships
• Shipping conferences and alliances pool resources
and extend market coverage
International airfreight
Three types of international airfreight operations include:
1 Charted aircraft
2 Integrated air carriers
3 Scheduled air carriers
Surface transportation
• Transit times can be significantly impacted by a
country’s infrastructure and modal operating
characteristics.
• Short sea shipping is an alternative to surface
transporting
One source of delays is that certain countries limit a motor
carrier’s operations to within a particular state’s borders; as a
result, multi-state shipments must be transferred from one
company’s vehicles to another company’s vehicle whenever
crossing into another state. Another source of delays is that
certain countries conduct inspections of trucks as they move from
one state to another. This can include physical counting and
inspection of all shipments, inspection of documentation, vehicle
inspection, as well as driver inspection.
International Trade Inventories
• Safety stocks must be large due to greater

uncertainties, misunderstandings and or
delays.
• Inventory valuation is difficult due to continually
changing exchange rates.
• Product return (reverse logistics) policies must be
understood.
• Insufficient warehousing practices can lead to higher
inventory carrying costs.
Logistics Performance Index
The LPI is a potentially valuable international logistics tool
because the data can be analyzed from several different
perspectives. First, the LPI can be analyzed for all countries
according to the overall LPI score as well as according to scores
on each of the six dimensions. Second, the LPI can be analyzed
in terms of an individual country’s performance relative to its
geographic region and income group. Third, the overall and
dimension-specific LPI can be compared for up to 20 countries.
◦ Relatively new international logistics concept
(2007)
◦ Updated in 2010
◦ Created in recognition of the importance of logistics
in global trade
◦ Incorporates data for approximately 155 countries
◦ Measures a country’s performance across six
logistical dimensions
◦ Efficiency of the clearance process by border
control agencies, including customs
◦ Quality of trade- and transport-related

infrastructure
◦ Ease of arranging competitively priced shipments
◦ Competence and quality of logistics services
◦ Ability to track and trace consignments
Timeliness of shipments in reaching the destination
within the scheduled or expected delivery time