International logistics requires many different options and requirements to be met in order for a business to operate internationally (Wood, 2012). International logistics is the design and management of a system that controls the flow of materials, through, and out of the international business unit. By taking a systems approach, the firm explicitly recognizes the linkages among the traditionally separate logistics components within and outside the corporation (David, 2003).
The differences between domestic and international logistics start with:
- Currency variation
- Border-crossing process
- Transportation modes
- Packaging and labelling
The following aspects are the main tendencies for international logistics operations (David, 2003);
- Production efficiency and increased demand from other countries.
- Chaining nature and inventory philosophy.
- Development and advancement in computer technology.
- An increased public concern for delivery.
- Growth of several new, large retail chains or mass merchandise with large demands.
- Rise of very sophisticated logistics services and decline of traditional channel & distribution.
- Reduction in economic regulation and regulatory policies in the local.
- The growing power of retailers.
- Increased globalization.
Challenge of the extended lead time of supply
According to Harrison and Van Hoek, (2008), the main challenge of international logistics is provided by its complexity. In an internationally organised business, most products produced in a particular factory remain sold in a number of different countries (Ali, Jaafar, and Mohamad, 2008). In order to manage the interface between the production and sales teams in each territory, long lead times may be quoted. This buffers the factory, allowing it to respond to the local variations required in the different markets.
Challenge of extended and unreliable transit times
Owing to the length and increased uncertainty of international logistics pipelines, both planned and unplanned inventories remain higher than optimal (Harrison and Van Hoek, 2008). Variation in the time taken for international transport will inevitably lead to the increased holding of inventory with the aim of providing safety cover.
Challenge of multiple consolidation and breakpoints
Consolidation remains one of the key ways in which costs in pipelines remain lowered. Economies of scale are achieved when goods produced in a number of different facilities are batched together for transport to a common market (Branch, 2008).
For instance, products manufactured in India remain consolidated at the site on the east coast for shipping to Singapore. It is then combined with the output from the Thai and Singapore factories to ship to Hong Kong. Again, products remain consolidated at a Chinese port and transported by rail or sea to Hong Kong.
Challenge of multiple freight modes and cost options
Each leg of a journey between manufacture and the market have a number of freight mode options. These remain broken down in simplistic terms into air, sea, rail and road. Within each of these categories lies a further range of alternative options (Harrison and Van Hoek, 2008). Each of them remains assessed for their advantages and disadvantages in terms of cost, availability and speed. When the journey along the supply chain involves multiple modes, the interface between them provides further complication.
Challenge of location analysis
A structural component of international logistics pipeline design is the location design, or, in other words, deciding where operations are going to be performed. There is a sequence to the decision-making process involved that incorporates the business and geographical decision making (Branch, 2008). Business decision making evolves from a strategic commitment through a decision support analysis project for the implementation of the resulting plan at a selected location. In parallel, the location analysis starts at the level of the relevant continent, through consideration of relevant countries and regions, to the selection of a location. Based on the above challenges the following flowchart of international logistics is proposed by Harrison and Van Hoek, (2008).
A decision framework for international logistics
The logistics dimension of internationalisation conjures up a vision of parts flowing seamlessly from suppliers to customers located anywhere in the world, and a supply network that spans the entire globe (Harrison and Van Hoek, 2008). Often basic products such as deep-freeze pizzas combine a multitude of locations from which ingredients are sourced and an international transport network that links production locations to warehouses and stores. The enormous geographical span of this logistics system cannot remain recognised in the price of the product. This remain explained by transport having become just a commodity.
Within the context of this changing global landscape for logistics, the above framework was formed to analyse the internationalisation of logistics and organise international supply chains. Based on the framework, drivers and enablers remain balanced out with risk factors in organising logistics internationally. This means developing and designing an international logistics network comprises of managing risks and developing international regulations.
Using the framework, global supply chains remain less complicated by an easy understanding of the uncertainty and difficulty of control. The risks of longer lead times and lack of knowledge for local market conditions is also assessed using the framework. The coordination becomes less complex because of the understanding of the language and currency transactions before entering the global market.
- Ali, R.M., Jaafar, H.S. and Mohamad, S., 2008, August. Logistics and supply chain in Malaysia: issues and challenges. In EASTS International Symposium on Sustainable Transportation incorporating Malaysian Universities Transport Research Forum Conference, Johor (pp. 12-13).
- Branch, A.E., 2008. Global supply chain management and international logistics. Routledge.
- David, P., 2003. International logistics. Dreamtech Press.
- Harrison, A. and Van Hoek, R.I., 2008. Logistics management and strategy: competing through the supply chain. Pearson Education.
- Wood, D.F., Barone, A., Murphy, P. and Wardlow, D., 2012. International logistics. Springer Science & Business Media.