Supply Chain Management - ESCM 2724 PDF

ESCM 2724 SUPPLY CHAIN MANAGEMENT PROF C HENDRIKS LU 8 INTERNATIONAL LOGISTICS AND TRADE Learning outcomes Understand international logistics Identify distribution channels LU 8 INTERNATIONAL LOGISTICS AND TRADE (CH 19) 19.1 INTRODUCTION International movement is a synthesis of all the...

ESCM 2724 SUPPLY CHAIN MANAGEMENT PROF C HENDRIKS LU 8 INTERNATIONAL LOGISTICS AND TRADE Learning outcomes Understand international logistics Identify distribution channels LU 8 INTERNATIONAL LOGISTICS AND TRADE (CH 19) 19.1 INTRODUCTION International movement is a synthesis of all the aspects of logistics into the capability to move goods internationally. Includes warehousing, storage, cross-docking and the transport part of international movement additional aspects such as customs, financing, risk management and special legal issues such as bribery and corruption. This makes it a demanding but extremely exciting aspect of logistics. 19.2 DISTRIBUTION CHANNELS 19.2.1 Choosing a distribution channel Distribution channels in international trade are the physical routes that a product follows from the seller (exporter) to the buyer (importer). Successful international marketing often results from partnering with a key intermediary who has access to distribution channels in a foreign market. The longer the distribution channel, the greater the number of intermediaries, resulting in less profit accruing to the seller. LU 8 INTERNATIONAL LOGISTICS AND TRADE Sellers can use the following criteria to determine the length of their distribution channels: o Complexity of technical requirements o Lifespan of the product o Price of the product o Service requirements o Turnover generated. LU 8 INTERNATIONAL LOGISTICS AND TRADE Distribution channels include the following: (each will be discussed) sole distributors trading houses government departments industrial buyers Wholesalers retailers and chain stores and export agents. 19.2.1.1 DISTRIBUTORS Foreign distributors act as a principal, buying goods from the exporter and selling them for its own account to a specific type of customer, usually wholesalers. The distributor is the exporter’s customer, not the end user. The distributor sells on its own terms, but in close consultation with the exporter. Delivery to end users is made by the distributor, who manages the local customer relationship directly. 19.2.1.2 TRADING HOUSES Trading houses may deal in imports and exports (i.e. two-way trade). It may buy directly from the seller, acting as an agent for the exporting seller. It may also act as an agent for an importing buyer. Sales to trading houses are mostly single, complete transactions. Trading houses do not usually enter into a contract for exclusive rights over a period, as distributors do. Trading houses conduct their own marketing, carry the credit risk, administer all documentation, and oversee the physical distribution of products to their final destination. 19.2.1.3 GOVERNMENT DEPARTMENTS Government departments in some countries occasionally import commodities, often on a long-term basis. 19.2.1.4 INDUSTRIAL BUYERS Large industrial firms often purchase directly from manufacturers. For example, a ship builder may purchase steel sheeting or furnishing material directly from foreign sellers if importation constitutes the cheapest way of building the ships. 19.2.1.5 WHOLESALERS Wholesalers may be direct importing purchasers, or obtain their supplies through an importing distributor. Wholesalers do not usually have exclusive selling rights for the products they buy. However, they may have a commanding market position with little competition. 19.2.1.6 RETAILERS AND LARGE CHAIN STORES Large chain stores and franchise retail groups may also buy directly from exporters. They often negotiate exclusive selling rights. They often purchase in bulk and demand that the products are packaged in their own consumer packs. (e.g. Shoprite, Pick n Pay, Spar, Woolworths, Walmart’s,) 19.2.1.7 EXPORT AGENT(S) An agent is an individual or legal entity authorised to transact business for and in the name of another, known as the principal. Agents are responsible for: Customer Service Order tracking and reporting Issue Resolution Promotion Market and customer research; and The selling process.