In a global context, more products are moved far greater distances because of the concentration of production facilities in low-cost manufacturing locations. Long-distance modes of transport have thus become much more important to the development of efficient logistics operations that have a global perspective.
International logistics involves the management of resources in a company’s supply chain across at least one international border.
International logistics includes a close consideration of every factor involved in the flow of products, people, and paperwork, starting from the acquisition of raw materials and ending with the product’s purchase. In a traditional framework, the flow of goods is as follows: raw materials are harvested, components are produced from the raw materials, the final product is produced, goods travel to wholesalers, wholesalers distribute the goods to retailers, and customers purchase and use the goods. Along the way, the business will need to take every possible step to control costs and maintain an efficient supply chain.
Given the large scope of this process, minor inefficiencies can become glaring issues, which is why careful planning is an essential element of an international strategy. If your business intends to manufacture goods in one country and market them in another, your ability to manage international logistics will play an important role in your success.
While businesses use hundreds of different international logistics strategies, the goals of these strategies are identical: to limit costs while maintaining good customer service and product quality. The second half of that sentence is important — logistics doesn’t mean sacrificing your brand. Think of it as streamlining the paperwork, improving your workflow, cutting material costs, and perhaps most importantly, monitoring everything to spot inefficiencies before they become major issues.
Few components of international logistics are as important as material handling and warehousing. In order to sell products outside of their physical country of origin, you need to be able to make reliable, timely, and cost-effective shipments.
Domestic and International Logistics
Domestic logistics is the distribution of goods within a country, while international logistics is the distribution of goods beyond the country boundaries. Managing logistics domestically is very different from managing logistics internationally because of the much narrower geographic scope in a domestic operation. Let us now compare the different aspects of both domestic and international logistics.
- Management – Domestic logistics companies have a single logistics manager to supervise and manage all sides of planning and execution related to the movement of goods. On the other hand, international logistics will have a corporate logistics manager who will coordinate logistics activities with other managers. This will require clear plans on execution and distribution processes, and may lead to challenges in decision making.
- Transportation – Domestic logistics can utilize a variety of transportation options for moving goods, out of which road transport is the most common preference. Road transport in itself also provides a variety of options. With international logistics, you have limited transportation options – some would require only rail while others would require only flight or sea transport. International logistics may also involve using multiple transportation alternatives for a single transaction.
- Costs involved – In both domestic and international logistics, you have to consider the costs involved with store facilities, transportation, workers and technology. But, in international logistics, there are some additional costs to be considered too which include tariffs, government taxes, fees and currency exchange fluctuations.
- Supply chain relationships – In order to build relationships between businesses or between a business and the customers, trust is the most important factor, which decides on the nature of the relationship. It gets easier to build trustworthy relationships domestically but, in international cases, different country regulations, geography and economic roadblocks present more challenges in building reliable relationships.
Guidelines for effective international logistics
- Strong partnerships. International supply chain partners share a general lack of trust. Many companies have been burned in the past, and are unwilling to make a commitment to do anything out of the reactive norm.
- Even if they do agree to work within a standardized, proactive model that provides communication and visibility, they likely will be unable to deliver on the commitment due to inefficient processes in other international logistics relationships. Building strong partnerships requires a serious effort to communicate and demonstrate your own level of commitment to achieving your vision.
- It is critical to establish standards for each supply chain partner. These standards not only benefit your company, but also drive the same consistent, reliable flow for each partner.
- To establish trust within your supply chain, consider all parties involved. In a truckload shipment from the United States to Mexico, for example, the Mexican carrier must be confident that the shipper, U.S. carrier, Mexican customs broker, and border/drayage carrier are meeting their standards. When the Mexican carrier knows a trailer will arrive by a designated time, it can proactively allocate a tractor and a rested driver.
- Now assume the Mexican carrier delivers and drops the trailer on time at the consignee in Mexico, and the consignee unloads the trailer within the standard. The carrier is able to proactively plan for pickup at the designated time, ensuring efficient equipment utilization.
- Sharing service standards builds a foundation for efficient, consistent, and reliable logistics flow. Full visibility for each partner in your supply chain enables efficiency. Workload imbalances are amplified in the international realm, but as your supply chain partners look upstream, each one is able to plan and allocate resources to assist overall efficiency, and ensure high service levels to your organization.
- Factors affecting the standardized flow of a complex global supply chain—such as inclement weather or heightened border security—will always be present. Enabling proactive communication downstream allows each supply chain partner to take immediate action as needed.
- The need for controls is amplified in the international realm. More parties are involved, creating greater complexity. There are also internal dynamics to consider within an organization. Lacking full alignment toward strategic goals results in higher direct costs, and can challenge the day-to-day flow of logistics operations.
- Consider implementing a centralized decision-making process, proper organizational structure and division of responsibilities, internal audits, and a formal problem-solving process.