Global Logistics For Dummies E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Wissenschaft und neue Technologien
• Sprache: Englisch

Seitenzahl: 477

Veröffentlichungsjahr: 2017

Beschreibung

Your one-stop reference for entering the global logistics environment

Global Logistics for Dummies is an operational-level reference and overview for those manufacturers, businesses, product distributors, providers of logistics services, humanitarian and disaster relief responders and logisticians on both ends of a global chain who are considering entry in or have recently embarked on entering the global logistics chain/market. Easy to follow and packed with tons of helpful information, it serves as a springboard to larger texts for more detailed information.

Beginning with an introduction to both the “whats” and “whys” of global logistics, the book sheds light on how global logistics demands the involvement of not only all elements of the logistics enterprise – e.g., design, logistics engineering, supply, storage/distribution, maintenance, transportation, returns/re-manufacturing, etc. – but also all elements of the business enterprise. In no time, it’ll get you up to speed on the whole-enterprise logistics elements that should be considered in the decision to enter and excel in providing logistics end-items, goods, and services to a global customer.

• Deliver global disaster and relief logistics support
• Explore global manufacturing and distribution logistics
• Provide logistics services for foreign customers
• Adapt domestic logistics to foreign operating environments

Written by a team of SOLE – The International Society of Logistics credentialed practitioners and academicians, Global Logistics for Dummies makes it easier than ever to succeed in this ever-growing field.

Leseprobe

Global Logistics For Dummies®

Published by: John Wiley & Sons, Ltd., The Atrium, Southern Gate, Chichester,www.wiley.com

This edition first published 2017

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Global Logistics For Dummies®

To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Global Logistics For Dummies Cheat Sheet” in the Search box.

Table of Contents

Cover

Introduction

About This Book

Foolish Assumptions

Icons Used in This Book

Beyond the Book

Where to Go from Here

Part 1: Taking Your First Global Steps

Chapter 1: Getting Started in Global Logistics

Understanding the Evolution of Global Logistics

Introducing SOLE – The International Society of Logistics

Getting Started: Some Basic Logistics Concepts

Deconflicting Some Unique Language of Global Logistics

Identifying the Need for This Global Logistics Discussion

Chapter 2: Understanding the Role of Logistics in Global Manufacturing and Sales

Manufacturing in a Foreign Location

Dealing with Foreign Distribution Chains

Anticipating the Impact of Geo-Politics and Social Change

Adapting to the Logistics of Global Internet Sales

Chapter 3: Providing Global Logistics Services

Defining Logistics Services and Logistics Service Providers

Providing Global Logistics Services

Culture, Culture, Culture

Working for Government Clients

Chapter 4: Supporting Global Humanitarian and Disaster Relief Efforts

Directing and Managing International Disaster Relief Efforts

Organizing for H&DR Logistics Support

Providing Logistics Support to H&DR Events: Dangerous but Rewarding

Part 2: Manufacturing in a Global Environment

Chapter 5: Making Your Product and Establishing Your Global Supply Chain

Establishing Your Presence

Deciding How to Support

Managing Your Global Logistics Operation

Chapter 6: Stocking and Distributing Your Products

Building and Managing Your Inventory

Warehousing and Distributing

Shipping and Receiving: From Beginning to End

Chapter 7: “Greening ” Your Manufacturing Line

Safeguarding the Environment

Growing a Green Operation

Applying Green Logistics Best Practices

Chapter 8: Keeping Everything Running Smoothly

Maintaining the Line

Implementing Tools and Metrics

Managing Risks and Crisis

Establishing a Production Continuity of Operations Plan (Production COOP)

Chapter 9: Protecting Your Designs and Data

Developing Your Supply Chain Risk Management Plan

Safeguarding Your Intellectual Property

Fighting Industrial Espionage

Preventing and Recovering from Logistics Data Disasters

Part 3: Selling What You’ve Already Made

Chapter 10: Moving It from “Here” to “There”

Choosing Your Transportation Modes

Establishing, Managing, and Maintaining Your Own Fleet

Using Freight Forwarders

Chapter 11: Keeping Everything Secure

Identifying Potential Distribution Chain Threats

Combating Piracy: On and Off the Seas

Screening Cargo: Both Coming and Going

Dealing with Dunnage, Demurrage, and Damage

Chapter 12: Making the Sale

Identifying and Establishing Your Points of Sale

Building a Winning Strategy

“Capturing” the Sale

Supporting and Educating Your Customers

Chapter 13: Dealing with Losses, Theft, Damages, and Returns

Minimizing the Risk at the Point of Sale

Recovering from the Damage or Loss

Accepting Damages and Returns: Taking It All Back

Part 4: Providing Logistics Services to Global Customers

Chapter 14: Understanding and Accommodating Cultural Differences

Confronting Cultural and Language Barriers

Understanding the Corporate Climate

Adjusting and Responding to Social and Political Uncertainty

Chapter 15: Identifying Insurance and License Requirements

Identifying the Ground Rules

Indemnifying and Protecting Your Operations

Getting and Keeping Your Permits and Licenses

Chapter 16: Deciding on Your Source of Manpower

Identifying Your Labor Pool: Internal versus External

Understanding the Difference between Expatriates, Local Nationals, and Third-Country Nationals

Managing and Retaining Your Foreign Employees

Chapter 17: Understanding Foreign Labor Laws and Requirements

Integrating Labor Laws into Work Schedules

Accommodating Religious Requirements

Understanding the Special Provisions for Employing Women and Children

Compensating Your Workforce

Part 5: Being Part of a Global Humanitarian & Disaster Relief Logistics Team

Chapter 18: Understanding Global Humanitarian and Disaster Relief Logistics

Defining the Scope of Humanitarian and Disaster Relief

Introducing the H&DR Logistics Delivery Framework

Knowing and Understanding the H&DR Logistics Team

Identifying the Phases of Operational Response

Chapter 19: Defining Your H&DR Logistics Role

Making the Corporate Commitment

Deciding What H&DR Logistics Support to Provide

Preparing Your Team: Establishing Internal Systems and Protocols

Responding to the Call for Logistics Support

Chapter 20: Operating as Part of the H&DR Logistics Team

Deploying Your Humanitarian & Disaster Relief (H&DR) Logistics Team

Conducting H&DR Logistics Operations

Closing out the Team’s Mission: Reporting Out and Returning Home

Part 6: The Part of Tens

Chapter 21: Ten “Stars” of Global Logistics

Amazon.com: Leveraging E-Commerce to Support a Global Logistics Enterprise

Coca-Cola: Investing in Product Sustainment in Foreign Communities

Dell: Moving Manufacturing to Capture Global Demand

International Federation of Red Cross & Red Crescent Societies: Disaster Relief

International Flavors & Fragrances: Integrating Multiple Supply Chains

Mali: Revolutionizing the Logistics of Exporting Agricultural Products

McDonald’s and Starbucks: Adapting to Local Customs, Traditions, and Tastes

Toyota: Streamlining the Global Management of Inventory

Volvo: Designing the Environment into Product Engineering

Walmart: Pioneering the Commercial Use of RFID

Chapter 22: Ten Examples of Global Logistics Gone Wrong

Best Buy Europe: Underestimating Cultural Differences in Technology Purchasing

Boise Cascade: Undone by Local Politics

British Petroleum: Inadequate Global Operating Standards

Ford Motor Company: Operational Mismatches

Home Depot: Missing the Cultural Mark

Korean Airlines: Older Is Not Always Wiser

Nestlé: Failing to Understand the Actual Market

SNC Lavalin: Crossing the Ethical Line

Target: Global Is Better Only if Your Logistics Infrastructure Can Support It

Uber: Using Technology to Circumvent Regulatory Requirements

Chapter 23: Top Ten Resources

Global Logistics Manufacturing and Distribution

Global Logistics Services

Global Humanitarian and Disaster Relief Logistics

Glossary

About the Authors

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End User License Agreement

Guide

Cover

Table of Contents

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Introduction

There are many good reasons to consider expanding your successful domestic business into a new foreign location. There may be a new market in which to sell or distribute your product. There may be manufacturing cost savings by locating closer to either new consumers or to your product’s raw materials and components. Or, you may have determined that you can achieve labor cost savings in order to meet the expanding demand for your product. However, in spite of all the economic advantages you may have perceived, be aware that the physical and cultural challenges of your new location may far outweigh any potential cost savings. In this book, we will assist you in identifying — and, hopefully, avoiding — these challenges.

About This Book

The book has four major focuses: the logistics involved in establishing and sustaining a “global” manufacturing operation (Part 2), the logistics related to globally marketing and distributing your products (Part 3), providing logistics services to or for global clients (Part 4), and the unique aspects of providing humanitarian and disaster relief logistics (Part 5). Finally, in The Part of Tens (Part 6) we highlight ten companies that have been successful in their global expansion; examine ten companies that made significant missteps in their global expansion (although some of those companies adjusted their approach and are very successful today); and provide ten suggestions for resources you may consider when conducting your due diligence to make your ultimate decision to “go global.”

We also use the following conventions throughout the book to make the world of global logistics even easier for you to venture into:

New terms appear in

italics

and are closely followed by an easy-to-understand definition. In a few instances,

italics

are also used for emphasis.

Bold

text highlights the action parts of numbered steps.

Web addresses appear in

monofont

. (Some URLs may have broken across multiple lines as we laid out this book, but rest assured we haven’t added any spaces or hyphens. Just type in the address as you see it.)

Foolish Assumptions

Because the world of global logistics can be daunting, this book is based on the premise that you already are part of a business or organization that has a solid logistics foundation; one that is considering expanding its domestic logistics operations — whether manufacturing, selling product, or providing some form of logistics services — into a new and foreign market.

While the basic “language” of logistics may be familiar to you, the “world” of humanitarian and disaster relief (H&DR) may be totally foreign. There are an almost overwhelming number of governmental and non-governmental agencies that become involved in a natural or man-made disaster. Because we didn’t want your introduction to H&DR logistics to thoroughly discourage you from participating in disaster relief efforts, we limited our focus to discussing just the major elements and agencies of the United Nations (UN). We apologize in advance for the detail of the discussion, but hope that you’ll see value in becoming part of relief initiatives in spite of the UN’s organizational complexity.

Finally, we understand that your understanding of logistics may be more limited than that of the authors. When SOLE – The International Society of Logistics (SOLE) talks logistics, it speaks to the entire enterprise that is “logistics,” and not just a single aspect (such as supply chain management). Accordingly, in Part 1 we introduce you to what we mean when we speak of “whole enterprise” logistics.

Icons Used in This Book

As you may expect, this icon highlights important points you won’t want to forget.

This icon clues you in to some tips that can help you along the way and potentially make your life a little easier.

When you see this icon, read carefully. It marks potential pitfalls and helps you steer clear of frustrating and time-consuming mistakes.

Beyond the Book

In addition to all the great information provided within this book, you can also find a handy online Cheat Sheet that provides both an overview and summary of the hurdles in mastering the logistics of global manufacturing, marketing, and distributing your products; providing logistics services to foreign customers; and an introduction to the logistics of providing global humanitarian and disaster relief. To get this Cheat Sheet, simply go to www.dummies.com and enter “Global Logistics For Dummies” in the Search box.

Where to Go from Here

While you may only be interested in one particular aspect of global logistics, we recommend you spend a little time reading through the other parts because some of the nuances of one aspect of the global logistics environment may also be relevant to your global plans.

Part 1

Taking Your First Global Steps

IN THIS PART …

Discover both the history and evolution of global logistics, as well as how SOLE – The International Society of Logistics defines the elements of the total logistics enterprise.

Understand not only the role of logistics in global manufacturing and sales, but also how geopolitical and social operating environments affect a company’s decision to “go global.”

Explore a framework for providing logistics services in a foreign environment as well as the types of companies that provide logistics services.

Gain a perspective on the critical need for global humanitarian and disaster relief logistics support, to include an appreciation of the costs and impacts of providing such support.

Chapter 1

Getting Started in Global Logistics

IN THIS CHAPTER

Exploring the history and emergence of global logistics

Introducing SOLE – The International Society of Logistics and its role in “global logistics”

Identifying the elements of the total logistics enterprise

Providing the framework for this overview of global logistics

“The line between order and disorder lies in logistics …”

This succinct observation about the importance of logistics was made over 2,500 years ago by Sun Tzu, the Chinese philosopher and general whose work on military strategy significantly influenced both Western and Eastern philosophy.

The requirements for large-scale manufacturing, purchasing, and distribution were mostly found in support of war campaigns, since an armed force without adequate supplies and transportation was doomed to fail. History’s great military leaders Hannibal, Alexander the Great, and the Duke of Wellington are considered to have been logistical geniuses. Alexander's military campaign from Greece to India (334–324 BC) benefited considerably from his meticulous (and occasionally ruthless) attention to the provisioning of his army. And, in 218 BC, Hannibal’s march of elephants from Spain to Italy over the Alps loaded with his troops and supplies might easily be considered to be history’s first recorded supply chain!

Understanding the Evolution of Global Logistics

As populations grew and trade routes were established and expanded beyond country borders, manufacturing started to ramp up. The British and American industrial revolutions (1760–1870 AD) brought about the capability to produce in larger volumes to meet the growing demand. Often the local repositories of raw materials had become inadequate or totally depleted, which forced manufacturers to expand their sourcing beyond national boundaries.

World Wars I and II significantly increased the need for commercial logistics in order to meet the heavy demands of the fighting forces. Following both wars many of the factories that used to manufacture combat items shifted production not only to meet the growing demand for consumer items but also (and probably more importantly) to remain in business.

As global distribution infrastructures matured, manufacturers realized that profit could be generated from sales beyond one’s own region and nation, and started marketing their products to a more global market. This marketing expansion was made possible both by the development of modern communication technologies and networks, and the deliberate political choice of many nations to open markets to international trade and finance.

The history of organized logistics support to international humanitarian and disaster relief operations is a fairly recent phenomenon. Until the 1970s humanitarian and disaster relief (H&DR) was the sole responsibility of the affected nation; any international support (if it occurred at all) was primarily financial. It has only been in the last 40 years that international manpower and logistics support to augment an affected country’s capabilities has become more prevalent.

Finally, with the establishment of the World Trade Organization (WTO) in 1995 — which replaced the General Agreement on Tariffs and Trade (GATT) of 1948 — the many individual free-trade agreements that were negotiated between countries were governed under specific rules of international trade. It was through the negotiation and establishment of numerous multinational and regional trade treaties that the world’s “global supply chain” emerged.

Introducing SOLE – The International Society of Logistics

SOLE – The International Society of Logistics was founded in 1966 (originally as the Society of Logistics Engineers) as an international nonprofit professional association. Since then, SOLE has served academia, business and industry, and logistics professionals around the world through its certification and designation programs, training, forums, publications, and thought leadership.

Since its inception, SOLE has been regarded as a highly valued organization that serves the entire spectrum of logistics, focusing on the entire logistics enterprise. The association is perhaps best known for its certification and credentialing programs that recognize the professional expertise and accomplishments of logisticians within commerce, industry, defense, government agencies, academia, and private institutions. In addition to its certification and designation programs, SOLE has long provided other critical avenues for professional support, education, and advancement for logistics practitioners.

SOLE’s many accomplishments include the following:

Recognition as ethical, objective, and expert consultants to the highest levels of government and industry. As such, SOLE has helped US federal agencies like the National Aeronautics and Space Administration (NASA) and the Department of Defense (DoD) to plan, host, manage, and facilitate forums on topics ranging from human capital development, to emerging logistics technologies, to the impact of extreme space weather.

Selection by the US Department of Labor (DOL) as the default commentator as regards expert assessments of the logistics services industry as a whole.

The conferral of over 2,500 Certified Professional Logistician (CPL) and Certified Master Logistician (CML) credentials.

The conferral of over 25,000 Designated Logistician program credentials since 2005.

Development and delivery of unique educational programs in the United States and abroad, including logistics body-of-knowledge overview classes, local and regional professional development forums on an array of technical topics, and customized training programs and academic curricula for industry and higher education.

Establishment of the SOLE Press, which has published four volumes on logistics principles, integrated logistics support, and quantitative measurements of logistics.

Since its inception over 50 years ago, support of logisticians in over 50 countries around the world.

Getting Started: Some Basic Logistics Concepts

The term “logistics” has undergone numerous attempts to be defined and re-defined over the past 50 years. Today, there are literally thousands of companies around the world that have the word “logistics” in their name, in their logo, or in their description. For some, “logistics” is simply the movement of goods from one place to another. Others — when they use the term “logistics”— are actually only describing an element of the whole logistics enterprise, that aspect of the supply chain that includes the functions of procurement, storage, and distribution.

SOLE views logistics as an integrated, whole logistics enterprise that begins with the integration of logistics engineering and support considerations into a product’s design and use, and ends with the system or item’s disposition. Specifically, SOLE considers logistics to be “The art and science of management, engineering, and technical activities concerned with the requirements, design, and supplying and maintaining resources to support objectives, plans and operations.” It is a whole enterprise view, as depicted in Figure 1-1. This definition of logistics provides for an integration of the many elements of logistics that mirrors a product or service life cycle from start to finish (or, from “birth to death” — hence, the logistician’s use of the term “product life cycle”).

© John Wiley & Sons, Inc.

FIGURE 1-1: The logistics enterprise.

The world of logistics is, therefore, broad in scope but can generally be depicted by five functional domains, as shown in Figure 1-2.

© John Wiley & Sons, Inc.

FIGURE 1-2: The functional domains of logistics.

Logisticians rarely work alone. Rather, they are critical players in the whole logistics enterprise that manages an integrated process that is defined for each product or service at its inception. The Integrated Logistics Support (ILS) Plan (as depicted in Figure 1-3) is a plan that’s developed by the logistics community, working closely with the product designers and systems engineers; and that provides a technical basis for integrating all support elements in order to maximize the product or system’s availability while optimizing the costs of logistics support throughout the life cycle.

© John Wiley & Sons, Inc.

FIGURE 1-3: Elements of Integrated Logistics Support (ILS).

Life cycle support is viewed as the composite of all considerations necessary to assure the effective and economical support of a system throughout its programmed life cycle. It is an integral part of all aspects of system planning, design and development, test and evaluation, production or construction, consumer use, and system retirement. Over time, integrated logistics support planning has evolved to include the following major elements:

Reliability and maintainability:

The logistics engineering elements of reliability and maintainability impact all other product aspects because a life cycle support-centered design is one that minimizes the logistics footprint while maximizing reliability. Such a design ensures that maintainability is user friendly and effective, and addresses the long-term issues related to obsolescence management, technology refreshment, modifications and upgrades, and usage under all operating conditions.

Technical data:

This includes product production designs and instructions, operating and maintenance instructions, inspection and calibration procedures, facilities information, drawings, and specifications that are necessary for not only the performance of the product but also its associated maintenance functions.

Maintenance planning:

This includes all planning and analysis associated with the establishment of requirements for the overall support of a system throughout its life cycle. Maintenance planning starts with the development of the maintenance concept and continues through the product’s design and development, the procurement or acquisition of support items, and through the consumer use phase when an ongoing system/product support capability is required to sustain operations.

Support and test equipment:

This category includes all tools, special condition monitoring equipment, diagnostic and checkout equipment, metrology and calibration equipment, and maintenance stands; and the identification of the servicing and handling equipment required to support all scheduled and unscheduled maintenance actions associated with the system or item.

Supply planning:

Supply planning addresses all spares (for example: units, assemblies, and modules), repair parts, consumables, special supplies and inventories needed to support the end product, related software, test and support equipment, transportation and handling equipment, training equipment, and facilities. Supply planning also covers provisioning documentation, procurement functions, warehousing, distribution of material, and the personnel requirements associated with the acquisition and maintenance of spare and repair part inventories at all support locations.

Packaging, handling, storage, and distribution:

This element of logistics results in the articulation of the requirements for any special provisions, containers, and supplies necessary to support packaging, preservation, storage, handling, and transportation of the product; associated test and support equipment; spares and repair parts; personnel, technical data, and mobile facilities.

Personnel:

This category includes the identification of the personnel required for the installation, operation, evaluation, handling, and maintenance of the product and its associated test and support equipment.

Training:

This category includes not only the initial product familiarization training for users and support personnel, but also refresher training when new users and support personnel are exposed to the product or system. Safety is a major element of all training.

Facilities and infrastructure:

This refers to all buildings and real estate needed for product production, product distribution, and the performance of maintenance functions. Since infrastructure costs can be a significant factor in the production and maintenance of a new product, a cost analysis is normally included with this category.

Information systems:

This facet of support refers to all computer equipment and accessories, software, program databases, and any peripheral equipment or data systems used during the manufacturing, maintenance, sales, and distribution functions. The element also includes both condition monitoring systems and maintenance diagnostic aids.

Deconflicting Some Unique Language of Global Logistics

Sounds simple, right? Hopefully, as you go through the various parts of this book you will see that the whole logistics enterprise is a complicated one — one that will become exponentially more complicated when the enterprise goes global.

Because there are so many logistics-related terms to keep track of, we have provided a listing of terms that are used throughout the book. You can find it in the Glossary after Part 6.

Earlier we discuss how SOLE defines “logistics” as the higher-taxonomy level domain, under which operate the functions of logistics engineering, supply chain management, maintenance, and numerous other logistics services (such as food and mortuary services). With these basic logistics concepts outlined earlier, it becomes clear that SOLE has always considered logistics to be more than supply chain management. Accordingly, when we talk to the “whole logistics enterprise” we include all the functionalities and domains of logistics.

Having said that, we need to call special attention to one concept in particular — that of sustainability. When we use terms relating to sustainability with regard to global humanitarian and disaster relief (see Part 5), we are using the concepts set forth in the globally accepted definition that was articulated in the Bruntland Report of 1987. Specifically, “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

However, those of you in the field of logistics — particularly those of you who may be working as part of a country’s military-industrial complex — may be using the term “sustainability” primarily either as an adjunct to or in place of the technical terms “reliability, maintainability, and supportability”; or the concept of product, system, or operational “survivability.” (For example, the US DoD uses the phrase “life cycle sustainment” in describing the end result of providing “life cycle support.”)

If that weren’t confusing enough, in many companies and organizations the term “sustainment” is all about keeping the company itself financially healthy and operationally viable (that is, “staying alive”)!

Identifying the Need for This Global Logistics Discussion

We have started this discussion based on the premise that you are part of a successful business or organization that is considering expanding your domestic logistics operations — whether manufacturing, product sales, or the provision of some form of logistics services — into a new, foreign market.

There are many good reasons to consider exporting your successful domestic business to a new foreign location. There may be a new market in which to sell or distribute your product. You may achieve manufacturing cost savings by locating closer to either new consumers or to your product’s raw materials and components. Or, you may have determined that you can achieve savings in the cost of the labor required to meet the expanding demand for your product. However, in spite of all the economic advantages you may have perceived, be aware that the physical and cultural challenges of your new location may far outweigh any potential cost savings.

You are not alone. Hundreds of companies every year — small, medium, and large — look to expand their operations on a more global basis. And, generally, less than 30 percent of them are successful at their first attempt.

The reasons for being unsuccessful are many and varied, but most often relate to not having a complete grasp of the proposed foreign location’s people, customs, culture, laws, and regulations. In this book we describe many of the pitfalls that may be encountered when venturing into a new foreign location. Our hope is that — with the knowledge of what lies ahead — you can make the right decision for you and your company.

It should be noted that while the global expansion of manufacturing, sales, and product distribution has been and continues to be a growth area — especially due to the rise of the Internet and electronic commerce — logistics support to global humanitarian and disaster relief operations is predicted to grow even faster.

Accordingly, the book has four major focuses: logistics related to manufacturing “overseas” (Part 2), logistics related to global marketing and distribution (Part 3), providing logistics services globally (Part 4), and the unique aspects of providing humanitarian and disaster relief logistics (Part 5). While you may only be interested in one particular aspect of global logistics, we recommend you glance through the other parts, as some of the nuances of that segment of the global logistics environment may also be relevant to your global plans.

Finally, in The Part of Tens (Part 6), we include chapters on ten companies that have been successful in their global expansion; ten companies that made significant missteps in their global expansion (although some of those companies adjusted their approach and are very successful today); and ten resource suggestions for you to consider when performing the due diligence necessary to make your final decision about “going global.”

Welcome to the world of global logistics!

Chapter 2

Understanding the Role of Logistics in Global Manufacturing and Sales

IN THIS CHAPTER

Understanding the role of logistics in global manufacturing

Shifting from domestic to foreign manufacturing and distribution

Considering geo-political and social environments in the decision to go global

Adjusting your business practices to e-commerce

Now that you’ve successfully mastered the logistics necessary to profitably design, manufacture, sell, and recycle your product in your domestic market, you’re weighing the decision to expand your operations into foreign markets.

As shown in Figure 2-1, logistics plays a significant role in the successful design, manufacturing, sales, and disposal of all products. The term life cycle is used to identify the major elements in a product’s “life,” from its conception (that is, its initial design) to its ultimate disposal.

© John Wiley & Sons, Inc.

FIGURE 2-1: The role of logistics in a product’s life cycle.

In this chapter, we provide an overview of those aspects of your current manufacturing life cycle that you may need to adjust or redesign when establishing your foreign manufacturing operations as well as the associated distribution chains (as addressed in Parts 2 and 3).

Finally, we conclude with some additional thoughts regarding the influence of world affairs on global operations, as well as a discussion of the impact of e-commerce (that is, the electronic sale of items over the Internet) on global logistics.

Manufacturing in a Foreign Location

In Part 2 we explore both your decision-making process and the ultimate establishment of manufacturing options in a foreign location. In relationship to Figure 2-1, this discussion starts with the production of a product that has already been designed and is currently being manufactured in your domestic location(s).

Chapter 5 covers the setting up of manufacturing operations in a foreign location. There must be clear corporate goals, a comprehensive business plan (one that includes additional emphasis on security and the protection of intellectual property, which is discussed in detail in Chapter 9), and an informed foreign manufacturing strategy in place when determining the location of your foreign operations. The chapter also explores the decision to use either internal (that is, domestically-based corporate assets) or external (that is, contracted out) logistics support for both the physical production facility and the new supply chains associated with your foreign operations.

Chapter 6 includes a discussion on the inventory levels of raw materials and components needed to support foreign production, with a particular emphasis on how those levels may be different than those in your domestic operations due to the establishment of local foreign supply chains. The chapter also provides aspects to consider when establishing the warehousing and distribution locations associated with the foreign production facility; shipping foreign-manufactured product back to your domestic market (if that is desired); and managing returns of your foreign-manufactured goods.

Chapter 7 considers eventual consumer use and focuses on the additional environmental considerations of product and packaging, establishment of the foreign physical facilities, and distribution chain management. It includes a discussion on the need for ensuring a corporate culture of environmental stewardship sensitive to your foreign presence, as well as an exploration of the various components that make up “green manufacturing.” Finally, it offers several “green” best business practices, such as the development and execution of an environmental management plan.

In Chapter 8 we explore the establishment and use of operational readiness levels and production metrics for your foreign manufacturing and distribution operations. We also provide an analysis of potential production stoppages and present recommendations for risk reduction and recovery options should stoppages occur.

Chapter 9 discusses risk, with the focus on the inherent dangers to your intellectual property (specifically product designs and corporate “trade secrets”) and logistics data resulting from long-distance management of remote supply chains. The chapter closes with a detailed discussion on how to prevent and (if necessary) recover from the loss or compromise of such intellectual property and data.

Dealing with Foreign Distribution Chains

Whereas Part 2 addresses your company’s establishment of foreign manufacturing operations for either the production of existing products or for new product lines, Part 3 speaks to the sale and distribution of your products — whether made domestically or in a foreign country — in the global marketplace.

Chapter 10 is all about selecting the transportation system and modes that best support your global operations. It explores not only the various options for and selection of the optimum movement method (via land, air, or sea) but also discusses how to determine the optimum mix of transportation modes for each segment of the distribution chain. This determination is based on the outcome of any decision you make about operating your company-owned fleet of transport vehicles or contracting out the movement of all — or any portion of — your supply and distribution chains. In our discussion of the pros and cons of each course of action, we explore the role of freight forwarders to assist in the movement of your raw materials or finished products.

In Chapter 11 we discuss both protecting your cargo against loss or damage, and investigating and responding to threats in your distribution chain should that protection fail. The chapter includes a warning about piracy, now a real and major concern on many land and sea routes. Further, since your global operations likely ship across international borders, we provide a discussion on the responsibilities to ensure compliance with shipping laws and regulations designed to help prevent the flow of contraband between countries.

Chapter 12 explores the establishment of your foreign points of sales; adjusting your current product configuration or packaging to enhance product acceptance by your foreign customers; and creating a profitable global sales strategy. Finally, the chapter discusses how logistics can help in gaining and keeping customer loyalty to your brand.

Chapter 13 wraps up the section on foreign distribution chains and focuses on dealing with losses, theft, damages, and returns. All companies routinely encounter these situations, but they can be much more significant when your distribution chains are operating in a foreign market. We provide suggestions both for how to minimize the risk from these incidents and how to recover when they occur. Because it has been proven that customer returns tend to occur more frequently in foreign markets, the chapter addresses the need to be prepared to either modify your domestic return policies and procedures or develop new ones that are foreign-market specific. The chapter concludes with a hard look at the large — and constantly growing — issue of counterfeit products and its impact on both original product manufacturers and the global economy.

Anticipating the Impact of Geo-Politics and Social Change

We would be remiss if, after the discussion of the chapters in both Parts 2 and 3, we didn’t call your attention to those underlying aspects of global logistics that are critical to the success or failure of any decision to expand your domestic operations to the global arena.

Society has changed significantly in the past 50 years. Technology advancements have resulted in a level of information capacity and product capability that has significantly impacted not only our daily lives but how governments manage. Countries not only have opened their borders to foreign goods but also often encourage foreign businesses to establish local production facilities. As the flow of information has become more sophisticated and more available, the demand for many existing and new products has increased. International trade organizations have been formed to provide protocols and procedures for conducting commerce across borders. As a result, the focus of marketing efforts has become far more international.

That said, there is still much uncertainty that impacts the conduct of foreign trade. Issues such as having to manage an influx of large numbers of refugees (whether generated by political unrest or natural disaster); increasing national debts and currency fluctuations; and a resurgence of nationalism affect business on a daily basis. Foreign trade agreements are often in flux, as a result of political pressures concerning the balance of trade between nations. Currency valuation — while normally fairly stable — may change dramatically as the result of local, national, and international issues. The work environment and cost of labor in many developing countries is becoming more legislated. Concerns over ecological issues are forcing change in the design, production, and disposal of many types of products. Further, the export of raw materials, as well as some highly technical products with possible military implications, is becoming more controlled.

When you make the decision to “go global,” multiple world conditions can affect your foreign operations far greater than they might your domestic operations. Those global impacts include man-made events such as wars, border disagreements, or even labor disputes that delay shipments or close critical transportation nodes. They also include natural disasters such as earthquakes, typhoons, or floods that have the same effect on your supply and distribution chains.

The unpredictable theft of goods during shipment is also an ever-increasing concern when manufacturing or selling in foreign markets. While nations have worked together to try to reduce the number of incidents, the criminals have also developed sophisticated capabilities that enable them to more easily target high-value shipments.

Adapting to the Logistics of Global Internet Sales

The advent and growth of the Internet and its cyber technology saw the emergence of e-commerce. And, with the rise of e-commerce has come a reassessment of the traditional “brick and mortar” storefront with its supply, warehousing, and distribution processes.

The Internet has become the most significant factor in the way business is conducted globally. The number of worldwide Internet users grew an estimated 918 percent between 2000 and 2016, and, by some estimates, now reaches over half the world’s total population. Even in Africa, where the percentage of users is the lowest at slightly less than 30 percent, there are still a reported 340 million–plus users.

In business, the Internet has expanded the marketplace at its most rapid rate in history. According to multiple statistical sources (such as Statistica.com or e-Marketer.com), in 2015, alone, Internet retail sales reached over $2.2 trillion with sales projected to continue to grow an estimated 10 percent annually.

Because of its availability to consumers 24 hours a day and resulting increase in product demand, the Internet has forced businesses to streamline not only their retail operations but also their production and sales distribution systems. In many cases that streamlining results in the elimination of physical storefronts, which then eliminates the associated expense of in-store and warehouse theft.

However, e-commerce brings with it many new challenges for companies. The percentage of goods that are purchased in a traditional store and then returned is approximately 8 percent, while an estimated 25–30 percent of goods that are purchased on the Internet are ultimately returned. This is causing a new emphasis on the need for the rapid inspection of returned items so they can quickly be returned to inventory. It is also creating the need for more durable packaging.

Internet-related theft and fraud are major concerns for both businesses and customers. A business’s intellectual capital can be stolen if not protected adequately. Consumers risk identity theft or the theft of credit-card information. Accordingly, increased and improved online security is not only expected but demanded from merchants and e-commerce service providers. Consumers expect the deployment of countermeasures such as firewalls and anti-virus software to protect e-commerce networks.

In a variation of “high seas piracy,” there has been an increase in the Internet ransom of businesses and individuals, where a business or personal Internet site is “held captive” until the site owner pays to get its data restored. Phishing (that is, the attempt to fraudulently acquire sensitive information by email) is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer when they have actually fed private information to a system operated by a malicious party. Denial of service attacks continue to be a risk for merchants, as are server and network outages. Further, the thefts by hacking of tens of thousands of customer records from retailers’ on- or off-line corporate databases are growing in alarming number and frequency.

Finally, the sale of counterfeit goods is yet another critical area that has seen an increase because of e-commerce. Now that consumers have the ability to compare prices between Internet sites, they are often inadvertently encouraged by applications or websites that consolidate unvalidated web-listed prices to purchase from sites that sell counterfeited versions of the products being sought, at a reduced price. Unfortunately, neither the customer nor the product manufacturer has any recourse if the purchased item is counterfeit. The customer may lose his money (since the “real” manufacturer won’t refund or replace a counterfeit item), and the manufacturer loses not only a sale but also a small portion of the brand’s image.

Having provided an overview of the logistics involved in both establishing a foreign manufacturing operation (Part 2) and the global distribution of your manufactured products (Part 3), in Chapter 3 we explore the world of providing logistics services to foreign customers (which we will further expand on in the chapters of Part 4).

Chapter 3

Providing Global Logistics Services

IN THIS CHAPTER

Understanding what logistics services are and who provides them

Building the framework for providing logistics services in a foreign environment

Making adjustments for cultural differences

Accommodating the additional requirements of government contracts

In Chapter 2 we preview both Part 2 (setting up your new manufacturing operations in a foreign location) and Part 3 (understanding the modifications that may be needed for an effective and efficient foreign distribution chain).

In this chapter we provide an overview of providing global logistics services (the focus of Part 4). We start by addressing the many tasks that can comprise logistics services for a foreign customer, as well as defining the types of organizations that provide those services. Our focus is on the workforce — the options you have when it comes to providing logistics services, either for your own operations or for a foreign client — and all the rules and regulations that you must consider. Additionally, we address how to protect your investment by obtaining the insurance and licenses required when operating in another country.

We close this chapter with a discussion of the absolute requirement not only to understand and appreciate but also accommodate the culture of the country and its residents. We also shed light on the additional challenges faced when providing global logistics services under a government contract.

Defining Logistics Services and Logistics Service Providers

While no one list of global logistics services is all-encompassing — that is, most lists do not reflect the full scope of the logistics enterprise — the list used by the United Nations Economic and Social Commission for Asia and Pacific provides a basic supply chain–centric platform and includes the following:

Transportation services (both people and things)

Logistics information services (including order tracking and tracing)

Warehousing

Freight consolidation

Customs requirements and other order administration

Selection and integration of multiple carriers

Packaging, assembly (or kitting), and processing of goods

Technical testing

Localization

(that is, the process of adapting a product or marketing program for a specific region or language by adding locale-specific components and translating text)

Quality inspection

Logistics consulting and supply-chain design

Management of a supply chain

Operation of a supply chain

Procurement and contracting

Financial services (such as collateral management)

Aftermarket services (such as reverse logistics and returns)

Maintenance and repair

Call-center operations (for example, technical and warranty inquiries)

Although the preceding list is a good start, it doesn’t include food service support or mortuary services support (both of which are included as part of the services provided by many countries’ military logisticians). Also not included on the list are logistics engineering services, which are an integral part of our definition of the logistics enterprise.

As for who provides logistics services, there are several options. First, the services can all be provided in-house, by the company that manufactures, directly sells, and services the product. This is known as a first party logistics provider (1PL). This type of original manufacturer logistics was much more prevalent when products were produced only for a local market.

If the manufacturer does not perform all its own logistics services, then the remaining services requirements must be contracted with other companies specializing in one or more of the required services. These companies are characterized as one of the following:

Second party logistics providers (2PLs)

is the term for companies hired by the manufacturer to serve as either a carrier, a warehouse manager, or a logistics engineering firm for the operational execution of any clearly defined logistics task. The management and oversight of the service provided remain the responsibility of the manufacturer. The manufacturer’s relationship with the logistics provider is often only cost-driven and short-term, with the provider delivering what the client requires and being paid accordingly.

Third party logistics providers (3PLs)

are used when the manufacturer outsources a grouping of transport and logistic activities. The 3PL service provider organizes those activities and may act as a broker and — in turn — subsequently hire additional companies for task execution. The 3PL service provider often interfaces not only with the manufacturer but also with the actual provider of the service. The manufacturer often enters into a long-term partnership with the 3PL provider in a cooperative environment. The manufacturer retains enough expertise in order to measure, evaluate, and, if necessary, correct the logistic performances of not only the 3PL service provider but also the task subcontractors.

Fourth party logistics providers (4PLs)

provide support on an even higher level of logistics system integration. The manufacturer outsources not only the organization of its logistic tasks but also the full management thereof. 4PL providers often manage an entire, singular supply chain. The 4PL’s role requires a heightened involvement in the business operations of the manufacturer, because the manufacturer has not only contracted for the execution but also the monitoring of all the company’s specified logistic processes. In effect, the 4PL serves as a member of corporate-level staff. Short-term relationships established by collaboration agreements that are based purely on cost-related criteria are replaced with long-term partnerships, where quality of the service plays the primary role and risks and benefits are shared jointly. Further, 4PLs now have to address the management and security of multiple electronic interfaces between supply chain providers with enormous databases.

The emergence of

fifth party logistics providers (5PLs)

is relatively new. A 5PL provider guarantees the management of

networks

of supply chains, or even the entire logistics enterprise — in effect, serving as the company’s corporate chief logistics officer (CLO). The manufacturer hires 5PLs for the development of strategic and innovative logistical solutions and concepts. A 5PL service provider develops and implements, preferably in close consultation with the client, the best possible logistics solutions. The term “5PL” is often linked with e-commerce.

Providing Global Logistics Services

Now that we’ve identified the possible providers of global logistics services, let’s take a look at the various discussions in Part 4 of the various specifics providing global logistics services.

Chapter 14 sets the stage for a comprehensive discussion of perhaps the most critical aspect of providing global logistics services. Businesses that plan to provide global logistics services using a foreign workforce must understand what is important to that workforce. The barriers to such an understanding can include both language issues (written and spoken) and the cultural issues that may affect everything from work hours, to the gender or age of the workforce, to the food in the lunchroom. The chapter also warns that the workplace climate and company loyalty may be at odds with those of your domestic operations and corporate headquarters. The chapter concludes with details on identifying and dealing with social or political uncertainty or upheaval.

So how do you go about trying to protect your interests? Chapter 15 identifies some of the nuances of operating in a foreign country. It discusses some of the various types of insurance that may be necessary and that may not be available through the insurer of your domestic operations. The chapter also details how to establish your company’s intellectual property rights protection plan, as well as what protection is available under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The chapter finishes with a section concerning how to obtain and retain your business licenses to operate in a foreign country.

Chapter 16 goes into detail about the various options you have when you are ready to staff your new location. These options include both internal as well as external hires. The chapter describes the differences between local nationals, expatriates, and third-country nationals; and when each type of staffing is appropriate or advantageous. Depending on both the host country where you operate and the country where your domestic headquarters is located, each country may have rules and restrictions that affect your hiring options. The chapter also discusses the pros and cons of hiring independent contractors instead of using your own paid workforce.

In Chapter 17 we examine many of the labor laws that you may have to comply with. This includes an overview of the resulting impact on and cost of workforce scheduling, accommodating restrictions, and your ability to successfully fulfill your logistics services support contract. The chapter includes a section that highlights some of the issues you may encounter in various foreign locations when hiring females and minors. Also included is a section on complying with foreign national and regional requirements and prohibitions for work hours, overtime, and vacation time, as well as providing examples of how the rules vary significantly between countries. Similar variances are discussed with respect to potential host-country requirements concerning the compensation of any mix of workforce you intend to employ.

Culture, Culture, Culture

According to multiple industry analysts, as many as 70 percent of companies fail in their first attempt at expanding successful domestic operations into the global marketplace. (Having said that, the estimate may be low since there is a reluctance in many cultures to openly admit to failure.) While the reasons for failure are many and varied, most failures are built upon an ignorance of cultural and societal differences between domestic and foreign markets.

While improvements in global information systems have helped companies gain a better awareness of culture and their religions, traditions, and ideologies, it is still common for businesses to ignore the information that is available to them. Instead, they fall back on the same policies, processes, and procedures that made them successful in their domestic operations.

This lack of appreciation of people — whether they are your foreign customers, new government regulators, or your own new workforce — is almost certainly a fatal mistake in any attempt at a global expansion.

In Part 6 we include a chapter on ten businesses that have been successful in their global expansion efforts, and another chapter on ten businesses that initially fell short. In all cases the understanding of the culture in the foreign locations was a critical factor in success or failure.

Working for Government Clients

Many companies, large and small, provide logistics services for government contracts operating in foreign locations. The work is normally performed under contracts that range from one to five years, depending on the contracting rules of the client government. The work can be done at the government’s own facilities, at the client’s facilities, or at a third-party location determined by the contract.