International Distribution Systems

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International DistributionSystems


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In International Distribution

The firm sells to its customers:

directly through its own sales force

indirectly through independent intermediaries

indirectly through an outside distribution

system with regional or global coverage


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International Distribution

Systems

I. Problems in International Distribution

1) More stringent legal restrictions2) Goods must be transferred further

3) May be difficult to get product to the

consumer (infrastructure issues)


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Intermediaries

Sources for Finding Intermediaries

Distributor inquires

Governmental agencies

Commerce Departments Trade Opportunities

Program

U.S. Exporters Yellow Pages

Private sources

Trade directories

Screening Intermediaries

Performance

Professionalism


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Selection of Intermediaries

Agents

Foreign (Direct) Brokers

Manufacturers Reps

Factors

Managing agents

Purchasing Agents

Domestic (Indirect)

Brokers Export Agents

EMCs

Webb-Pomerence

Commission agents

Distributors

Foreign (Direct) Distributors/dealers

Import jobbers

Wholesalers/retailers

Domestic (Indirect)

Domestic wholesalers

EMCs

ETCs Complementary

marketers


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Systems

II. Moving the Product Overseas1) Ocean shipping

2) Air freight

III. Types of Middlemen

1) Freight forwarders2) Trading Companies

3) Export Management Cos.


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Real Physical Distribution Costs Between Air and

Ocean Freight - Singapore to the United States

In this example, 44,000 peripheral boards worth $7.7 million are shipped from aSingapore plant to the U.S. West Coast. Cost of capital to finance inventoriesis 10 percent annually; $2,109 per day to finance $7.7 million.

Transport costs $31,790 $ 127,160(in transit 21 days) (in transit 3 days)

In-transit inventoryfinancing costs $ 44,289 $ 6,328

Total transportation costs $ 76,079 $ 133,487Warehousing inventory costs (60 days @$2,109/day)

Singapore and U.S. $ 126,540Warehouse rent $ 6,500Real physical distribution costs $ 209,119 $ 133,487

Ocean Air

SOURCE: Adapted from: "Air and Adaptec'c Competitive Strategy,International Business, September 1993, p.44.

Irwin/McGraw-Hill


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Systems

III. Types of Middlemen (Cont.)

4) Piggybacking

5) Domestic export middlemen

IV. Choosing a Middleman


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International Logistics

V. International Logistics - the designingand managing of a system that controls

the flow of materials into, through, andout of the international corporation.

Major decision areas:

locating plants and warehouses; choiceof transportation mode; managinginventory; packaging.


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The Impact of International Logistics

Logistical costs are 10% to 30%of the total landed cost of an

international order.

Factors necessary for the useof logistics as a competitive tool:

Close collaboration with suppliers and customers

Technologically advanced information processingand communication exchange capabilities

An integrated business infrastructure


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International Transportation Issues

Transportation infrastructure

Roads, rail lines, airports, seaports, pipelines

Availability of transportation modes

Overland shipping, ocean

shipping, air shipping Choice of modes

Transit time, predictability,

cost, noneconomic factors

Noneconomic Factors

Government involvement,

the UNCTAD and

the 40/40/20 concept


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International Logistics

VI. Inventory Management Considerations

- Carrying costs

- Order cycle time

- Order cycle consistency

- Difficulty in applyingservice rules


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International Inventory Issues

Inventory carrying costs can be up to 25% ofthe value of an inventory

Just-in-Time policies minimize inventory

volume by making it available when needed.

Inventories assist in the movement of products.

Factors in deciding on the

level of inventory to maintain:Order cycle time

Desired level of customer service

Use of Inventory as a strategic tool


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Order Cycle Time

The total time that passes between the

placement of an order and the receipt of the

merchandise.

Length of the total order cycle

Longer cycle in international marketing than domestic

Consistency of the order cycle

More complicated delivery mode reduces consistency

Altering cycle timesChange transportation methods

Change inventory locations

Change ordering process


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Long Tail Strategies

International Distribution Systems

Documents

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