TMA305E - LOGISTICS AND
INTERNATIONAL FREIGHT FORWARDING
TOPIC 2: GLOBALISATION & LOGISTICS
NGUYEN Minh Phuc (PhD),
Dept. of Logistics & Supply Chain Management,
School of Economics & International Business
MAIN CONTENT
• Globalisation of markets, production & supply
chains
• International trade
• Value-added role of logistics
• Factors affecting the cost and importance of
logistics
• International logistics management issues
Source: BP Statistical Review of World Energy (2020)
Globalisation of Markets
• Globalisation is the ‘process of increasing
interconnectedness between societies such that events in
one part of the world more and more have effects on
peoples and societies far away’ (Bayliss and Smith 2001, p.
9)
• Globalisation has enabled the production and distribution of
products and services on a worldwide basis
– It is a consequence of convergence, which is the tendency for the
tastes and preferences of people in different countries to become
similar
Globalisation of Markets
• Convergence is encouraged by global linkages - networks of
individuals, institutions and countries which tie together
trade, financial markets, technology and living standards
(Czinkota et al. 2005)
• Linkages in the network are facilitated by TV, radio,
movies, the Internet, by music and transport
• Global linkages result in people in many countries wearing
jeans, drinking cola and eating pizza and hamburgers, etc.
Globalisation of Markets
• Developments in communications and transportation
technologies have moved the world towards becoming a
‘global village’ of interdependent people
• Goods and services, as well as people, travel between
continents and this has led to an economic system that
transcends national boundaries and markets
• National markets and their associated economic systems are
no longer isolated from one another by distance, time or
culture: they have merged into one huge global market
Globalisation of Production
• The sourcing of goods and services from locations around
the globe to take advantage of national differences in the
cost and quality of factors of production ... to lower their
overall cost structure and/or improve the quality or
functionality of their product…. (Hill 2005, p. 7)
What does International Trade Mean?
International trade = Exporting and Importing
SELLING (within the country) BUYING
EXPORTING (across the border) IMPORTING
• SIMILAR IN MEANING BUT THE INTERNATIONAL
DIMENSION ADDS COMPLEXITY TO THE PROCESS OF
BUYING AND SELLING.
What does International Trade Mean?
• exporting involves the sale of our product or service in a
foreign market. It necessitates finding foreign markets,
setting up marketing organisations, developing business
within those markets, making transactions, physically
shipping goods to markets, managing the movement of
documents and managing the process of getting paid
(Dudley 1989, p7) .
• “The basis of exporting is marketing; the basis of importing
is purchasing”.
The Concept of International Logistics
• The 7Rs (7
Rights) of
Logisitcs:
product,
customer,
place,
time,
quantity,
quality,
price
The Concept of International Logistics
LOGISTICS vs SCM
Logistics Questions: Location
• Location of resource inputs (Where?)
– Where to find material needed
– Where to find labour and parts supply, etc
• A decision on location includes also what product to
produce & which plants to produce them in
• When resources are found, another question is where to put
them together to transform raw materials into WIP or
finished products:
– Where to set up production bases or factories?
– Where to build warehouses or distribution centres?
– Where to establish branch organisations? Etc.
Logistics Questions: Movement and Storage
• Movement and storage of resources and products from the origin
of resources to the final destination of finished products
– how to transport from A to B, by air, sea, road or combination of them;
– when should the transport start; which route should be chosen;
– should storage be needed; is packing needed and if so, when and how etc.
• The two groups of logistics questions are logically interrelated
• Logistics concerns space and time, and is about to answer the
questions of location, movement and storage of economic
resources.
Value-added Role of Logistics
• Most commonly referred to in terms of economic utilities:
– Form utility
– Place utility
– Time utility
– Possession utility
Important Logistics Concepts
• Total costs: the
essence of
logistics is to
minimise total
costs of logistics
rather than cost
of an individual
activity
Important Logistics Concepts
• Cost trade-offs: a useful analysis tool aiming at
minimising integrated logistics costs
• At the stage of planning and assessing integrated
logistics system, different combinations of cost
elements should be sought, analysed & compared
to identify an optimal portfolio
• All major cost elements in a logistics system are
interrelated; thus a best combination must exist
with which total costs are the minimum
• Reducing a cost element may incur another; so a
total cost saving must be sought
Important Logistics Concepts
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Factors Affecting the Costs and Importance
of Logistics
Management of International Logistics
Issues of International Logistics
Management: Complexity
Issues of International Logistics
Management: Others
