Typical Logistics Problems and Solutions in International Trade

Each export-import firm must use a logistics system that best fits its product line and cho­sen competitive strategy (see Table 6.1 for differences between domestic and international logistics).

Example 1

Arturo Imports Incorporated, a firm based in Boca Raton, Florida, specializes in the importation of gift articles from South America and the Caribbean. It sells its products through company-owned retail stores in thirty U.S. states. The com­pany has distribution centers in twenty locations all over the country and spends more than $650,000 a year in warehousing costs. Over the past few years, it has come under increasing attack from competitors and has lost about 20 percent of its market share. Its profits also declined by more than 15 percent in 2010 alone. The firm hired a consultant to advise it on how to reverse the situation. On the basis of the advice it received, Arturo Imports consolidated its operations in six distribution centers; reduced dead, obsolete, and slow-moving stock; and decreased the likelihood of stock-out (an item that is out of stock) for products customers want to buy. It centralized its purchasing functions and switched to an intermodal air and truck (from ocean and rail) combination to ensure rapid delivery. The company began to see its market share and profit margin grow six months after implementing its new logistics systems.

Example 2

A U.S.-owned export firm in Bangor, Maine, serves a narrow product line in east­ern Canada from two distribution centers located in Montreal and Toronto. The company began to reexamine its logistical infrastructure in response to its loss of profits and market share to competitors. It increased the number of branch warehouses and level of fast-moving inventory while reducing the market area served by each warehouse. It also extended its product line. In spite of the ad­ditional expenses incurred, the company began to see a marked increase in its profits and sales volume.

Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.

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