What Is International Logistics? - Definition & Explanation

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Lesson Transcript
Instructor: Shawn Grimsley
Logistical management is an essential component of any company and can be complex in our global economy. In this lesson, you'll learn the key concepts related to it. A short quiz follows.

So What Is International Logistics?

According to the Council of Logistics Management, logistics is the management process of 'planning, implementing, and controlling the physical and information flows concerned with materials and final goods from the point of origin to the point of usage.' International logistics involves the management of these resources in a company's supply chain across at least one international border.

Conceptual Framework

It may sound complicated, but logistics is basically the management of stuff, and information regarding the stuff, from one place to another until it reaches the consumer. The logistical management of physical items may include integration of information (such as inventory databases and shipping schedules), material handling, production, packaging, inventory, transportation, distribution, storage, and security for the resources.

Example of International Logistics

Let's look at a simple example. Just pretend for a moment that you work as a logistics manager for a large American jewelry company based out of New York. Your company has an extensive international supply chain. We'll walk through a simplified logistical process for a diamond ring.

Your diamond supplier is in South Africa. You get your gold from a supplier in China. The jewelry itself is assembled in Switzerland. Your job is to manage the supply chain from acquisition of a resource through its transformation into a finished product and until it is sold to a customer. Your responsibilities may include the following:

  • Oversight of the purchase of diamonds in South Africa and gold necessary from China to fulfill the company's production demands
  • Arranging for the temporary warehousing of the purchased diamonds and gold at local storage facilities
  • Arranging for the international shipping of the gold stored in China to a subsidiary in a small Eastern European country, where the gold will be refined and prepared for the jewelers in Geneva
  • Arranging for the international shipping of the diamonds stored in South Africa to the company's facilities in Geneva for cutting and polishing
  • Arranging for the international shipping of the refined gold to the company's Geneva facility to create rings and settings
  • Once the rings are finished, arranging for their warehousing at the company's central warehouse until they are needed to fill orders, keeping meticulous computerized inventory records, and ensuring the facility is adequately secured
  • Arranging for the shipment of an order of diamond rings to the company's flagship Manhattan retail store
  • Continued monitoring of the inventory at the retail store until the product is sold to a customer

International Logistics Channels

If you look closely at the earlier example, you can discern three different types of processes involved in international logistics that we will call logistics channels:

  1. The transaction channel involves buying, selling, and the collection of payment.
  2. The distribution channel involves the physical movement of resources and products throughout the supply chain process, from acquisition to sale.
  3. The documentation/communication channel involves the management of information regarding the resources and products such as inventory controls, commercial shipping documents, and contracts.

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