Discuss about the Contemporary Issues in International Trade Logistics.
International logistics refer to as the process of planning, implementing and controlling the movement of storage foods and services and the relevant information from the point of origin to a point of consumption that might be located in various countries. International trade is the exchange of the goods and services across the border. Countries specialize in the products and services products and import their products in other company (Wild, Wild and Han, 2014). On the other hand, the logistics are all about managing the activities along with the supply chain from procuring materials to delivery of final goods that can fulfill the needs of the customers. Therefore, logistics and the transport management is a key enabler of the international trade.
In simple words, it can be said that without logistics and transport management the companies and countries will not be able to get involved in the international trade. In the year 2014, about a third portion of all the goods and services produced were traded internationally (Oxford Brookes business school, 2018). International trade is the effective driver that contributes to increase the living standard of the developing world. Though, this is the fact that the current international trade logistics operations are assumed to be unsustainable. This unsustainability of the operations creates the impact on the international trade. Moreover, there are numerous contemporary issues which might affect the international trade logistics.
The successful international trade logistics leads to a rise in the international competition among the business as the growth of the companies depends on the expansion of the business into new markets. Though, managing logistics along with the supply chain makes the international trade difficult for companies. Moreover, the new product from the unfamiliar markets leads to the complexity of the export and import logistics (Fernie & Sparks, 2014). Along with this, it leads to the on-time delivery as a challenge. On-time delivery of the product is essential for the companies who are relying on the logistics. Therefore, they deal with those logistics managers who can assure the on-time delivery of the products. Moreover, it is suggested to the companies to open their manufacturing outlets at the major places in which they are performing main operations (Savage, Fransman & Jenkins, 2013).
In addition, the complexity of the sourcing options and evolving trade regulation together affect the balance of compliance and also makes the decision daunting for the most experiences logistic teams. Apart from this, there are numerous challenges which might affect the international trade. Some of them are: –
Higher international shipping volumes lead to the exposure to trade regulations violations: – The changes in the trade regulations take place on a frequent basis which affects the balancing of the compliance. Considering the business needs, the change in the trade regulations is a challenge for the logistics management. Due to this, most of the companies find themselves not prepared for the operations in the international market. Moreover, the companies also find it a threat of huge penalties due to non-compliance with regulations. In these challenges, the compliance departments of the company play a vital role in managing the logistics of international trade (Damco, 2014).
If the company has strong compliance at the single location it doesn’t reflect that the company is able to meet the logistic compliance at other locations as well. If there are gaps in the custom skills of the company at other locations that means they have to adopt automated solutions and enlists the support of the logistics and supply chain management experts. This is the only way through which the company will be able to safeguard it from compliance.
Breakdowns in cross-burden shipments: – In the today’s business world most of the businesses provide diverse product line to fulfill the demands of the consumers in various countries. The companies perform international trade with diverse goods from other countries. At the time of international trading, the companies have to face the trade regulations irrespective of the flow of goods (import/export). If there is any single mistake in the compliance (missing license and regionally applicable requirements) then the supply will stop and this prevents crossing border (Yu, 2011). Therefore, it is recommended to the company to ensure that they are meeting each and every requirement.
Inconsistent trade practice can increase compliance issues: – There are different operating procedures available for the different activities such as acquisition, mergers, expansion and other. Due to this strict adherence, companies might fall rapidly on prey to dispersed trade practices and leads to inconsistency in the logistics and supply of goods (Gereffi, Frederick & Gereffi, 2010). It is suggested to the company to be consistency for the international trade practice because this inconsistency makes the company away from the legal obligations that are essential for the international trade logistics.
Inability to keep a pace with the modern customs technology: – There is rapid growth in the use of technology to achieve the objective and needs of the customers. Electronic systems are exchanging the older customs processes because automation has become an importance for trade authorities in the today’s generation. The emergence of technology forced the companies to bring the changes in their traditional process and they are forced to adopt the new one. Though, most of the companies have implemented the use of technologies while performing the international trade logistics (Tseng, Wu & Nguyen, 2011). But there are not able to keep a pace with the modern customs technology due to the introduction of advanced technology with the change in time. It is suggested to the companies to adopt the technologies which are essential such as advance e-manifest filings and new licensing or documentation.
All these are the major challenges or issues of international trade logistics related to the compliance that might affect the companies. It is suggested to the companies to perform the partnership with the 3PL and should start making the use of C-TPAT certified customs brokers that helps the companies to acknowledge the areas associated with the international trade regulations.
Apart from this, the major logistics companies like FedEx, DHL, and UPS have contributed to bringing the industry to the higher standard. Due to these industries, the transportation and logistics sector is developed and leads to challenges for the business due to which they have to appoint the C-level executive who can help them in managing the international trade effectively. These C-level executive have the knowledge related to the international currencies (taxes, regulatory laws, government issues, and many others) which helps the companies in making the deal cost effective for them. Along with this, these executives get involved in the regular international trading which helps the company in performing logistics effectively (Morales, 2015).
Apart from the compliance issues there are some other challenges which are mostly faced by the companies in international trade logistics and these issues are discussed below: –
Infrastructure: – The lack of infrastructure facilities is one of the major challenges. There are numerous terminals on which the infrastructure is still under process which leads to the problem for international traders. In the developing countries, the issue related to the infrastructure is rising. For instance; the container handling from Asia to the US has increased from 115.7 million TEUs to 405 million teus from the year 2000 to 2014 (Kevas, 2015). In addition, it is expected that the container handling will increase in the coming years. Moreover, the major issue is the track and the weather of the countries which is a major barrier for the international trade. The government of the countries should take the steps to overcome the challenge of infrastructure faced by the traders as this is the effective way through which government can bring development in their countries (Waters & Rinsler, 2014). Along with this, the government will be able to open more options for the welfare.
Capacity: – Overcapacity in the ocean shipping and tightening capacity in the domestic shipping in numerous countries is also impacting the logistic management of international trading activities (Hummels, 2007). The numbers of deliveries are increasing which leads to the regular pressure on the freight rates. This overcapacity increases the prices of the logistics which becomes costly for the companies and ultimately they bear the loss in their expected profit. For instance: In US there was a shortage of approx. 30,000 truckers and at that point of time there was 100% active utilization of the truck due to which there was the hike in the trucking rates (Kevas, 2015). Moreover, the aging population and the increase in regulations leads to rising in cost pressure that creates the impact on the flow of the international trading.
It is suggested to the companies to analyze the demand for the products and after considering the demand the company should supply the products which help in reducing the overcapacity in the ocean shipping. Along with this, by doing so the company will be able to save the amount and resources because overcapacity leads to rise in the prices of the labors so ultimately the company has to pay more amounts while shipping. Apart from this, the company can open their manufacturing units so that they don’t have to depend on shipping of products. Moreover, there are different ways such as sea shipping, air transportation and use of trains for domestic purpose through which trading is possible. The company can make use of air transportation for international trading as in this logistic the burden of the ocean shipping will reduce.
Security: – Security is one of the emerging concerns in the logistics industry because goods are delivered from point of origin to point of delivery. There is a set process that is conducted in the international trade logistics. Shipper book the cargo with the local trucker’s origin that makes the deliveries of the cargo to a local warehouse for handling the goods. The warehouse’s team then load the cargo to the truck which delivers to the port from where the shipment will take place. Then the final shipment of the goods takes place to the final destination. The whole process reflects that before the final delivery there were many hands involved in the delivery of the goods which leads to the threat of the security for the traders (Mangan, Lalwani & Lalwani, 2016).
The security of the goods is necessary for the company as international trading is done in bulk. It is recommended to the companies to appoint the services providers of logistics and supply chain management. These providers keep the goods at the secure places and ensure they reach safely to the final destination. Moreover, these providers participate in the government security programs like C-TPAT or AEO. Apart from this, the increase in the number of cyber terrorism and finding qualified are the major challenges. Though, these logistics service providers spend a maintainable amount of money and time to protect these cyber threats. This is also the fact that there is no as such person who can stop such kinds of cyber-attacks. In such cases, the companies should provide the training to their employees which help them in preventing such attacks (Eft, 2017).
Overall analysis of the issues reflects that there are numerous challenges that can be faced by the international traders while managing the international trading. The major challenges have been discussed along with the recommendations which show that the companies have to take some precautions because international trade is essential for the companies. International trade helps the companies in registering growth and expansion. Therefore, this is the fact that companies cannot take steps to reduce the international trade because of logistics issues.
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