What Is International Logistics? Components, Process, Channels and Examples

International logistics is an increasingly important discipline for the global economy as more companies leverage it to reduce costs and take advantage of highly specialized capabilities in different industries and regions worldwide. Though the potential pitfalls are many, investing in good technology and procedures, and finding the right international partners, can build more competitive businesses — businesses capable of sourcing, hiring, and saba sport login delighting customers around the world.

What Is International Logistics?

In business, international logistics is the study, planning and implementation of how a business moves physical goods and materials from supplier to customer in a way that involves crossing at least one international border. It also includes the international movement of money and information. Said another way, it’s simply business logistics that span two or more countries.

Key Takeaways

• International logistics involves moving physical goods, money, and information across international borders.
• Great international logistics management requires working on multiple horizons: mapping out supply chains years in advance, staying weeks ahead of orders, and having systems that let the business collect, process and act on data in real time.
• Good partners and technology providers are essential to early success in international logistics.

International Logistics Explained

There are many well-developed best practices for managing logistics in general:

• Optimizing supply chains
• Managing inventory
• Staying on top of, but never too far ahead of, demand,
• And getting shipments from suppliers to customers as efficiently as possible.

The additional challenge of crossing international borders can make logistics wildly more complicated than local or national businesses. But it doesn’t always have to be a roadblock.

For most companies, international logistics start as a “learn by doing” exercise — solving problems as they arise while the business grows in scope and complexity. Eventually, though, the best way to optimize international logistics isn’t just to continually adapt to constraints and challenges as they arise; it’s to see the whole picture and optimize around the complete set of global constraints and options available to the business.

In that approach, strategies that never would have occurred to business managers (e.g., putting a warehouse in a country where there are no customers or hiring employees in a city where there are zero sales or production facilities) may become great ways to improve operations.

Importance of Logistics in Global Trade

International logistics have taken on new importance in the modern era. As economies grow, they naturally allow for increased specialization. In other words, individuals and businesses can focus on doing fewer things but doing them better. A small town might have one bakery, while a city often has specialty shops for cupcakes, donuts, and pies, along with broader bakeries. Such specialization spurs competition and creativity, as well.

In national economies, regions can specialize, too, attracting a critical mass of talent and capacity that allows for greater productivity and innovation than would otherwise be possible. The United States has seen the development of many such regions. For example, auto manufacturing in Detroit drew on specialized businesses from the surrounding states to make high-precision car components.

Over the last century, costs and time delays associated with international communications have plummeted. International shipping has scaled to the point where the cost per pound or cubic foot to send large quantities of physical products or materials is often a negligible component of the overall price. English has more non-native speakers than native ones, allowing for a standard means of communicating in almost every business center worldwide. Translators and translation software are both available when a common tongue is not.

There are plenty of other forces pushing operations in a global direction, from policy incentives to the increasing dispersion of skilled workers (as talented humans everywhere gain better access to education and training). The ability to operate internationally — to source, sell and hire from around the globe — is an opportunity for many businesses and a mandate for others that want to stay competitive. But once a business starts straddling its operations across international borders, its logistics become international logistics. And that’s why international logistics is more important than ever before.

Main Goals of International Logistics

The main goals of international logistics are, by and large, like any business logistics process: to ensure efficient and reliable operations that run smoothly and predictably while driving down costs and reducing uncertainty. Beyond that, good international logistics management can yield improved relationships with customers, partners and even with prospects. Let’s go through these goals one at a time.

1. Cost efficiency.

   This is usually the first goal that prompts businesses to focus on optimizing international logistics. Doing business across international borders can be expensive. There are multiple tax regimes to understand and manage, tariffs and other costly requirements, and the costs of long-distance shipping. These costs add up. By all the cost structures and options, from international real estate opportunities to regulatory frameworks, understanding businesses can respond to a complex and sometimes changing constraints to reduce costs. This is where casting a wide net and attention to detail matter.

2. Reliability.

   With international logistics, one misunderstanding of a local rule could result in an entire shipment being unusable (for example, if it gets confiscated or a perishable shipment is turned away or stalled). More common threats to timeliness and predictability also loom, from delays in processing and mistakes in filling out forms to last-minute changes in import, export or travel policies. Having dedicated people, services, and technology to spot and respond to these threats to reliability can go a long way toward making an international operation more dependable. In some cases, “reliability” is just another way of saying “viability” because, without this, some businesses wouldn’t be able to survive.

3. Relationships.

   Building a good international logistics operation often means making friends in many places. And when you have a reliable, efficient operation, it’s easier to build friendships. Growing businesses that pay their bills on time are a favorite of suppliers. Being the company that gets customers what they need, when they need it, at a fair price builds loyalty, especially when competitors are struggling. In some cases, an international supply chain may be the one competitive advantage that attracts customers, especially for product categories where offerings have low differentiation. Multiple office supply stores have gone out of business over the last few decades, for example, while those that remain have done so on the back of logistical expertise. They can get customers not only what they need but also when and where they need it, with comparatively high reliability.

4. Components of international logistics management.

   There are many ways to break down the components of managing international logistics:

   • All the different tasks a logistics manager faces in a day.
   • The different parts of the supply chain, from sourcing to production to storing to distribution to sales and delivery.
   • The people, objects, data and financial resources a business needs to do it well.

   But perhaps the most helpful approach for a business just starting in international logistics is to consider that it is all in service of a common goal: doing a good job for customers.

Four Critical Elements of International Logistics

A company’s international logistics must follow best practices in each of the following operational elements to reliably and consistently execute while adapting to changing circumstances. Good international logistics managers will spend at least some time thinking about each of these and laying the groundwork for it.

1. Transport visibility.

   Sometimes called “supply chain visibility” or simply “visibility,” this is the ability to see where goods are at any point from origin to buyer. Excellent visibility means being able to track every parcel, every order and every unit and locate it — in real time — in your supply chain and physical space. Which products are on which truck, and where are those trucks? What are the contents of each warehouse, and how much of that stock is scheduled to leave within the next 24 hours? Transport visibility gives businesses data they can use in real time, data to respond to upcoming demand, and data to learn from their history — successes and failures alike.

2. Chain of custody.

   Chain of custody is an extension of transport visibility — knowing where your goods are and were at all times — but it adds a new data element: knowing WHO did WHAT with or to the goods. This information isn’t usually needed daily, but having it helps companies track down the source of problems when things go awry. When did damaged merchandise get damaged? Are there any individuals, organizations, or facilities in the supply chain that have a higher rate of error than others (or more than is reasonable)? What opportunities are there for something to go wrong (which, in turn, can help you think about how to prevent this)?

   Chain of custody is one of the logistics elements that can get particularly tricky with international shipping, as goods may need to travel across many modes of transport and via multiple carriers. A FedEx tracking number, for example, does little good once the package is on a shipping container and no longer in FedEx’s care, and neither will that shipping container’s information do any good once its goods are offloaded. The number of opportunities to lose track of things is magnified when operations go international, which is why this can be difficult and crucial to get right.

3. Traceability to origin.

   This element is also like visibility and chain of custody but in reverse. Instead of knowing where things are and where they’re going, traceability to origin (sometimes called backward traceability) is about where the goods came from and where all of the components came from.

   For international operations that source from all over the globe, it’s not always enough to know that a car rolled off the line in Michigan, was sent to a dealership in New Hampshire and then bought by a customer who drove it to their home in Massachusetts. Knowing where every part of that car came from is important, too, in some cases for simple inventory and supply chain management concerns, but also for safety and, as of August 2022, for tax credit purposes.

   The U.S. Inflation Reduction Act changed the old electric vehicle tax credit to the clean vehicle tax credit, the amount of which is determined based on where the components of the vehicle and its battery were manufactured and assembled. Traceability to origin is even more critical in the case of a problem or recall. If it’s found that some metal gears manufactured in China have a structural defect, or a brake pad made in Canada will need replacing earlier, knowing exactly where every component came from in every unit sold isn’t just good for business and customer relationships; it can save lives.

4. Integrity of consignment.

   This element is the essential goal of all the others. Integrity of consignment means the product reached the intended recipient in proper condition and was handled appropriately per the terms of the contract and/or reasonable expectations of the recipient. This obviously means intact, fully present, and usable, but it could also include issues related to proper handling in transit. A perishable good may be fine to use upon arrival, but if it was improperly stored in transit, its useful life could be greatly reduced and costly to the recipient. The integrity of that consignment would have been compromised.

Examples of International Logistics

Examples of international logistics are everywhere — it’s probably harder to find a large company’s product that isn’t an example. The clothes you’re wearing, the last vehicle you rode in and the device you’re using to read this article almost certainly crossed international borders or have components that did. But examples of international logistics best practices and money-saving maneuvers are often hidden from plain sight. In other words, it’s well known that many modern products are assembled out of parts and materials from all over the world, but far less obvious is what the company had to do to get it to you quickly and cheaply. Sometimes the secret isn’t just in smooth daily operations but in decisions made years earlier to put a business in a position to execute.

Here are examples of two areas in which international logistics plays a crucial role: where to locate facilities and finding the right business partners.

Locating Facilities

Ever wonder why United Parcel Service (UPS) has its biggest shipping facility, at over 5 million square feet, in Louisville, Kentucky? That isn’t where UPS is headquartered (which is Atlanta); Louisville doesn’t have one of the world’s most active airports (the world’s busiest would be, again, Atlanta); and it’s not that there are a lot of customers or executives in Louisville, either. What Louisville has going for it is that it’s close to the population-weighted geographic center of the United States, which minimizes total transport distances when running a hub-and-spoke system. That, in turn, minimizes flight times and fuel costs and gives employees on the ground more precious minutes to get cargo from the plane it arrived on to the plane it needs to leave on.

Though Anchorage, Alaska, is a town of fewer than 300,000 people, its airport is the fourth-busiest air cargo hub on the planet, and many companies run logistics through there. Why? Because it’s a convenient stopover between North America and Asia. Not many customers live there; not many businesses have major operations or production there. But it’s critical to getting goods (especially time-sensitive products, like perishable inventory) back and forth promptly and cost-effectively.

The key insight for international logistics is that businesses don’t have to put supply chain facilities in places that are close to their offices or customers. They need to put them in places that provide the most logistical value for international operations. Sometimes that means putting a warehouse in a country where a business has no customers because it’s near the factory or on the way to the customers, and it’s a cheap and convenient place to serve as a hub in your own network. Sometimes that means building factories in places with easy access to an efficient seaport and a major airport. And sometimes, it even means forgoing economies of scale on the production side to account for the international logistics challenges.

For example, three factories in three different countries may not produce the same low-average unit cost as one mega factory would, but if doing that solves a variety of political, legal and transportation challenges, the decision to make things more expensively could ultimately pay for itself 10 times over.

Finding the Right Partners

International logistics is complicated, and growing companies don’t need to reinvent every wheel. There are plenty of B2B services companies that specialize in helping product-selling businesses navigate international logistics challenges, from law firms with years of working across a specific international border to trucking fleets with drivers who have passports and the language skills and experience needed to operate where your business needs transportation.

So, businesses facing major international logistics challenges should think “3PL” — third-party logistics. Global 3PL providers might be able to solve some international logistics problems in a way that makes economic sense for your business. Especially for small and medium-sized businesses growing into international markets and diversifying their supply chains across international borders, the path to success is often and increasingly the one walked with the right partners.

International Logistics Process

No two companies will have the same processes for international logistics. But every company that wants to enjoy long-term success will go through similar steps to set up their international logistical process and ensure excellent execution.