One major contribution of logistics management to international trade is in the area of efficient allocation of resources. International logistics allows countries to export products in which they have a competitive advantage and import products in which that are either unavailable at home or produced at a lower cost overseas, thus allowing for efficient allocation of resources.
Such advantages from international trade cannot be realized without a well-managed logistics system. To the extent that logistics facilitates international trade, it contributes to expansion of economic growth and employment.
As major import forms expand their ability to procure needed raw materials or components for their customers, international logistics management becomes a critical source of competitive advantage for both the firms and the customers. Such procurement and sourcing decisions include the number and location of warehouses, levels of inventory to maintain, as well as selection of the appropriate transportation mode and carrier.
The development of advanced logistics systems and capabilities has also increased the efficient production, transportation and distribution of products. The use of various transportation modes facilitates rapid and consistent delivery service to consumers, which in turn reduces the need for safety stock inventory.
Transportation cost is also reduced through shipment consolidation and special contracts with carriers for large shipments without adversely affecting delivery time. A well-managed international logistics system can result in optimal inventory levels and optimal production capacity, thereby maximizing the use of working capital which lead to strengthening of the competitive position of domestic companies in global trade.
