International Logistics, Part 3: Inventory as a Strategic Tool

International inventory can be used by the international corporation as a strategic tool to dealing with currency valuation changes or hedging against inflation. By increasing inventories before an imminent devaluation of a currency, instead of holding cash, the corporation may reduce its exposure to devaluation losses. Similarly, in the case of high inflation, large inventories can provide an important inflation hedge. In such circumstances, the international inventory manager must balance the cost of maintaining high levels of inventories with the benefits accruing to the firm from hedging against inflation or devaluation. Many countries, for example, charge a property tax on stored goods. If the increase in tax payments outweighs the hedging benefits to the corporation, it would be unwise to increase inventories before a devaluation.

Despite the benefits of reducing the firm’s financial risk, inventory management must still fall in line with the overall corporate market strategy. Only by recognizing the trade-offs, which may result in less than optimal inventory policies, can the corporation maximize the overall benefits.

Overcoming barriers to int’l trade

BY KELVIN TAN for Business Times

Tariffs and duties are among the most important factors dictating the ability of companies in Asia to increase their exports, and underscore the importance of easing trade access within the region and beyond. For companies looking to import or export goods, understanding custom and excise requirements can be challenging as different countries and economic blocs have vastly different rules.

In Asia, ambiguities remain despite the efforts of member governments to reduce or alleviate tariffs when trading with one another. For example, while developed states like Hong Kong and Singapore impose import duties on a limited number of goods, developing nations like Cambodia and Myanmar impose import duties on hundreds of goods and the rates and list of goods are subject to constant changes. These differences can cause much confusion and can deter businesses from trading with a particular market.

In a bid to boost and facilitate international trade, governments and economic blocs turn to free trade agreements (FTAs) with the aim of increasing export and import volumes.