SUPPLY CHAIN MANAGEMENTLI & FUNG

KUSHAL BAGADIYA (B006)KUNAL GUPTA (B020)MELVIN JOSE (B027)PRAVEEN RAJAGOPALAN (B047)SONAM SIKARIA (B051)APOORV SINGHAL (B054)

GROUP 1

Agenda

Introduction & Background of Li & Fung Evolution of Li & Fung Business Strategy Alignment between Strategy and Capabilities Evolution of supply chain Global Expansion opportunities vs challenges 7 Principles of Li & Fung SCM & Sourcing Trend Indian process network of Li & Fung with Client

Examples IT’s role in Supply Chain Management Conclusion

Introduction

Started in 1906 by the Fung Family

Listed on Hong Long Stock Exchange

Market Capitalization: HKD 106Bn

Employees: 14,490 (Annual Report

2011)

A Supply Chain Manager

Background

Export Trading Company Operates in three segments:

Trading Network Logistics Network Distribution Network.

Global Footprints

5

Americas (9 locations)

New York City BostonSan FranciscoDominican RepublicGuatemalaHondurasGuadalajaraMexico CityNicaragua

Europe/Mediterranean

(13 locations)

London Huddersfield AmsterdamRomaniaFlorenceTurinTunisIstanbulDenizliIzmirOportoJordanCairo

Africa

(3 locations) DurbanMauritiusMadagascar

South Asia

(11 locations) BangaloreChennaiMumbaiNew DelhiKarachiLahoreDhaka ColomboSharjahBahrainSoutheast

Asia

(9 locations)

SingaporeBangkokShah Alam ManilaHanoiHo Chi Minh CityJakartaPhnom PenhSaipan

East AsiaHONG KONG - Head office(21 locations)

Shanghai Dalian Nanjing Beijing Seoul QingdaoTaipei TokyoHepuNingboMacau Liuyang Huizhou Dongguan Longhua Guangzhou Shenzhen Zhongshan Shantou Zhanjiang

Li and Fung Business EvolutionStage 1: Regional sourcing

agentCustomer wants an item, Li and

Fung brings together buyer

and supplier

Stage 2: Manage and

Deliver Manufacturin

gClient expresses requirement and

requests for a production program

Stage 3: Dispersed

Manufacturing

Dissect the value chain to optimize

production process by spreading it across to many

smaller suppliers

Stage 4: Integrated

Supply ChainBuy the right things

and shorten the delivery cycle

Sta

ge 1 1906 to 1979

Started by Mr. Li Tom-Ming and Mr. Fung Pak-Liu the company traded in items like porcelain, silk, bamboo, ivory and from 1949 included labor intensive items like garments, toys, electronics and other plastic items.

Sta

ge 2 1979 to 1995

Third generation of Fung family Victor and William returned after education from US and started modernizing and restructuring the business.

Sta

ge 3

an

d 41995 onwards

Rationalization of supply chain. Implementing a complete supply chain. Enhancement of customer base, geographic reach through acquisitions. Leverage on IT, operational efficiency and virtual manufacturing

Borderless Manufacturing 1990’sDispersed manufacturing

• Manufacturing in HK became increasingly expensive.

• Almost all labor intensive work moved across the border to China

• Design, packaging, and other technically advanced manufacturing techniques - in Hong Kong

• Eventually whole East Asian region pulled manufacturing based on strengths 

• Li & Fung became expert at finding the best solution for each step in the manufacturing process

Smokeless Factory

AssemblyCHINA

ShellKOREA

LiningTAIWAN

FillerCHINA

ZipperJAPAN

Label, elastic,studs, toggle

and stringHONG KONG

Made in Hong Kong

Li-Fung: Business Strategy

Transforming customer experience Moving up the Value Chain : high value adding front and back

end tasks done in HK

Just-in-time sourcing

Eating into Soft$3 Add value to customer throughout the value chain

Virtual manufacturing Smokeless Manufacturing

Flexibility : More responsive to market shifts, technology change

Leverage Information Technology a core strength: Import Direct Shorten lead time from 3 months to 5 weeks

Add value to customer throughout the value chain

Implementation of Import Direct

ImportDirect

XTS-5

Tracking SystemSuppliers

Li & Fung staffForwarder

Customers

delivery of orders direct access

estimateshipment scheduleTrack production

progress

submit Quotations

$1 $4

Product design

SourcingLogisticsWholesale

retailInformationManagement

Alignment between Strategy and Capabilities

Strategy Capabilities

Buying Agency Acquisitions are key to grow market share in target geographic marketsLi & Fung is growing through global integra-tion

Sourcing Sources from virtually anywhere in the world and builds customized solutions for its retail customers

Borderless Manufac-turing

Network of 10,000 suppliers and staff in 40 different countries

Virtual manufactur-ing

Builds customized solutions for its retail cus-tomersAble to be both locally relevant and globally optimized

Supply Chain Man-agement

Orchestrates a supply chain network of 14,000 staff and 10,000 specialized companies in 40 countries

The Evolution of Supply Chain Management

The Supply ChainThe Supply Chain

Manufacturing Control

Shipping Control

Factory Sourcing

Raw Material Sourcing

Product DevelopmentConsumer Needs

Consumer Wholesaler/ Retailer

Product Design

LocalForwarding Consolidation

Forwarder Consolidation

Customs Clearance

Global Expansion Opportunities vs Challenges

Opportunities• Globalized in a short span

of time• Pressure from the US and

European retailers to cut costs by moving to cheaper sourcing locations

• Shortening product life cycles

• Direct outcome of the company’s efforts to add more value to its trading activities

Challenges Hiring local staff, developing

new vendors, dealing with local government authorities and coming to grips with local cultures

Proximity to customers, wage levels and manufacturing capabilities

Need greater supervision and travel costs in order to generate profits for new operations

Multitude of national trade restrictions

Li & Fung’s Integrated SCM

Sourcing trend

Evolved from a sourcing agent to a global supply chain manager

Instead of just sourcing- owns and licenses brands outright Manages supply chain through its office network in more

than 40 economies

Global Reach, Local Presence

What happens when Li & Fung gets an order?

What happens when Li & Fung gets an order?

European retailer

orders 10,000 garments

Buy yarn from Korean

manufacturer

Weave & dye in Taiwan

5 weeks later 10,000

garments reach Europe

Manufacture garments in

Thailand

Buy the beat Japanese zippers & buttons

All look alike as though

manufactured in five factory

Make best use of quotas, labour conditions split

order to 5 factories

Manufactured in China

Li & Fung’s clients

Li & Fung’s order process

There in “value network” added. Each step is identified as the most efficient &

cost effective step Looking for the best solution in each step Looking for best country to locate their

manufacturing facility “plus”

“This new approach to manufacturing, known as ‘dispersed manufacturing’, challenges the established notion of doing everything under one roof”

IT’s role in Li & Fung

INTRANET

EXTRANET

E-COMMERCE

VENDOR PORTAL

VIDEO CONFERENCE

VOIP

APPLICATIONS

IT’s role in Li & Fung - INTRANET

To link the Group’s offices and manufacturing sites around the world

To allow tracking of orders and shipments

Digital imagery allowed for online inspection and troubleshooting

To expedite and simplify internal communications

INTRANET EXTRANET E-COMMERCE OTHERS

IT’s role in Li & Fung - EXTRANET

To link the company directly to its key customers, with customization to individual customer’s needs Online product development and order tracking Platform for manufacturers and retailers to interface To streamline communications To promote quick response manufacturing

Enhance the supply chain’s efficiency and make the system more transparent to customers

INTRANET EXTRANET E-COMMERCE OTHERS

IT’s role in Li & Fung – E-COMMERCE

A B2B website linking small to medium sized businesses with suppliers

Offer a wide array of customization options to its clients Streamline supply chain management and reduce costs

INTRANET EXTRANET E-COMMERCE OTHERS

IT’s role in Li & Fung – OTHERS

1. Vendor Portal Automate all transactional processes Enhance all communication channels Reduce manual data entry

2. VOIP and Video Conferencing Place both audio and video calls to offices Enable effective communication and reduce travel costs and time

INTRANET EXTRANET E-COMMERCE OTHERS

Conclusion

Li & Fung’s competitive advantage : Strong Supply Chain Management Focus on customer experience throughout the value chain Innovation: global network though Dispersed

manufacturing Building mutually profitable relationships with network

partners Leveraging Information Technology: Employing enterprise

information systems to increase efficiency of supply chain Flexibility: Nimble organization design through Customer-

centric divisions, One-Stop-Shop Service Efficient work, information and cash flow in the supply

chain

THANK YOU