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Li & Fung

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Li Fung

on 30 October 2012

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Transcript of Li & Fung

Background 1906 2012 1945 1937 Background (cont.) Customers Business Model Operate in a portion of the supply chain
Own physical assets (Plants, Property, Equipment)
Limited outsourcing of non-core businesses Traditional Companies Manages physical assets such as warehouses and factories
Serves as a supply chain manager, leveraging on wide global network to provide solutions to customers Business Model Video – what is a supply chain manager? Comparing Business Models Image from http://www.lifung.com/eng/company/ Supply chain manager which provides solutions to customers at any point of the supply chain Business Model Plastic body Electrical
components Plastic eyes Stuffed body Packaging Taser Kitty Final product Assembly Supplier 3 Supplier 2 Li & Fung Outsourcing Supplier 1 Customers Flowchart(simplified) Role of I.T. in Li & Fung Imitating Li & Fung Supplier E-Commerce Internal XTS Limitation VoIP Video
Conference XTS – Export Trading System Growth Strategy Order tracking system to track the current status of the order
Allows company to find out where is the product Tracking Portal XTS – Export Trading System Once an order is made, an electronic placement memorandum and letter of credit are generated to the supplier’s portal

Time and Action (TnA) Calendar formed which contains the production details Proprietary
Centralized database
Orders made electronic
- eliminates the hassle of signing physical forms and sending back and forth
- Cut costs XTS – Export Trading System "Showroom Booking System”
- Record of meeting schedules
- Employees can use system to check details of meetings
- Helps to reduce mix-ups Arrangement of Meetings Use of common system for internal operations across different departments
- XTS Integration of different departments and employees Integration of different departments and employees Use of ‘OneFamily’ site
- Dissemination of information
- Staff welfare cloud-based supply chain collaboration platform

reflects the standardised business processes ecVision Customer interactivity enhanced
Design can also be changed before material is cut
Track the status of their order anytime, anywhere online
- Real-time data ecVision Serves as a common standardization platform to mesh the supply chain

Complements XTS ecVision Challenge:
Managing thousands of Li & Fung's supplier Operations with Suppliers - able to track whether a factory passes inspection
- conduct a greater number of inspections in a day, improving productivity
- company conducts more audits in less time
- qualify factories much faster Developing Countries Suppliers in developed countries are linked immediately to headquarters in Hong Kong
Sending of digital photos of fabrics or products back and forth Developed countries In the past, each supplier uses various platforms to communicate with manufacturers

Difficulty in communication and less productivity ecVision Usage of email attachments using Microsoft exchange
- to keep on top of progress with individual orders
- mobile PDA technology
a web-based platform to input their audit results in real time.
- “thin” Connection Developing Countries ecVision “Thick” connection Microsoft Exchange Server 2010 Benefits:
- Improves user experience
- Improves system availability and disaster recovery
- Reduces storage costs Use of VOIP in all of Li & Fung’s offices and connections to some of its key customers
Receives and transforms audio signals into digital signals which are then sent by packets through the internet Benefits Costs savings in terms of call expenses (local and international)
Additional savings in the form of travel expenses as discussions between offices worldwide can be done through VOIP and also decreases communication time Allows company to organize meeting and presentation online Suppliers might provide the wrong information through online platforms
Physical supervision of the entire production process is required to ensure that suppliers comply with the standards and deadlines Miscommunications Technology Differences System does not connect to all manufacturers
- Communications systems are not advanced enough
e.g developing countries like China, Philippines. Human Expertise Certain human expertise are unable to be replaced
eg.
- designing products
- allocating an order to four different factories. Limitations of I.T. Technology Differences Uses outdated, conventional methods: fax and couriers

Difficult to communicate

Takes longer time Role of I.T. in Li & Fung As a huge firm with complex operations, the use of enterprise systems is important in carrying out operations
Standardization and synchronization of data
Operational efficiency
Cost savings

Particularly important since Li and Fung requires speed and accuracy to facilitate the coordination of the supply chains of its customers Enterprise Systems Not easy to imitate Li & Fung
Dubbed as “leaders in Asia in providing this full solution of sourcing and supply-chain management”
Thus, Li & Fung have “built up a very considerable barrier to anyone else trying to replicate it” Imitating Li & Fung Large network of suppliers & customers makes it possible for Li & Fung to serve a market that would otherwise be impossible to serve
Able to aggregate buying power for small manufacturers (customers)
Able to aggregate demand for small suppliers B2b Market Even with a wide business network, supplier and customer loyalty is not something which can be achieved easily Supplier and Customer Loyalty Wide Networks A robust I.T structure must be set in place to complement the huge array of operations Substantial groundwork, e.g. establishing offices worldwide, has to be laid
Li & Fung: “heavy-lifting and investments have been done” and thus the company can “leverage a lot of existing set-ups” Sophisticated Infrastructure Sophisticated infrastructure
Requires the establishment of wide networks with manufacturers and suppliers
Supplier and customer loyalty
Ability to provide for the B2b (small b) market Imitating Li & Fung Growth Strategies Organic Growth
Mergers & Acquisitions Identify strategies to remain relevant

- “need an intermediary to manage factory logistics, communications and quality checks—services that Li & Fung is eager to provide beyond supplying goods” Organic Growth Identify strategies to remain relevant

- “sacrifice margins to in order to defend against customers from sourcing directly”
- Or to rethink how they can add value to their customers Organic Growth 3 year plan
– monitoring, forecasting
Identify new opportunities to grow its network or plug gaps
Integrating, restructuring and managing acquisitions made
Growth into three different networks of trading, distribution and logistics Organic Growth Acquired 19 companies in 2011
Number of acquisitions may fall due to focus on organic growth but will not stop

Pros:
Remain relevant and drive growth
Cons:
Investors question if such a strategy can help to reduce costs Mergers & Acquisitions The Flat World
- However, it will also be easier for rival companies to build up their own connections with suppliers and manufacturers as they now can reach out to the masses
- Gives competitors ground to compete with Li & Fung
- Allows manufacturers to bypass Li and Fung Challenges & Problems Recent Economic Downturns & Rising Costs of Raw Materials
Companies seek to reduce cost of production to a greater extent
May bypass Li & Fung to go directly to their suppliers
Example: Walmart case Challenges & Problems The Flat World
- Globalization as a double-edged sword
- Businesses are encouraged to locate parts of or their entire supply chains to cheaper areas
- Increases the demand for outsourcing or construction of global supply chains which means more business opportunities for Li & Fung Challenges & Problems Challenges & Problems Hardware platform that emphasize servers and storage Database software
Store information of all the orders
As well as clients’ information Innovative online transaction system
Cover every facet of online shopping - Online configuration of products
- helps overcome complexity
- complicated product offerings
- with software that speeds sales cycles and streamlines the contract process Evaluate credit risk for order placed Bulk freight specialistWith
door-to-door tracking system - Management consulting
- Leading systems integrator
- “wrap” the entire package for a seamless experience
- Improve efficiency E-Commerce - Make Li and Fung relevant nowadays
- Offer customers a wide range of option to customize their products
Full transcript