SUPPLY CHAIN MANAGEMENT LI & 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 ITs 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
Americas (9 locations) New York City Boston San Francisco Dominican Republic Guatemala Honduras Guadalajara Mexico City Nicaragua Europe/Mediterranean (13 locations) London Huddersfield Amsterdam Romania Florence Turin Tunis Istanbul Denizli Izmir Oporto Jordan Cairo South Asia (11 locations) East Asia HONG KONG - Head office (21 locations) Dalian Beijing Qingdao Tokyo Ningbo Liuyang Huizhou Dongguan Longhua Guangzhou Shenzhen Zhongshan Shantou Zhanjiang Bangalore Shanghai Chennai Nanjing Mumbai Seoul New Delhi Taipei Karachi Hepu Lahore Macau Dhaka Colombo Sharjah Bahrain Southeast Asia (9 locations) Singapore Bangkok Shah Alam Manila Hanoi Ho Chi Minh City Jakarta Phnom Penh Saipan

Africa (3 locations)

Durban Mauritius Madagascar

Li and Fung Business Evolution

Stage 1: Regional sourcing agent
Customer wants an item, Li and Fung brings together buyer and supplier

Stage 2: Manage and Deliver Manufacturing

Client 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 Chain

Buy the right things and shorten the delivery cycle

Stage 2

Started by Mr. Li TomMing and Mr. Fung PakLiu 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.

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

Stage 3 and 4

Stage 1

1906 to 1979

1979 to 1995

1995 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 1990s

Dispersed manufacturing

Smokeless Factory Manufacturing in HK became increasingly expensive. Assembly Almost all labor intensive work CHINA Lining moved across the border to Shell TAIWAN China KOREA Design, packaging, and other technically advanced manufacturing techniques - in Label, elastic, Hong Kong studs, toggle Eventually whole East Asian Filler and string region pulled manufacturing CHINA HONG KONG based on strengths Zipper JAPAN Li & Fung became expert at finding the best solution for each Made in Hong Kong step in the manufacturing

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

Product Wholesale Sourcing Logistics Information Management design retail

$1
Implementation of Import Direct XTS-5
delivery of orders

$4

Suppliers Li & Fung staff

submit Quotations

Import Direct

direct access Tracking System

Forwarder

estimate Track production shipment schedule progress Customers

Alignment between Strategy and Capabilities

Strategy Buying Agency Capabilities Acquisitions are key to grow market share in target geographic markets Li & Fung is growing through global integration Sources from virtually anywhere in the world and builds customized solutions for its retail customers Network of 10,000 suppliers and staff in 40 different countries Builds customized solutions for its retail customers Able to be both locally relevant and globally optimized Orchestrates a supply chain network of 14,000 staff and 10,000 specialized companies in 40 countries

Sourcing Borderless Manufacturing Virtual manufacturing

Supply Chain Management

The Evolution of Supply Chain Management

Consumer Needs

Product Development Raw Material Sourcing Product Design

Factory Sourcing Manufacturing Control

The Supply Chain

Shipping Control

Forwarder Consolidation
Local Forwarding Consolidation Consumer Wholesaler/ Retailer 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 companys 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 & Fungs 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 & Fungs clients

Li & Fungs 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

ITs role in Li & Fung

INTRANET EXTRANET E-COMMERCE VENDOR PORTAL VIDEO CONFERENCE VOIP APPLICATIONS

ITs role in Li & Fung INTRANET

INTRANET

EXTRANET

E-COMMERCE

OTHERS

To link the Groups 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

ITs role in Li & Fung EXTRANET

INTRANET

EXTRANET

E-COMMERCE

OTHERS

To link the company directly to its key customers, with customization to individual customers 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 chains efficiency and make the system more transparent to customers

ITs role in Li & Fung ECOMMERCE

INTRANET

EXTRANET

E-COMMERCE

OTHERS

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

ITs role in Li & Fung OTHERS

INTRANET
1.

EXTRANET

E-COMMERCE

OTHERS

Vendor Portal

Automate all transactional processes Enhance all communication channels

Reduce manual data entry

Place both audio and video calls to offices Enable effective communication and reduce travel costs and time

2.

VOIP and Video Conferencing

Conclusion

Li & Fungs 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

THANK YOU