*SCM Challenges in a Global Trading Company*

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*SCM Challenges in a Global Trading Company*

  1. 1. Li & Fung Group 28 May 2004
  2. 2. Li & Fung Group Li & Fung (1937) Ltd Li & Fung (Retailing) Ltd Financial Investors Public Shareholders IDS Group/ Li & Fung (Distribution) Ltd Li & Fung (Trading) Ltd Core Export trading Business : of soft goods and hard goods to US & EU Turnover : US$ 4.5 Billion Employee : 6,000 <ul><li>Retailing in Greater China and ASEAN countries: </li></ul><ul><li>Toy R Us </li></ul><ul><li>Circle K </li></ul><ul><li>US$ 0.26 Billion </li></ul><ul><li>2,000 </li></ul><ul><li>Marketing, logistics & contract manufacturing in Greater China and ASEAN </li></ul><ul><li>IDS Manufacturing </li></ul><ul><li>IDS Logistics </li></ul><ul><li>IDS Marketing </li></ul><ul><li>US$ 1 Billion </li></ul><ul><li>6,000 </li></ul>
  3. 3. LI & FUNG (TRADING) LTD
  4. 4. Background <ul><li>Li & Fung is a specialist in the sourcing of private label consumer goods, primarily to retailers and brands </li></ul><ul><li>Headquartered in Hong Kong </li></ul><ul><li>Close to 100 years of history </li></ul><ul><li>a sourcing network of 68 offices in 40 countries </li></ul><ul><li>6,000 staff </li></ul><ul><li>Member of Hang Seng Index, Morgan Stanley </li></ul><ul><li>Hong Kong Country Index, Dow Jones </li></ul><ul><li>Sustainability Index </li></ul><ul><li>Market cap approx US$5 billion </li></ul>
  5. 5. Li & Fung’s Supply Chain Management
  6. 6. Supply Chain and Supply Chain Management <ul><li>A supply chain encompasses all activities from obtaining the raw materials, through production, wholesale, retail, warehousing and transportation, to the delivery of the final goods or services to the end-customers. </li></ul><ul><li>“ Four Flows” : work flow physical flow information flow funds flow </li></ul>Supply Chain
  7. 7. Supply Chain and Supply Chain Management <ul><li>Supply chain optimization </li></ul><ul><li>Buying the right thing and shortening the delivery cycle </li></ul><ul><li>i.e. products to be produced at the lowest cost with the fastest turnaround time possible </li></ul><ul><li>Advantage : Overall cost reduction with maximum efficiency </li></ul>Supply Chain Management is about:
  8. 8. The concept of “Soft $3” $1 $4 Product design Sourcing Logistics Wholesale retail Information Management The cost that is spread throughout the distribution channels – the “Soft $3”
  9. 9. Li & Fung’s Supply Chain Management <ul><li>Globalization effect: Competition is no longer between companies but between companies’ supply chains </li></ul><ul><li>Definition of supply chain management is yet being compromised </li></ul><ul><li>Harvard Business Review: 6 case studies of Li & Fung </li></ul><ul><li>As a leader in supply chain management, Li & Fung has derived seven principles in supply chain management </li></ul>
  10. 10. Li & Fung’s Supply Chain Management <ul><li>Be customer-centric and respond accordingly to the market demand ; </li></ul><ul><li>Focus on one’s core competency and outsource non-core activities, and develop a positioning in the supply chain ; </li></ul><ul><li>Develop a close, risk- and profit-sharing relationship with business partners ; </li></ul><ul><li>Design, implement, evaluate and adjust the work flow, physical flow, information flow and cash flow in the supply chain ; </li></ul><ul><li>Adopt information technology to optimize the operation of the supply chain ; </li></ul><ul><li>Shorten product lead time and delivery cycles ; </li></ul><ul><li>Lower costs in sourcing, warehousing and transportation. </li></ul>The 7 Principles of Li & Fung’s Supply Chain Management :
  11. 11. The Changing Role Of The Trading Company Level of Value Added 1906 Now Buying Agency Sourcing Borderless Manufacturing
  12. 12. Borderless Manufacturing Assembly CHINA Made in Hong Kong Shell KOREA Lining TAIWAN Filler CHINA Zipper JAPAN Label, elastic, studs, toggle and string HONG KONG by 
  13. 13. The Changing Role Of The Trading Company Level of Value Added 1906 Now Buying Agency Sourcing Borderless Manufacturing Virtual Manufacturing
  14. 14. The Changing Role Of The Trading Company Level of Value Added 1906 Now Buying Agency Sourcing Borderless Manufacturing Virtual Manufacturing Supply Chain Management
  15. 15. Li & Fung’s Business Paradigm Supply Chain Management Local Forwarding Consolidation Consumer Retailer Wholesale Importer Consumer Needs Product Design Factory Sourcing Mfg Control Export Docu- mentation Forwarder Consolidation Customs Clearance Raw Material Sourcing Supply Chain Financing Raw Material Mill Supply Chain Factories Financing Shipping Airlines Financing Financing Financing Product Developm’t
  16. 16. Thank you. 28 May 2004

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