The document discusses Li & Fung's global sourcing operations and the benefits of developing lean suppliers. It describes Li & Fung's evolution from a trading company in the early 1900s in Hong Kong to a global sourcing network with over 350 offices worldwide by the 2000s. It also discusses how Li & Fung helped manufacturers relocate production to lower cost regions like South China. Additionally, it outlines reasons why companies develop lean suppliers, such as avoiding vertical integration and enlarging the supplier pool. Honda's experience developing small local suppliers from scratch is provided as an example. Lessons are provided for both customers in developing lean suppliers and for suppliers in the process.

1. Operations Management-II Dr. S.Venkataramanaiah Assistant Professor OM & QT Area IIM Indore, Pigdamber, Rau Indore- 453 331 Email : [email_address]

2. Global Sourcing, Logistics and Lean Suppliers Li and Fung Global sourcing

3. Li and Fung Case and Lean Suppliers

5. Li and Fung Global Sourcing Early stages 1950s 1970s Pak-Liu and Toming Hon-Chu regime & British control 1937- Ltd Co & WW II and Pak-Liu passed away HK export hub Labour intensive products Competition (Taiwan Singapore), disintermediation 1973-Restructuring by HBS Professionals, public ltd, IPO – 113 times subscription

6. Li and Fung Global Sourcing 1990s Post 2000 Effective use of IT Global status (2000) and 95% rev from NA & Europe 1992- re-listed HKSE Expansion of sourcing US, Europe & Acquisitions Expansion of product lines & Customer network 2002 revenue increase 13% & 38% increase in NP US major clients like Disney etc Products- soft/garments (68%) and hard goods (32%) 1980s 1979-relocation of manf to S China, trading in developing Economies- Taiwan, S’pre, Korea Asia’s Major Trading 1989 drastic change- Pvt co Restructured-Export & Retail 68 offices in 40 Countries 4.5k employees and became Global player

10. Li and Fung Global SC

11. Li and Fung Global SC

12. Li and Fung Global SC

18. Li & Fung- Supply Chain capabilities Dramatic reduction in LT Constant search for new & better sources of supply Better Inv. Mgmt. Lower mark-downs Going upstream & organising production Flip info between 350 customers/7500 suppliers Managing 1.5 m workers in 26 countries Participating in design, manage tiers of suppliers Developing capabilities in Logistics & Transportation Dissecting the value chain

20. Lean Suppliers

33. Procurement Mechanisms Issues to consider Product Attributes System Attributes Single item, Single attribute Multi item, single attribute Single item, configurable attributes Business constraints Cost complementarities Capacity constraints Single item, multi attribute Multi item, multi attribute Multi item, configurable attributes Increasing complexity