Li & Fung:

Role of IT in supply chain management

BUSINESS MODEL
Components of a Business Model

Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate Information Strategy and Management . Burr Ridge, IL: McGraw-Hill/Irwin, 2002. Introduction Figure I-3

STRATEGIC GRID
High
Impact on business operations FACTORY STRATEGIC

SUPPORT

TURNAROUND

Low

Impact on Strategy

High

Seven Pillars of Li & Fung's supply chain management

Customer Centric and Market Demand driven Focus on ones core competency and outsource noncore activities Close risk and profit sharing relationship with business partners Design, implement, evaluate and improve the several flows IT to improve efficiency of the SCs operation Shorten Production lead time and delivery cycles Lower costs in sourcing warehousing and transportation

Functional Areas Product Development Raw material Sourcing, Factory Sourcing Production planning Manufacturing Control

Information system Order Processing Network Database Production planning Machine Control

Decision level Operational Level Operational Level Middle management Operational Level

Li & Fung Web based design center Global Sourcing network

Intranet

Export Documentation

EXDOC, shipping solutions

CRM

Operational Level

Secured Extranet

Shipping Consolidation

Operational Level

Extranet, online tracking system

Procurement

Supply Chain Management

Electronic Stock Order

All levels

SCM, e-Commerce, B2B portal (lifung.com)

Future venture

Operational Level

Components Competition Market Size Cycle Time

Before IT Local competitors $6.6billion 3 months

After IT Global competitors $26billion (54 billion estimated) 5 weeks

Profit Margin Soft Goods; Hard Goods

Buyers Globalization Customization Quality Assurance Revenue Contribution

6-8%; 10-30%
Big Buyers 1 country Mass customization Express Mail Soft Goods

25% increase in hard goods

Big Buyers and SME 32 countries Limited Mass customization for SME Highly digitized photo Hard Goods

IT/Internet Strategic Alignment

Improving Operational efficiency Supply Chain Integration Extending to SME Buyers Increasing Market Size Improved communications

Issues
Channel conflict by use of internet Educating the Suppliers, Customers Diversified European Market Insufficient engagement of small and medium sized enterprise customers Overreliance on Hong Kong Market

Recommendations
Concentrate more on US-market. Start an onshore in Europe taking the learning from the US market. Capture markets in growing economies. Focus on distribution. From consumers to industrial products also. Electronic stock offer portal

Present Day Scenario

Exceeded target of 10Bil in the U.S. Market[61%]. Entered into an agreement to acquire Peter Black International Limited [2007][18%]. Asia accounted for 12% of turnover, compared to not more than 4% previously[14%]. Li-Fung Ltd first began its distribution business in US in 2005,and then expanded to Europe in 2008. The trend towards bilateral is likely to increase, given the ebb and flow of international politics. Not enough protection when you are single sourcing

Thank you