LI & FUNG – GROWTH OF SUPPLY CHAIN
NAME ROLL
NO
Narayan Mitra 23
Sailesh Kumar 33
Suraz Varma
Praveen Padala
LI AND FUNG GROUP
Li & Fung established 1906 in Guangzhou province in china.
First Chinese-owned company to engage in foreign trade.
Earlier as a Garment Trading company.
Total employee more than 26,000 across 40 countries.
It has three business entities.
Li & Fung trading
Integrated Distribution Services Group Ltd.(IDS)
Convenience Retail Asia Ltd.
LI AND FUNG OFFICE WORLDWIDE
Europe/Mediterranean East Asia
(15 Locations) (21 Locations)
South Asia
(11 Locations)
Americas
(9 Locations) Southeast Asia
(10 Locations)
Africa
(3 Locations)
LI AND FUNG MARKET SEGMENT
Market segments Service offering
Footwear Bonded warehousing
Fashion Inventory management
Liquor Freight forwarding
Retail
Multi-modal transportation
FMCG
Pharmaceutical Specialty warehousing
Agrochemical Re-labeling and
Industrial repackaging
Cosmetics Customs clearance
Cross docking
Regional hubbing
Supply chain management
Common warehouse management system – EXceed 4000 and
proprietary web-based application to provide real time
visibility of inventory, delivery status and KPIs
LI AND FUNG – EXPORT SC MODELLING
Before IDS
Factories in
China
vendor shipments
inter-DC transfer
international shipment
DCs in retail delivery
UK
Markets
Germany Australia Japan South Africa U.S.
DC DC DC DC DCs
Wholesalers or Retails
LI AND FUNG – EXPORT SC MODELLING
After IDS
Factories in
China
vendor shipments
international shipment
China hub
retail delivery
Markets
UK Germany Australia Japan South Africa U.S.
DC DC DC DC DC DCs
Wholesalers or Retails
LI AND FUNG BUSINESS TRANSFORMATION
Reform of business in three phases
Local trading company into regional sourcing agent
Office in Asia like Taiwan and South Korea.
Providing best quality and cheapest supplier.
Value added service for clients.
Contract manufacture from sourcing agent
Product prototype to whole production process.
To increase the efficiency of operation activities.
Shorten production lead time (Fashion Garments).
Reducing the delivery cycle for sourcing from suppliers.
consolidation service to clients to logistics end.
“ Tackling the soft $3”
LI AND FUNG - VALUE ADDED ACTIVITIES
Support and trend
DESIGN
Information
Co-ordination of sourcing
MATERIAL SOURCING
activities
Quality control, Testing
MANUFACTURING
Support
Consolidation of goods for
SHIPPING
easy delivery, Custom
clearance through onshore
business
LI AND FUNG - TACKLING SOFT $3
Product Sourcing Logistics Wholesale
InformationManagement
Design Retail
$1 $4
The cost that is spread throughout the
distribution channels – the “Soft $3”
LI AND FUNG EXPANSION STARTEGY
Across 40 countries with 80 buying offices to take advantage of
Political, economic, and regulatory condition.
Acquisition to extend its supplier network and customer portfolio.
Inchcape Buying services a British firm in 1995 ( presence in
ASIA)
KarstadtQuelle AG whole buying division a retailer of Germany in
2006.
Silvereed Group and Wilson & Wong Trading Co. Ltd(Hongkong).
Buying office in Turkey to take advantage of its
Geographic proximity
Delivery time 7 days for finished garments to Europe by roads.
Lower Production Cost.
LI AND FUNG EXPANSION STARTEGY Cont……
Onshore Business (2004)
Li & Fung USA( San Francisco) played a role of importer than
exporter.
It mainly focused on three business areas
Proprietary Brands.
Private Labels
Licensed Brands.
Higher profit margin due value added service.
$1 billions (2004 -2007).
Customer portfolio diversification in European market.
From 18% in 2006 to 26% in 2007.
It extended into health, beauty and cosmetics through the
acquisition of Hong Kong based CGroup.
RT sourcing: Point of sales display for cosmetics (US) a major
supplier.
LI AND FUNG SCM EVOLUTION
LI AND FUNG IDS OPERATION
marketing logistics manufacturing
promote, sell, bill, collect ship, store, deliver make, test, package
QUESTION
What could Li & Fung do to safeguard the growth of its business?
Reduce lead time from 35 days to 7 days.
Reduce inventory holding.
Integration of operation and speed the efficiency of the supplier.
Integration of import and export operation.
Lower warehouse handling capacity thereby optimizing the cost.
Procurement of raw material at lower cost and production at lower rate
through regional sourcing.
QUESTION
How could it achieve the target turnover of US$ 20 billion between 2008
and 2010?
Import Direct, Buy Local - low landed cost, high inventory turn, maintain
service level
Global sourcing and procurement
Centralized inventory holding and replenishment at Global Export DC (Hub)
Optimized consolidation
Continuous replenishment (Buy less, more often)
Collaborative global/regional promotion and new product introduction
Move costs upstream – improve bottomline and balance sheet
Minimize capital expenditure on distribution centres
THANK YOU
