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Li & Fung Group
The Li & Fung Group
A Hong Kong-based multinational company founded in 1906
Operates in some 40 countries and regions and employs over 26,000 people worldwide
Core competency: Supply Chain Management 3 core businesses: Trading, retailing and
distribution
The Li & Fung Group
Li & Fung (1937) Ltd.Li & Fung (1937) Ltd.
Li & Fung (Trading) Ltd.
Product Sourcing
Li & Fung (Trading) Ltd.
Product Sourcing
Li & Fung (Retailing) Ltd.
Retailing
Li & Fung (Retailing) Ltd.
Retailing
IDS Group
Distribution, Marketing & Logistics
IDS Group
Distribution, Marketing & Logistics
Publicly Listed
MSCI Hong Kong IndexHang Seng Index
Publicly Listed
MSCI Hong Kong IndexHang Seng Index
Publicly ListedPublicly Listed Publicly ListedPublicly Listed
The Li & Fung Group
Li & Fung Trading GroupLi & Fung Trading Group
•A Leader in Global Sourcing A Leader in Global Sourcing
•70 Offices in 40 Countries/ Regions70 Offices in 40 Countries/ Regions
•9,600 staff9,600 staff
•Turnover US$ 8.7 bTurnover US$ 8.7 b
Li & Fung Trading GroupLi & Fung Trading Group
•A Leader in Global Sourcing A Leader in Global Sourcing
•70 Offices in 40 Countries/ Regions70 Offices in 40 Countries/ Regions
•9,600 staff9,600 staff
•Turnover US$ 8.7 bTurnover US$ 8.7 b
The Li & Fung Group
Li & Fung Retailing GroupLi & Fung Retailing Group
• Circle K (>300 stores) Circle K (>300 stores)
• Toys R Us Asia (>49 stores)Toys R Us Asia (>49 stores)
• Others (Trinity, BrandedOthers (Trinity, Branded
Lifestyle, etc.) Lifestyle, etc.)
•11,000 staff11,000 staff
• Turnover US$ 700 mTurnover US$ 700 m
The Li & Fung Group
IDS GroupIDS Group
• Marketing & Logistics expertsMarketing & Logistics experts
• 9 markets in Asia & Greater China9 markets in Asia & Greater China
• 40 distribution centers40 distribution centers
• Over 300 MNC principlesOver 300 MNC principles
• 5,000 staff5,000 staff
• Turnover US$ 1 billionTurnover US$ 1 billion
IDS GroupIDS Group
• Marketing & Logistics expertsMarketing & Logistics experts
• 9 markets in Asia & Greater China9 markets in Asia & Greater China
• 40 distribution centers40 distribution centers
• Over 300 MNC principlesOver 300 MNC principles
• 5,000 staff5,000 staff
• Turnover US$ 1 billionTurnover US$ 1 billion
Li & Fung Trading Group
Customer Base
Others10%Europe
18%
USA72%
Hardgoods32%
Apparel68%
Major Customers - North America
Europe
Rest of the World
Coordinated Global Network70 Offices in 40 Countries / Regions
Europe/Mediterranean(15 Locations)
Africa(3 Locations)
South Asia(11 Locations)
East Asia(21 Locations)
Southeast Asia(10 Locations)
Americas(9 Locations)
Li & Fung’s Supply Chain Management Model --
Thought Leader in the Industry
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.
“Four Flows” ： work flow physical flow
information flow funds flow
Supply Chain
Supply Chain
Supply chain optimizationDeliver the right product at the lowest
price, in the shortest time, and in the right place to the end user
Advantage ： Overall cost reduction with maximum efficiency
Supply Chain Management
Supply Chain Management (SCM)
Globalization effect: Competition is no longer between companies but between companies’ supply chains
Definition of supply chain management is yet being compromised
Harvard Business Review: 6 case studies of Li & Fung
As a leader in supply chain management, Li & Fung has derived seven principles in supply chain management
Li & Fung’s Supply Chain Management
The concept of “Soft $3”
$1 $4
Product Design
Sourcing Logistics WholesaleRetail
Information Management
The cost that is spread throughout the distribution channels – the “Soft $3”
(1) Be customer-centric and respond accordingly to the market demand ；
(2) Focus on one’s core competency and outsource non-core activities, and develop a positioning in the supply chain ；
(3) Develop a close, risk- and profit-sharing relationship with business partners ；
7 Principles of Li & Fung’s SCM
7 Principles of Li & Fung’s SCM
(4) Adopt information technology to optimize the operation of the supply chain ；
(5) Design, implement, evaluate and adjust the work flow, physical flow, information flow and cash flow in the supply chain ；
(6) Shorten product lead time and delivery cycles ；(7) Lower costs in sourcing, warehousing and
transportation.
Li & Fung Trading’s Business Model
Li & Fung Trading’s Evolution to A Global Supply Chain Manager
Lev e
l of
Va l
ue A
dded
1906 Now
Trading Broker
Trading Broker
Regional Sourcing Agent
Regional Sourcing Agent
Global SupplyChain ManagerGlobal SupplyChain Manager
Dispersed Manufacturing / Borderless Manufacturing
AssemblyCHINESE
MAINLAND
ShellKOREA
LiningTAIWAN
FillerCHINESE
MAINLAND
ZipperJAPAN
Label, elastic,studs, toggle
and stringHONG KONG
Made in Hong Kong
by
Performing production slicing to identify the best location/ country to undertake each stage of process, adding value along the way & integrating the entire supply chain
Orchestrator of the Supply Chain
Li & Fung (Trading)
Supply Chain Management Supply Chain Financing Supply Chain
Consumer Needs
Product Design
Product Development
Optimize the Supply Chain
Factory & Raw Material Sourcing
Manufacturing Control
Forwarder Consolidation
Customs Clearance
Local Forwarding Consolidation
Distribution Services
Inventory Management
Factories
Importers,. Wholesalers
Shipping / Airlines
Raw Material MillsFinancing
Financing
Financing
Retailers
Consumers
Virtual Manufacturing
Benefits from owning 7,500 “smokeless factories” without investing huge sums of money to acquire the production and associated logistics facilities
Leverages the assets of our partners and mobilizes them to reach our growth initiatives, instead of owning them
Reduces the risks associated with the burden of asset ownership
Enjoys high degree of flexibility More responsive to potential market shifts and
technological changes
Capital-light / Leveraged Growth Business Model
One of the best embodiments: Virtual Manufacturing Maintains minimal financial leverage. Almost no
debt on the balance sheet Li & Fung continues to deliver a return on equity
of more than 20% Employee productivity: close to US$1 million in
sales per employee
Managing the Supplier Network
Has intimate knowledge of suppliers
Balances job allocation among our portfolio of suppliers
Becomes the orchestrator in the entire production process, ensuring each milestone is achieved
Managing the Supplier Network
Share responsibilities with suppliers:
Helps suppliers to solve their sourcing &
manufacturing problems. Leverages on our
supplier network to secure materials for our
manufacturers at better terms
Provides sufficient economic incentives for
suppliers: take 30%-70% of their production
capacity over the long term
Business Drives Information Technology
The application of IT aims to provide more value-added services, shorten lead time, lower cost and enhance flexibility
Li & Fung has established sophisticated & Internet-based systems to link up all its business partners, including customers, producers, distributors, logistics service providers etc
Lead time is reduced from 3 months to 5 weeks
Business Drives Information Technology
An interface software for e-commerce Core management system for Li & Fung Functions include:
(1)platform for e-commerce between suppliers and customers (supplier ： an interface for product
promotion ； customer ： a tool for sourcing and tracking
process)(2) product catalogue(3) enquiry on sourcing materials(4) submit purchase orders and track production process
Import Direct
Business Drives Information Technology
Implementation of Import Direct
ImportDirect
XTS-5
Tracking SystemSuppliers
Li & Fung staffForwarder
Customers
delivery of orders
direct access
estimateshipment scheduleTrack production
progress
submit Quotations
Integration of all information
Close communication with business partners
Shorten back-and-forth adjustment time among various components of the supply chain
Information sharing
Foster communication with participants in the Supply Chain
Advantages of Import Direct
Business Drives Information Technology
Organization Innovation
Smart Organization Design
Customer-Centric Divisions
Designed around customers
Creates a customized value chain for each of the customer’s orders
Encourages Entrepreneurship – Little John Wayne Optimizes the supply chain by better fulfilling
customers’ needs, maximizing performance & maintaining high quality level
Think like a big company, act like a small one
Organization Innovation
Operation Support Group (OSG)Centralizes and maintains tight control over
the financial control & operating proceduresSet up an OSG to serve as the back-office
hub administering 3 functions: IT, finance & human resources
Marries the strengths of being both small and big at the same time: being flexible and responsive, and having rich & powerful resources
