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8/13/2019 Walmart and Li&Fung Case
1/24
8/13/2019 Walmart and Li&Fung Case
2/24
Other than a need to expand, what other
reasons would Wal-Mart have for
opening stores globally? Why would the
company want a strong centralized
control of its stores? Why would it want
strong local control of stores?
8/13/2019 Walmart and Li&Fung Case
3/24
Reasons for opening stores globally
To diversify its market - reduces risk against poormarket conditions
To decrease competitionspenetrate othermarkets and gain market share
To reach out to more customers
To increase revenue
To develop optimal and efficient supply chainacross global
To develop unique logistics network
To take advantage of low cost countriesTo utilize effective labor sources from around the
world
8/13/2019 Walmart and Li&Fung Case
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Reason for a strong centralized control of its
storesTo allow Wal-Mart to obtain demand forecast
to
its warehouse and to its suppliers giving abilityto adjust production and inventory to meet the
demand
8/13/2019 Walmart and Li&Fung Case
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Reasons for strong local control of stores
To cater with fierce local competitionTo deliver goods directly to stores on
time
To reduce price haggling with suppliers
8/13/2019 Walmart and Li&Fung Case
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What were the major problems
Wall- Mart faced during the initial
years of operations in SouthAmerica ?What were the major
drivers of these problems?
8/13/2019 Walmart and Li&Fung Case
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1) Brutual competition and markets that dont supportWal-Marts ability to achieve economies of scale.
2) Suppliers umbrage at Wal Marts aggressive pricing
policies3)The biggest issue Wal-Mart is shipping product on timeand getting on the shelf
4)Wal-Marts troubles in South America stem partly fromits own mistakes , mainly because analysts failed to
do its homework before entering South America(i)Some goods are useless in San PauloEx Live trout, American footballs, Cordless tools(ii)Wal-Mart brought in stock-handling equipment
that didnt work with standardized local pallets.
(iii)Installed a computerized bookkeeping systemthat failed to take into account Brazils wildlycomplicated tax system.
iv) slow to adapt to Brazil fast changing culture.
8/13/2019 Walmart and Li&Fung Case
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Managing dispersed production
forced us to get smart about
dissecting the value chain". Explain.
8/13/2019 Walmart and Li&Fung Case
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Dissecting value chain
Borderless manufacturing
Breaking up the value chain- dispersedmanufacturing
Several high cost hubs- sophisticated planning
Constantly look for new and better sourcessupply
8/13/2019 Walmart and Li&Fung Case
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Labour intensive work to China
Dissect and look for best solution at each step
Not which country can do best job but optimizingeach step, globally
8/13/2019 Walmart and Li&Fung Case
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When large manufacturing companies
managing their own supply chain, how
does it help to lower markdown for theretailers?
8/13/2019 Walmart and Li&Fung Case
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Retailer can involved in making adecision which product we should buy orwhich is not.
Retailers were participating in productdesigning process they are also managingsupplier through Li & Fung and are evenreaching down to their supplier
they were able to manage their inventoryin a better manner and lower markdownin the store.
8/13/2019 Walmart and Li&Fung Case
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Explain the role of Li & Lung in
shortening the buying cycle and how does
it help them to lower the cost in the supply
chain?
8/13/2019 Walmart and Li&Fung Case
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They outsource all the finished good or component
which required to produce a complete garment and take
the advantage of satisfying its customer by shortening
the delivery time.
Assembling of product at a single place
Due to short buying cycle the problem of obsolete
inventory decreases.
Saving in inventory markdown
Shortening buying cycle consists of flexibility,
response time, small production runs, small minimum
order quantities and move along with the trend
8/13/2019 Walmart and Li&Fung Case
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Buyer informs Li & Fung 5 weeks before the
requirement of yarn without complete specifications
(colour & design)
Good relation and trust of Li & Fung with its suppliers
help in reserving the undyed yarn for the buyer
Lock up capacity at mills for weaving and dying of
yarn by promising order of specified size
Factory receives fabric and have 3 weeks for producing
the garments
Reduction in cost by introducing the concept of
trackling the soft of $ 3 in the cost structure
8/13/2019 Walmart and Li&Fung Case
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How is the organization of Li Fung
different from others in the industry?
How does this help to achieve itsstrategic objectives?
8/13/2019 Walmart and Li&Fung Case
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1) Li Fung organizes around the customers, as theirbasic operating unit is division , while others areonly customer focused as they have countryunits as their profit .Their country units are
competing against one for the business.2) Compliance and ethical sourcing are more hot
topic here.
3) They always abide by local rules and regulations,
in whichever country they operate.4) Emphasized the relevance of dispersed
manufacturing in order to meet the needs of itscustomers
8/13/2019 Walmart and Li&Fung Case
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Achieving customer demand and specifications Develop a close, risk- and profit-sharing
relationship with business partners..
Spread out geographically in order to maximizesupply chain profit through the concept ofdispersed manufacturing.
The company has better bargaining power
Meeting customer lead times in the competingenvironment
Ensure long term sustenance through ethicalsourcing , compliance and abiding by local rulesand regulations.
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What were the basic changes that took
place in Li & Fung as it grew over
the years both in size andgeographic scope? What effort did
the company take to hold the
organization together?
8/13/2019 Walmart and Li&Fung Case
20/24
Changed from Hong Kong basedChinese company to regionalmultinational company
From 99.5% Chinese and 80% HongKong Chinese into a regionalmultinational
Diverse workforce and now haveworkforce from at least 30 countries
Positioned as Hong Kong-basedmultinational trading company
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The company managed on a day to day basis by
product group managers.
Formation of policy committee which consists of
about 30 people.Meeting is done every five to six weeks.
People fly in and around the region to discuss and
agree on policies.The committee of 30 not only shapes the policies but
also translates them into operating procedures that
they think will be effective in field.
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With advent of IT, doing business
became both easier and difficult for
the company. How did the companyenvisage reconciling with the new
systems and also retaining the
traditions they had built over theyears?
8/13/2019 Walmart and Li&Fung Case
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Is an information node with flipping between
350 customers and 7500 suppliers
Manage that with phone calls, faxes and on sitevisit
Soon there will be sophisticate information
system with very open architecture to
accommodate different protocols from
suppliers & from customers
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Creating a database to track systematically all the
supplier relationships.
Everyone in the company can use to review theperformance history of all the suppliers
Continue to read faxes from customers to keep in
personal touch with the customers & operations on
daily basis
Think like a big company and act like a small one