Global Supply Chain
Global Supply Chain
Janice H. Hammond, Jesse Philips Professor of Manufacturing, Director of Faculty Planning William K.L. Fung, Group Managing Director, Li & Fung Ltd.
Willy C. Shih, Professor of Management Practice, Technology and Operations Management Unit Marjorie M.T. Yang, Chairman, Esquel Group
matter how large the order. But it then took The Limited
three weeks to get the items from their distribution center
to their stores. Mr. Fung offered a more efficient solution. Besides producing the goods for The Limited, Li & Fung
could also pack and ship the items as required by each
Limited store to cut down on this customer’s total supply
chain time—thus evolving from overseeing manufacturing
to providing more comprehensive supply chain solutions.
Despite initial objections from managers at The Limited, Li
& Fung eventually assumed this responsibility.
The global companies profiled in this session, Esquel, Li &
Fung, and Flextronics, highlight very different global supply chain management models. Esquel is vertically integrated;
Li & Fung has no manufacturing assets but coordinates
manufacturers; and Flextronics has the infrastructure and
capabilities to simultaneously manage supply chains for
hundreds of thousands of different products.
The global financial/economic crisis will hurt demand and
challenge the supply chains of each of these companies. It
will require becoming more efficient and responsive; better
matching supply with demand; continuing to have low prices;
and considering the opportunities and risks presented
through supplier financing.
In general, the company has benefited from two worldwide
trends and several important decisions.
Key trends. Li & Fung benefited from the widespread
adoption of offshoring and outsourcing. Its network and
supply chain management capabilities enabled the
company to capitalize on these trends.
“We are in the age of what I would call extreme
outsourcing. Nothing is sacred if somebody else can
do it better, faster, cheaper than you.”
These panelists offered their thoughts on the evolution of
their companies’ global supply chains and responded to
questions about the impact of the financial crisis.
William K.L. Fung
Not owning manufacturing. The decision not to manufacture but to coordinate has served the company well, resulting in partnerships with manufacturers.
Li & Fung Ltd. is a global trading company that has
evolved its supply chain to address changing market
conditions and meet changing customer needs.
Focus on specific product categories. Li & Fung focuses
on textiles; general hard goods like toys, shoes, and
other household goods; and health, beauty and
cosmetics; and is considering providing some food
Mr. Fung described his company’s history as a regional
and then global trading company. Li & Fung first exported
products from China, and then after 1949, exported lowcost consumer goods from Hong Kong.
Focus on specific markets. Li & Fung sells mainly to
the United States, Western Europe, and Japan. The
company is also beginning to sell in China as the market
there continues to grow.
The company became global over time as it moved the
location of manufacturing to countries with lower-cost
labor. Li and Fung shifted where it had goods made from
Hong Kong to Taiwan, and then Korea, and so on to a list
that includes more than forty countries today, such as
Turkey, Honduras, Guatemala, and more.
Emphasize compliance on ethical issues. Increasingly,
customers and their consumers don’t just care about
price and quality; they want to know how products are
made. This has led Li & Fung to focus on issues such
as underage labor, sweatshop conditions, pollution, and
unsafe ingredients like dyes that cause cancer and lead
in products at unsafe levels.
Throughout this evolution, during which time Li &...
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