Li & Fung's Global Supply Chain Excellence

Li & Fung a True Global Player in Supply Chain Managment 2010ECU MBA MGT 505Ralph Yew, All right reserved10/30/2010 MGT 505 – International Business ‘Fast, Global and Entrepreneurial: Supply Chain Management, Hong Kong Style Analyst : Mr RALPH YEW (email : etyew@hotmail.com) 28 February 2011 TABLE OF CONTENTS ,[object Object]

Why Customer Outsource to Li & Fung

The skills and competence to value add to their customers

Sustaining the company’s performance

Globalization effect on logistics and purchasing industries

The value innovation of Li & Fung - International Business Operation

Challenges and opportunities of IT and Internet

The Road Ahead : Growth, Innovation and Leadership

Fast,Global and Entrepreneurial : Supply Chain Management Hong Kong Style ,[object Object],The company Li & Fung has be synonymous with huge distribution network and total supply chain provider in Asia Pacific and the North America market. To date, Li &7 Fung headquarter in Hong Kong operates with a network of international spanning across the globe. In countries such as China, India, Hong Kong, Japan, South Korea and Singapore, rail is not only a medium to help people commute faster to work, but also as a medium to help people socialize through prompt and timely connectivity to different parts within a city. For instance in China, with a population of over 1 billion is also seeing the emergence of megacities. As such, the most practical solution of people’s mobility is urban rail system. Armed with the latest technology in supply chain system and sound IT infrastructure has enable Li & Fung to continue growing its revenue with strong profitability across international market. ,[object Object],Today, companies who are to succeed in the supply chain business must invest in very sound IT infrastructure to manage a very complex processes system across international border. Li & Fung owns 80 offices in over 40 economies and employed up to 33,000 employees worldwide and recorded an annual turnover of US $ 16 billion in 2009. A very stellar management team with in-depth knpwledge and experience in the retail and distribution business. Under leadership of Group Chairman Dr Victor Fung who is also the Chairman of International Chamber of Commerce. A member of Chinese People's Political Consultative Conference. Vice chairman of China Centre for International Economic Exchanges since March 2009. A member of the Commission on Strategic Development of the Hong Kong Government. Dr Victor Fung was assisted by his second in command Mr William Fung who holds the portfolio of Group Managing Director and his very able and President Mr Bruce Philip Rockowitz who was voted the top 30 best CEO in the world recently. The company Li & Fung is in the steady hand of very able team of dynamic modern business leaders. ,[object Object],The drivers for the huge investment in rail infrastructure in Asia Pacific are brought about by the factors like strong government initiative, rate of urbanization, competition for FDIs, and economic growth being the primary drivers. While for the the secondary drvers include social factor like mobility for people, environmental responsibility, and chronic road traffic congestion. source : Ralph YEW The primary drivers for the investment of rail infrastructure in Asia Pacific are government initiative to modernize their infrastructure, the rapid pace of urbanization, the competition to attact foreign direct investment (FDIs) and the role of rail in growing the economy and services sector growth. In Asia Pacific, our analysis shown that rail industry will grow year-on-year at more than 5% with the need to have reliable public transportation system for people’ mobility and the government investment in modernizing their infrastructure to continue progressing and attracting the much needed foreign investment. The secondary drivers promoting further the investment of rail infrastructure are the spending by rail operators for IT equipment and analytics tools to improve their services including smart card and automatic fare collection (AFC), the demand from the people for realiable and secured mode of travelling, the need for rail to complement other modes of public transport, the factor of environment, to alleviate growing traffic congestion and finally to use urban rail in promoting the tourism sector. ,[object Object],The current scenario emerging from the advanced technology in rail is a new shift towards making urban rail as the most environmental friendly mode of mobility for people and the infusion of state-of-art IT technology to increased its safety and effectiveness. ,[object Object],Both train manufacturer and operators in Asia Pacific are also testing with hybrid technology that combined the use of on-board lithium ion battery to the existing diesel multiple unit ( DMU), the usage of biodiesel through mixing ethanol to the current diesel fuel in running their trains and even energy saving regenerative braking that capture ‘lost’ electricity and return that to the third rail system to be used by other train. ( inset : Li & Fung Global Toy Dog – Topper ) ( inset: IDS Logistics Transport Solution ) ( inset : Li &7 Fung owned Toy R Us SEA ) ,[object Object],As more rail operators seek to improve efficiency and cut costs, the user expect better level of service while the regulators expected greater safety in the rail infrastructure and operations. The solution to that is essentially a sound IT infrastructure that is able to collect, extract , transform and load (ETL) the data in a data warehousing process manner to produce a consolidated data to create a smarter railway. More integrated solutions are being developed that blend predictive and analytical tools to enable scheduling and capacity to be balanced with demand volume in-real-time. These empower rail operators to optimise the leveraging of their resources to meet fluctuating demand. ,[object Object],With advancement of technology , the rail system and technology manufacturer are beginning to shipped their product assembly and manufacturing to the host countries like China and India. The modern communication technology allow for the design to be done in their company headquarter and final assembly be done in host country. The supply chain management technology gives them comparative advantage in sourcing rail components worldwide with the on-going standardization in rail products. With both Chinese and Indian Government investing heavily in its railway infrastructure, it holds tremendous opportunity for the rail system vendors. The companies which produce and shared its rail technology with local companies in host country gives them significant advantage in bridging the cross-cultural factor and having a much lower cost in comparative advantage to manufacture the product for the local marke; not to mention in getting its product typed approved and tropicalised for the host country. ,[object Object]

The strategic reason for the planning of global supply chain management systems is the benefits of a long term commitment to build and run a fast, cost-effective and reliable global supply chain management system. Firstly, with the better planning, there will be more integration of the various multi modes to have a truly modern network of urban public transportation. Secondly, on project development and management there can be achieve within the shorter time frame by employing the best project methodologies. Thirdly, in term of financial, there is better economies of scale through good planning and better business case resulting in better access to various funding mechanism including the private public partnership.quot;
Li & Fung - The Orchestrator of Global Supply Chain Managementquot;
- Written by Mr. Chang Ka Mun and Li & Fung Research Centre Supply chain excellence has become a key driver of competitiveness in most industries globally. A supply chain encompasses all activities from obtaining raw materials through to the delivery of final goods or services to the end-consumer. These include material sourcing and handling, product design, production planning, order processing, inventory management, transportation, warehousing and customer service. It also includes the management of information flow that facilitates communication among all these functions.For a company to be competitive, its supply chain must be flexible, agile, cost-effective and responsive. Nowadays it is more common for companies to collaborate in a global context where each of them focuses on its core competency and outsource the rest. As a consequence their success becomes increasingly dependent on how well they can orchestrate the different aspects and manage the external parties involved along the supply chain. Equally important are companies' abilities to satisfy their customers' needs, shorten production lead time and lower cost.Li & Fung has evolved from a sourcing agent to a global supply chain manager by being an innovator in the development of supply chain management. Through our practice and research in this area, we have derived the following seven principles which constitute the pillar of Li & Fung's supply chain management: ,[object Object],The seven principles serve as a guideline for Li & Fung to resolve many complex decisions, e.g. which channels to use for customers and suppliers, whether to manage operations internally or outsource, and how to implement new technologies to optimize the supply chain etc. By mastering the supply chain, Li & Fung has been able to provide better customer service and establish long-lasting supplier relationships, which becomes an enduring competitive advantage over its competitors and leads to market share gains ( source : Li & Fung )The globalization trend and its resulting competitive pressures will continue to underpin the development of supply chain management. As consumers and suppliers increasingly demand for quality and efficiency along the entire supply chain, Li & Fung's track record as a pioneer in global supply chain management certainly reaffirms the company as the partner of choice to those who are keen on expanding their businesses. ,[object Object]

From the quantitative and qualitative research we concluded that they are few pertinent points for the sustainability of the urban rail market in Asia Pacific to continue to advance and prosper for the next decade.

Firstly, the need for a common standardization plan for Asia Pacific rail system in term of reliability, availability ,maintenability and safety ( RAMS ) much like the European Committee for Electrotechnical Standardization Cenelec EN 50126 railway application practiced widely in European rail. Rail industry in Asia Pacific must adopt a common standard in its rail system and infrastructure to foster a deeper co-operation and allow for interoperability standards among the various regional rail operators.

Secondly,as the rail market in Asia Pacific gets full steam ahead with new orders continue pouring in; the critical issue of human capital becoming paramount. The railway industry must be able to attract and develop the new breed of young technical talents, and engineering knowledge workers since most of the current batch of technical rail workers are heading towards retirement. There must be that emphasis on making railway industry a learning organization with much of the tacit knowledge of the current rail workers being documented and digitized for reference.

Li & Fung's Global Supply Chain Excellence

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