Li & Fung Strategy Case

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Li & Fung

STRATEGY CASE- 3

HIMANI GUPTA ROLL No. 15 PGDM-IB 4/1/2011


(Q1) Explain briefly Li & Fung’s business model today. Comment on the sources of its competitive advantage. Is it sustainable? Why? Business Strategy
Li & Fung uses the holistic supply chain management (SCM) strategy to benefit their clients by shortening order fulfillment from months to weeks which allows clients to reduce the amount of inventory they hold. In addition they remained as the middle man, which allowed them to reduce matching and credit risks.

Business Model
Li & Fung’s supply chain management services offer Total Value-Added Package: from product design and development, through raw material and factory sourcing, production planning and management, quality assurance and export documentation to shipping consolidation. The company determines which supplier manufactures which element at the lowest cost possible to shorten order fulfillment and provide competitive prices to their customers.

Li and Fung provide SCm services that determined what supplier in which country would best maximixe it’s clients quality and time expectations at the lowest cost possible. It deals both in Hard goods and Soft goods.

HARD GOODS:
Fashion accessories
Festive or holiday products
Giftwares
Furnishings
Handicrafts
SOFT GOODS: Mainly apparels

Li & Fung defines itself as a “network orchestrator”. What it means by network is a more flexible supply chain. If supply chain is a set of 11 players who are currently in the soccer field, network is a team including those sitting on the bench. For Li & Fung’s customer cheaper and faster delivery is what is needed and how Li & Fung mix and match the suppliers does not really matter.

Process of Li & Fung:
Customers will be given an initial product concept of Li & Fung, such as product design, shape, color and quality requirements, etc., and then developed by Li & Fung customers a complete production plan, according to the customer market and the draft proposed by the design department, Li & Fung will conduct market research, purchase the appropriate parts in various places, such as cloth, lace, as well as provide the most suitable product manufacturers. •In the production process, Li & Fung will also make planning and monitoring production processes to ensure product quality and timely delivery. In this borderless production under the touch-type, Li & Fung in Hong Kong engaged in the design and quality control programs, such as high value-added business, and the low value-added services, such as production processes, distribution, the best place to another, for example, mainland China, so that the whole production process and the process to achieve truly global. •In the virtual production model based on the whole supply chain in order to make more reasonable and smooth operation, Li & Fung develops a more comprehensive supply chain services. •In addition to the center responsible for a series of work products, including market research, product design and development, raw material procurement, choice of supplier and production monitoring, Li & Fung also oversees a series of import and export clearance procedures and the local logistics arrangements, including for import and export documents, customs clearance, arranging export transportation and local transportation. •Li & Fung also selectively potential raw material suppliers, factories, wholesale importers and retailers to choose from. Occupy these key positions in supply chain financing companies, so that both supply and demand supply chain companies each node can best •Li & Fung, as global supply chain management is constantly under development and evolution, Li & Fung has developed into a global supply chain management business, its global distribution network has been compiled in 38 countries and regions, with 68 branches and offices. •Li & Fung as a customer services include...
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