Points of Li & Fung

This is a list of answers that concerned about the Li & Fung as the homework.

• 1, when the world becomes flat, the leadership will become one of the most important resource in the supply chain system.
• 2, With the expansion of the supply chain network, business stability will increase exponentially.
• 3, When the transmission of information and goods is no longer a barrier to business growth, we need more partners than ever.
• 4, In the supply chain network, our management must extend to the outside.
• 5, What we called supply chain is a win-win chain actually.
• 6,S’beauty company pattern will show advantages in this background, large companies will adopt a professional modular organization model, meanwhile small companies will be more professional, so as to adapt to the demand of organization and re-organization in the fast changing market.
• 7，Hong Kong will become a logistics hub in the Asia Pacific region.
• 8，Mainland will be good challenge and chance at the same time.
• Final thoughts and summary/ conclusion. 
• Reference：

Annalise the strategic evolution of Li & Fung in the new age of global competition. Why has it worked? Would it have worded elsewhere outside Asia? How much technology, strategy, leadership, management vision, mission and economic climate have helped?

1, when the world becomes flat, the leadership will become one of the most important resource in the supply chain system.

（1）Three strategic evolution of Li & Fung company.

Li & Fung company as the supply industry leader, has experienced relatively big business strategic evolution for at least three times, from the regional market supply agency in the early time, and then later gradually became the manager and executor of the production plan, finally use dispersed manufactory strategy, transferred the labor-intensive work to South China, now Li & Fung has developed into a regional multinational company.

（2）Supply chain integration capability is a kind of important competitiveness.

In the long history of the past, power, money and influence has been alternately acting as the society’s most important resources. In the past 30 years, with the degree of market deepening, Chinese market basically finished the alternating of wealth and power, the whole Asia further integrated in the external environment, the government power no longer strands as the most important factor in labor production. Those who have great wealth of resources began to play a more important role than ever before, they’ve got more right inside and outside the manufactory system.

（3）Not only Li & Fung, this opportunity is for all companies in the Asian industry.

It’s about 5 years ago, I was still in undergraduate, when the first time I read the book《the world is flat》.For quite a period, this book was recommended by Amazon on its homepage, when I actually did not understand it. I just regarded it as a point of view, like the fall of the Berlin Wall, the world became flat, and we would have more opportunities and challenges at the same time. Not until recent years, however, with the change of the external environment, the example Li & Fung company through the integration of supply chain and dispersed manufactory creates value, has told us that this is not only a point of view, it is what that really happening there.

（4）Soft power will be more powerful.

At present, this age that the advertising endorsement of a film star effect show more effect than hundreds of consumer education activities, we need to understand that leadership becomes one of the most important resources in the future world. Supply chain also shares the same case, the one who can properly integrate business resources to respond to the needs of the terminal market, handle well in coordination of production and transportation, fairly distribute the benefits on the supply chain, has such an influence. It’s more attractive for the upstream and downstream business partners driving the supply chain to win more together than holding large expensive manufactory infrastructure. Sometimes they do not even need to keep an own complete system of production facilities. Fast responding to market demand, product path designing and arrangements and communication between suppliers and clients, those works that barely sweat create much more value than the sweat dropped along the production line. With such a leadership that able to well organize the company’s internal and external information flow, it is also capable to manage the flow of human resource, cash, and goods. Each of the strategic evolution is the result of dual effect of the corporate mission and the external economic environment, technological innovation, leadership and management skills provide protection for the company to survive and further develop.

  What are the strengths and weaknesses of their strategies? What are the opportunities and threats given the recent and future economic climate? Your view on this.  

2, With the expansion of the supply chain network, business stability will increase exponentially.

（1）Strong supply chain networks consolidate the company's stability.

Just like the Internet, when a single physical network connection is interrupted, the whole information flow will be interrupted. But nowadays the Internet system has been strong enough, it’s so strong that it can always find different paths, sending a message from one place to even the other end of the earth. Through information transmission, file packaging checking, it ensure information flow can arrive at the right time, right place and right accuracy.

Similarly, only when there is more than one path for the material to pass through in the supply chain network, its ability to resist sudden situation can be guaranteed, supply chain fault tolerance ability is strong and stable.

In addition, the supply chain network not only provides path for raw material to pass through, but also provide a buffer for the transmission of continuous flow of products. From an economic point of view, The production capacity of MTS products is not necessary to be designed according to the peak amount of the product’s demand, as long as manage the production and inventory properly, you can use the off-season excess capacity to make up for the shortage of peak season production capacity. Like the inventory can provide a buffer for the Off-season and peak season conversion, decentralized storage of raw materials and semi-finished products in the supply chain network, the security inventory of products in the warehouses of dealers, distributors, retailers that prepared for non-planned orders, transported product of long distance order, all provide similar buffer functions. If the operation is properly, these can replace its own inventory to a certain extent, save the cost of inventory. Li & Fung uses its long-term stable relationship and mutual trust with their partners and cooperation advantages, raw material suppliers can prepare some raw materials in advance, at the same time, the downstream plant can conserve certain production capacity for the coming order. All these make Li & Fung run business more stable.

（2）The external market environment becomes more difficult.

Overall, the logistics capacity of Hong Kong area is far more than it really needs, but neighboring economies grows rapidly, Production and processing centers have been transferred to the mainland side, Guangzhou, Shenzhen and other places. Logistics center in the future may also be transferred to the mainland, Shanghai, Shenzhen. Other potential competitors with entity factories have better financing ability. The rapid growth of competitors and more changeable market demands increase difficulties in financing and labor cost bring management lot of pressure. When the advantages of existing logistics capacity is no longer a major competitiveness, the company’s business will be further squeezed by low-labor-cost areas.

3, When the transmission of information and goods is no longer a barrier to business growth, we need more partners than ever.

nowadays with low cost of information exchange and l convenient  logistics, taking good advantage of outsourcing business, using the power of dispersed manufactory with supply chain network, the benefits will be significant.

This huge enterprise group supply chain network benefits Li & Fung a lot saving a huge cost of manufactory. Li & Fung is able to manage thousands of upstream and downstream partners.it achieves a win-win cooperation with both suppliers and clients, through the integration of the various upstream and downstream resources, planning production supply paths whit certain profitability, in which way it makes their business relationship and the supply chain network more stable.

4, In the supply chain network, our management must extend to the outside.

When a large number of supply chain work achieve through the outsourcing model, management becomes particularly important. It is necessary to follow in real time to make sure the products can be delivered to the customer in time with right quality and quantity according to the order.

Inside a company, we can adjust the person’s subjective attitude, through the company’s rules and regulations, assessment, and other administrative means; control the quality of the product by adjusting the parameters of the equipment and the process; ensure that the production process can be carried out smoothly, through the mobilization of the company’s resources. Faced with various problems inside the company, we can solve them by relatively fixed method and process with the whole set of mature company system.  With the development of dispersed manufactory pattern and Increasing in the proportion of outsourcing business, the focus of management begin to shift from inside the company to outside the company. While there are different management methods between different organizations, they form in different structures and resources, the external management level is more reflected in the coordination ability.

To integrate the larger supply chain network, it is very necessary to extend the existing management inside the company to the outside, understand the different types of company management mode, position properly in changing situation. There wouldn’t be any problem to say that external management is one of the most important part in the supply chain management. Li & Fung have special teams severing various customers, send staff to partners’ factory to follow up the production process simultaneously, Li & Fung can handle external management work well, and this is one of the most important competitive power of Li & Fung.   What do you think are the key success factors, why, and evidence to support it? Any innovative approaches?  

5, What we called supply chain is a win-win chain actually.

（1）The so-called integration is a win-win situation.

Almost all the combination of business and production is out of interest, the role of each part linked in the supply chain is driven by profit. When a certain part in the supply chain is profitable, there will be more people to join in, as the interests are divvied up, someone quit. This is a very simple model of economics, it fits in line well with the laws of market fluctuations, from which the dynamic balance illustrates us that the scale and composition of all supply chain are the result of market selection. In the profitable situation, the supply chain always tends to be longer, wider, more crowded and more complex.

And this trend is a kind of conservation of total social resources. Final product will be transferred from manufactory to the hands of consumers finally. In traditional industry, the product may pass through distributers and then retailers, finally to the terminal consumers. While if the product has a higher profit, distributers in order to service more market, expand business scale to some remote areas, they will have to develop in the downstream distributors, downstream distributors offer service to retailers instead of distributors themselves, and then supply goods to consumers in remote areas. From this perspective, the existence of all parts on the supply chain can simplify the complexity of the business for their upstream parts and help in costs saving. This is only the simplest case, the number of participants and the complexity of the network of the actual supply chain are far more complex.

The competition between the enterprise group and the enterprise group has replaced the competition between the enterprise and the enterprise.

（2）Good integration brings good value.

There’re many stories about companies on the verge of bankruptcy regenerated after the reorganization, no matter it is inside the company or outside, different modes of operation organization may bring different efficiency, good management framework can improve the efficiency and quality of products.

（3）Fast getting into the supply chain, becoming a part of the chain, is an important points of success.

The competition between the enterprise group and the enterprise group has replaced the competition between the enterprise and the enterprise. A company is only needed when it is specialized. A company must have its own characteristics that cannot be easily replaced. If it is able to find their own positioning in the industry by its own professional ability, fast enough getting into the supply chain or even the entire industry chain, and become an organic part of the running chain. The company will have the opportunity to survive in the fierce competition in the market.

  What is Li &Fung’s future? Say in 2030. Do you think the SAR Government’s strategy to make Hong Kong become a regional logistics hub help? Outline your arguments and explain why.  

6,S’beauty company pattern will show advantages in this background, large companies will adopt a professional modular organization model, meanwhile small companies will be more professional, so as to adapt to the demand of organization and re-organization in the fast changing market.

In the company management level, although you can manage more people by improving the management ability, with the expansion of the business volume, you need to change the management mode, to further improve the efficiency of management. On the one hand, setting the specialized business module according to the needs of the company’s business and combining with its own management radius can truly avoid the influence of bullwhip effect may appear in the process of management. On the other hand, through the modular unit settings, the re-organization of business will be easily facilitated, and also a rich interface for cooperation with external partners will be provided.

Now the majority of large companies are more or less to adopt a modular organizational structure, development, procurement, finance, transportation, logistics and logistics, professional people handle professional things. Tailoring the needs of the market, different modules can be organically combined together, and create significant results. When a project life cycle comes to the end, the module can be re-organized to provide services for the new market demand. The modules are small and Beauty, so-called S’beauty company units, they are small and entrepreneurial. In a large company, they may be some specialized departments, for small companies, it is the embodiment of its professionalism. These modules connected with each other through the supply chain network forms the resource “warehouse” of talent, technology, solutions. Li & Fung has the need of such a “warehouse”.

7，Hong Kong will become a logistics hub in the Asia Pacific region.

According to Asia Pacific Logistics 2015 Report, Hong Kong is still one of the most important trade port cities in the Asia Pacific region, its advantageous geographical position, the open policy, the mature sound legal system, the rich talented is not what the other cities can match temporarily. For quite a long time in the future, the logistics industry is undoubtedly one of the pillar industries. Hong Kong is an irreplaceable link between the mainland and South Asian countries, the SAR Government’s strategy to make Hong Kong become a regional logistics center is just following the direction of the development of the city. Port enterprises, especially logistics related companies will benefit a lot.

If you were Victory Fung or William Fung, what would be your strategies to take advantage of the change in China,( i.e. One Belt One Road, The WTO, the 13th 5 years plan, Make in China 2025, 35, 45 etc. CEPA and even green logistics)? Justify your answer.

8，Mainland will be good challenge and chance at the same time.

First of all, inside the company, faced with the market which is more and more board and complex, we need to simplify the existing work flow, improve internal efficiency, strengthen the digital management, and pay more attention to the key node of improvement and innovation driving business to grow. External aspects, establish a strong management system of potential customers, to further enhance the both the size and number of customers. Next Three-Year Plan focusing on speed, innovation and digitalization of supply chain.

In the strategic level, according to the strategy of the surrounding economies, focus on the core trading and logistics. Develop long-term development goals, and a short-term planning of three years, pay attention to business growth, simplify the business, and focus organic growth.

Focus on the city Shanghai, set up an office in Shanghai to meet the coming challenges of the opening of the mainland. Take good use of the opportunities of free trade zone and WTO, expand Li & Fung’s business in East China, built a closer economic and trade relations with the mainland. As Shanghai is such an important consumer city and also a big port city, and there are quite a lot manufactories located around it, which maybe a new Hong Kong in the future.

Participate in the national strategy of One Belt One Road in the construction of port facilities. So that Li & Fung will have priority using these facilities. Be an expert of communication between China and the west world, and insist on business radiation throughout the Asia Pacific Region, where there may jump out considerable numbers of orders, and make an improvement in the scope, size and quantity of the customers.  

Final thoughts and summary/ conclusion. 

1. When the world becomes flat, the leadership will become one of the most important resource in the supply chain system.

2. With the expansion of the supply chain network, business stability will increase exponentially.

3. When the transmission of information and goods is no longer a barrier to business growth, we need more partners than ever.

4. In the supply chain network, our management must extend to the outside.

5. What we called supply chain is a win-win chain actually.

6. S’beauty company pattern will show advantages in this background.

7. Hong Kong will a logistics hub in the Asia Pacific region.

8. Mainland will be good challenges and chances at the same time.

Reference：

1. Group UN Global Compact Communication on Progress 2015 [R]:The Fung Group of companies 2016.

2. Interim Report 2016 [R]:The Fung Group of companies 2016.

3. 香港利丰集团：“采购业的沃尔玛”《 青年参考 》[N]. 高珮莙（ 2013.08.21日) 26 版

4. 香港利丰集团公司发展战略研究，《上海交通大学》[J]. 罗青, 2011

5. 香港利丰集团供应链管理对外贸发展的启示，《中外企业家》[J]. 毛丽佳，2015