Li&Fung Case

Li & Fung Established in 1906, Hong Kongbased Li & Fung is now one of the largest multinational trad-ing companies in the developing world, with annual gross sales of more than $7 billion in 2005, up from just $1. 2 billion in 2000. The company, which is still run by the grandsons of the founder, Victor and William Fung, does not see itself as a traditional trading enterprise. Rather, it sees itself as an nice in supply chain management for its 500 or so customers. These customers are a diverse group and include clothing retailers and consumer electronics companies.Li & Fung takes secerns from customers and past sifts through its network of 7,500 independent suppliers located in 40 countries to examine the unspoilt manufacturing enterprises to produce the yield for customers at the most attractive compounding of cost and quality. Attaining this goal frequently requires Li & Fung to break up the mensu say chain and disperse polar productive activities to manufacturers locate d in different countries depending on an assessment of factors much(prenominal) as labor costs, trade barriers, transferee costs, and so on.Li & Fung then coordinates the whole process, managing the logistics and arranging for the shipment of the finished product to the customer. Typical of its customers is The modified, Inc. , a large U. S. -based chain of retail clothing stores. The Limited outsources much of its manufacturing and logistics functions to Li & Fung. The process starts when The Limited comes to Li & Fung with designer sketches of array for the next fashion season.Li & Fung takes the basic product concepts and researches the market to find the right kind of yarn, dye, moreovertons, and so on it then assembles these into prototypes that The Limited can inspect. formerly The Limited has settled on a prototype, it impart give Li & Fung an order and ask for delivery within five weeks. The short era amid an order and requested delivery is necessitated by the rapid rate of product obsolescence in the fashion clothing industry. With order in hand, Li & Fung distributes the various aspects of the overall manufacturing process to different producers depending on their capabilities and costs.For example, Li & Fung major power decide to purchase yarn from a Korean company but wealthy person it woven and dyed in Taiwan. So Li & Fung testament arrange for the yarn to be picked up from Korea and shipped to Taiwan. The Japanese talent have the best zip-pers and buttons, but they manufacture them mostly in China. So Li & Fung will go to YKK, a big Japanese zipper manufacturer, and order the right zip-pers from its Chinese plants. Then Li & Fung might decide that out-of-pocket to con-straints imposed by export quotas and labor costs, the best place to assimilate the final garments might be in Thailand.So everything will be shipped to Thailand. In addition, because The Limited, like many retail customers, needs quick delivery, Li & Fung might divi de the order across five factories in Thailand. Five weeks later the order has been received, the garments will arrive on the shelves of The Limited, all looking like they came from one factory, with colors perfectly matched. The result is a product that may have a label that says Made in Thailand, but it is a global product.To better serve the needs of its customers, Li & Fung is divided into numer-ous small, customer-focused divisions. there is a theme store division that serves a handful of customers such as Warner Brothers there is a division for The Limited, and another for Gymboree, a U. S. -based childrens clothing store. Walk into one of these divisions, such as the one for Gymboree, and you will see that every one of the 40 or so sight there is focused solely on meeting Gymborees needs. On every desk is a computer with a direct software amour to Gymboree.The staff is organized into specialized teams in areas such as design, technological support, merchandising, raw ma terial pur-chasing, quality assurance, and shipping. These teams also have direct elec-tronic colligate to dedicated staff in Li & Fungs branch offices in various countries where Gymboree buys in volume, such as China, Indonesia, and the Philippines. Thus, Li & Fung uses information systems to manage, coordinate, and witness the globally dispersed design, production, and shipping process to ensure that the time between receipt of an order and delivery is minimized, as are overall costs.