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Li & Fung: Battling the Global Supply Chain Challenge |
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In the 2000s, Li & Fung evolved from a transaction facilitator into an aggregator, distributor, information analyzer, adviser, and credibility enhancer, serving different customer segments in trading, distribution, and retailing.
By 2006, Li & Fung was supplying hard goods as well as soft goods to more than 1,000 customers through its network of 8,000 to 10,000 suppliers. While garments and apparel constituted soft goods, hard goods comprised toys, fashion accessories, gift items, stationery, travel goods, fireworks, shoes, furniture, and so on. The soft goods business accounted for two-thirds of the company’s total trading business in 2006.
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| As Li & Fung expanded its business, it understood that sourcing could no longer be restricted to a few countries and that it required a vast network of sourcing offices to sustain the trading business. Thus, the company established sourcing offices across the world, mainly around its major markets, the US and Europe. Li & Fung also went in for acquisitions to strengthen its sourcing and distribution networks and expanded its product lines and customer networks... |
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| Realizing that trading was a sunset industry, William and Victor planned to evolve Li & Fung into a supply chain manager by taking the company through several stages of development, driven by significant changes in the global retailing industry, customer and retailer preferences, and economic trends across Asia... |
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| While Li & Fung grew into a successful supply chain management company, several factors led to the company later losing its sheen. Initially, the global financial crisis that started in mid-2007 drove the US retail industry into a downturn while the rise of fast-fashion brands such as Zara and H&M as well as internet retailers such as American multinational technology company Amazon.com Inc. and Chinese multinational conglomerate Alibaba Group Holding Limited, undermined the foundations of the retail industry. .. |
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| Even as Li & Fung was grappling with several issues, the US-China trade war started in mid-2018. This only added to its woes. In July 2018, Trump announced that the US would impose tariffs on Chinese goods worth US$34 billion comprising medical devices, flat-screen televisions, and aircraft parts... |
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| In August 2019, Li & Fung reported that for the first half of 2019, the company’s turnover had dropped 8.4% to US$5.4 billion and that its core operating profit had declined by 18.6% to US$105 million... |
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| Realizing that trading was a sunset industry, William and Victor planned to evolve Li & Fung into a supply chain manager by taking the company through several stages of development, driven by significant changes in the global retailing industry, customer and retailer preferences, and economic trends across Asia... |
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Exhibit I: Li & Fung’s Information Technology Initiatives
Exhibit II: Li & Fung’s Customer-Centric Divisions
Exhibit III: Five-Year Summary of Li & Fung’s Consolidated Statement of Comprehensive Income
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