Li & Fung shows its mettle in flat world
Pick up a toy or a piece of clothing at random and chances are it is likely to have passed through the sprawling supply chain network of the world's largest sourcing company Li & Fung.
What's staggering, however, is not the fact that the Hong Kong-listed company is able to produce more than two billion pieces of apparel, toys and other consumer items each year - that's more than US$8 billion in garments and other goods for the world's top brands and retailers - but that the firm is able to do so without owning one factory.
How is this done? Can a corporation of any size emulate such a business model and rise to the challenge? In Competing in a Flat World - Building Enterprises for a Borderless World, the company's owners, Victor and William Fung, along with their long-time adviser, Wharton School of Business professor Yoram (Jerry) Wind, say yes. In just under 240 pages, the authors demystify the mechanism behind one of the world's most successful and talked-about supply chain networks and highlight the trials and tribulations of what it means to operate in an increasingly flat and competitive world.
Flexibility lies at the heart of the complex network that provides a one-stop answer from design, sourcing to manufacturing and ultimately delivering almost anything anywhere at any time and the right price.
Not only is each solution crafted around the customer's specifications, its agility ensures it can respond, in a heartbeat, to any regulatory changes, natural or political catastrophes.
'Li & Fung was also able to quickly shift production from high-risk countries to low-risk ones, reallocating hundreds of millions of dollars' worth of merchandise in just a week's time,' the authors said of the days following September 11, 2001, when retailers feared the American consumer economy would come to a screeching halt.
The company's network model reduces prices, raises quality and shortens production cycles so retailers can delay ordering and sourcing decisions, improve forecasting demand and lower the costs of markdowns and stockouts.
Easy to understand metaphors that equate the network with the strength of an athletic team and its operation to the role of an orchestral conductor who needs to select the music, assign individual musicians their parts for a particular piece and stand at the front to ensure everyone stays in time and on the same page, are littered throughout the book, putting into context how some of the strategies work.
Chief executives and factory owners eager to claim their place in a rapidly transforming world will no doubt be hanging on to each word of the book though this can be a valuable read for anyone interested in understanding the impact a flat world is having on our lives today.
Andrea Li is a Hong Kong-based freelance journalist
