The business world is at the beginning of a new era of supply chain management, believes Victor Fung Kwok-king, group chairman of Li & Fung and chairman of the Hong Kong Airport Authority.
'Even within the company there is a lot of scope for supply chain management, for functions being integrated. Much of the consolidation has not yet been achieved,' Mr Fung says.
The value of the logistics sector worldwide is estimated at US$3 trillion, and this will grow in line with the scope for efficiency improvements along the length of supply chains.
'In the consumer goods industry, if an item costs $1 at the factory where it is made, it will end up in the consumer's hand for $4. For all consumer products this is a rule. It is almost never violated,' Mr Fung .
The scope for producing the item at 90 cents would require the work of a 'genius', he believes, whereas knocking 50 cents from the remaining $3 added before the good gets to the consumer would be, by contrast, relatively easy. This is the area supply chain management attempts to tackle.
'It's all part of the cost of getting the good ex-factory to the consumer. It hides a multitude of sins, each of which can be made more efficient. If you keep thinking about how you can eat into the soft $3, that is supply chain management,' he says.
