Presented bySection A Group 1

UM15002 Alisha Johney UM15014 Baidik ChakrabortyUM15024 Kanupriya Pandey UM15036 Priya Ranjan MohantyUM15047 Siddhant Mallick UM15057 Prateek Gupta

Introduction

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• Founded: 1906• Headquarters: Hong Kong• Over 80 offices in more than 40

economies• Revenue: USD 18.83 billion (2015)• 15000 International suppliers• 14000+ employees• Key People: William Fung

(Executive Chairman) Spencer Fung (Group CEO)

• Products: Apparel, Household goods, furnishings, toys, health & beauty products

World’s leading consumer goods supply chain management company, managing the supply chain for retailers and brands worldwide

Business

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Primarily into trading, a buying agency that does sourcing, borderless and virtual manufacturing by leveraging its supply chain.

Revenue Modelo Soft goods attract 6-8% margino Hard goods attract 10-30% margino Charged commission on supply of raw materials to its suppliers –

managing inventory on the supplier’s behalf

Soft - 68% Hard - 32%

Changing Role…

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Buying Agency

Supply Chain Management

Virtual Manufacturing

Borderless Manufacturing

Sourcing

1906 Present

Leve

l of V

alue

Add

Alignment between Roles and Capabilities

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Roles Capabilities

Buying Agency Key Growth through acquisition in target geographic markets and thereby global integration

Sourcing Sourcing from anywhere in the world and hence building solutions for its retail customers based on customer needs

Borderless Manufacturing

Value Addition through a network of 10,000 suppliers and staff in 40 different countries

Virtual Manufacturing

Development and manufacture of customized solutions with the ability to be locally relevant and globally optimized

Supply Chain Management

Orchestration of a supply chain network of 14,000 staff and 10,000 specialized partner companies in 40 countries without owning any piece of it directly

Customers & Competitors

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Customers Competitors

and many more…

Sourcing

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Supply Chain

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FlexibilityAgilityCostEffectivenessResponsiveness

7 Pillars of SCM

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Customer-centric and market demand driven supply chain management

Focus on one - score competency and outsource non-core activities

Close, risk and profit sharing relationships with business partners

Design, implement, evaluate and improve the several flows

IT to improve efficiency of the supply chain's operations

Shorten production lead time and delivery cycles

Lower costs in warehousing & transportation

Supply Chain Sustainability

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Supply Chain Sustainability means managing risk and compliance, sourcing responsibly and collaborating with our industry partners to bring benefit to workers and our communities

Li & Fung’s initiatives to enhance supply chain sustainability focus on three areas: Managing risk and furthering compliance along the supply chains Collaborating with customers

and industry partners to build better supply chains

Sourcing responsibly

Threats with the Dot-Com Era

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Acquisitions: Internet companies could use the money that was pouring in from venture capitalists to acquire offline competitors or their key people.

Joint Ventures: Offline companies like Japanese trading companies or local sourcing firms could partner with a dot-com company and become a competitor overnight.

Alignment between Business & IT

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• Established company-wide intranet linking critical company operations

• Dedicated extranet links – major elements of supply chain

• Provides tracking capabilities, streamline information flow

• Leverage the power of internet as customers demand more customized product choices

• In 2002, started an entire business division focused on B2B sourcing via ecommerce website called lifung.com

Three main groups – Trading, Retailing and Distribution

Information Platform for Integrated Solutions

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Lifung.com

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Unique Selling PropositionAggregation of SMEs smaller

orders via B2B portal with limited mass customization for achieving

low cost solution

Salient Features• Allowed SMEs to reduce their

inventory and use of the system for replenishment buying

• Brought SMEs at par with large retailers in identifying fashion trends

• Allowed a limited amount of customization

Future with eSO

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Electronic Stock Offer: Aimed at targeting the other side of the butterfly model

Unique Selling PropositionAggregation of suppliers to post surplus

inventory for sale online through Li & Fung

Salient Features Solution aiming the 6000 strong supplier

base of Li & Fung Solution for inventories resulting from

• Over production• Order cancelations

Offering excess inventories to large discount retailers

Embracing IT into all aspects of business to create new opportunities

Strategy Reason ResultGoing online to capture new markets

• Need for organic growth and expansion through acquisition

• Li & Fung could carry out online product development as well as order tracking, obviating much of the cost and time necessary to send hard copies of documents back and forth.

• Increase customer base

Three Year plans

• Filling in the mosaic• Expand margins• Doubling the profit

• Identifying and filling the gaps in its network of offices to cover new sourcing markets.

• Increase profitability.• Doubling profits every three years and

achieving $3 billion in annual sales.

IntranetExtranetE-Commerce

• To link their offices and manufacturing sites

• To link the key customer and customized to their individual needs

• Real time tracking of orders and shipment.• Extranet provided interface between

manufacturer and retailers.• Online product development and order

tracking.

Strategy Changes

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Strategy Reason ResultB2B Portal: lifung.com

• Capitalize on small orders on SME’s

• To minimize threat from other competitors going online

• Aggregate small orders and offer SME’s an array of products with options of limited mass customization

• Product differentiation to SME’s• Attain economies of scale by

manufacturing aggregated orders.• Reduced inventory level for SME’s

due to absence of no minimal orders.

Electronic Stock Offer (eSO)

• To create an efficient system for reaching out into Li & Fung’s supplier base and posting surplus stocks on the Internet

• To manage the piled up or cancelled inventory

• Efficient and cost effective platform to sell to buyers interested in purchasing sales. (second sales)

Strategy Changes

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Revenues

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• The balance sheet clearly shows the financial strategy of Li & Fung. Acquisitions were made in 2007 which lead to increase in net profits marginally but lead to a drastic increase in intangible assets, clearly showing that the goodwill of the companies acquired by Li & Fung were included under this lead.

• The reserves and surplus also increased indicating future acquisition plans.

Revenues

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The Debt to Equity Ratio for 2006 was 0.096 and in 2007 it was 0.5 indicating that the company is safe.

Turnover

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Steady growth from 2004 onwards Acquired 2 main rivals in 2007

Profit

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Steady profit growth from 2004 onwards Loss in 2001 due to failure of Lifung.com

Thank you!