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Li & Fung’s
Li & Fung broke the value chain into parts, which it called 'Dispersed Manufacturing.' Under this, the company performed all high end value-added activities such as design and quality control in Hong Kong and outsourced low end activities like manufacturing to the best possible locations across the world. For every order, the company aimed at customizing the supply chain to meet the client's specific requirements.
When Li & Fung got an order from a customer, it sifted through its global supplier network to find the right manufacturer for the specific product and the most attractive combination of cost and quality. The company broke up its supply chain to disperse different production processes to manufacturers in various countries, based on factors such as labour costs, quality, trade barriers, transportation costs and so on. The company coordinated all processes in the value chain, managing the logistics and arranging the shipment of the finished order to the client...
Conclusion
To ensure shorter product delivery cycles, Li & Fung managed the whole supply chain of its customers. To shrink the delivery cycle, the company reached upstream to organize production and ensured small production runs, which resulted in improved response time for retailers, enabling them to alter production in tandem with market trends. For instance, Li & Fung got to know that Levis would order 1 mn pieces of garments, but did not have specific details of style or colours. This would be disclosed only four weeks before delivery was due. Under these circumstances, Li & Fung, based on trust and its strong relationship with suppliers, reserved un-dyed yarn and locked up capacity at ...