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Li & Fung

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LI & FUNG: GROWTH FOR A SUPPLY CHAIN SPECIALIST

Question 1: In light of the American recession, what can Li & Fung do to continue expanding its business and reach its targets of US$ 20 billion for the period 2008 – 2010?

In order for Li & Fung to safeguard the growth of its business and achieve its target turnover of US$20 billion between 2008 and 2010, it needs to refocus its strategic vision in three areas:

1. Target high‐end customers to increase margins
2. Implement processes to better handle variability
3. Apply cost saving strategies to increase turnover and profit

In targeting high‐end customers, Li & Fung will be able to increase their margins and therefore lower their volume. By capitalizing on their already extensive network of suppliers, Li & Fung already has an advantage of attracting this new consumer segment.

By implementing processes to better handle variability, Li & Fung will have a better handle on forecasting and economic conditions. The use of an ERP system, although extremely expensive, will improve Li & Fung’s ability to look at all the different aspects of the company and how they are affecting each other. By considering variability in their business strategy, Li & Fung will also be able protect itself from liability concerns should their customers not be able to pay their manufacturers. More stringent credit analysis should be performed before issuing letters of credit.

Lastly, by implementing cost saving strategies Li & Fung will be able to increase profit, which declined 21% from 2007 to 2008. Four areas where Li & Fung can look to cut costs are:

1. Number of Warehouses
2. Wage Expenses
3. Number of Business Areas
4. Transportation Efficiencies

Question 2: Explore the growth opportunities available to Li & Fung.

The goal of Li & Fung is to continue growing its bottom line by...

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