By Karen E. Thuermer, AJOTLi & Fung is a force to contend with in China and worldwide.
“They are doubling their business every three years, swallowing up bigger companies and becoming a force in global sourcing,” said Tommy Lui, Managing Director – Greater China International Stream, IDS, to this AJOT reporter during a recent visit to Hong Kong.
Along with Li & Fung, IDS is the single brand of the Li & Fung Distribution Group.
Once a trader in porcelain and silk a century ago, today Li & Fung is largely involved in apparel (its main focus), as well as footwear, toys, pharmaceuticals, and healthcare products.
“We buy and sell, do contract manufacturing, and also financial services,” Lui described. “We also do a lot of logistics and are now thinking of how we can go forward in the next few years.”
While many may not be familiar with Li & Fung, the Hong Kong group of companies has a client list that reads like a who’s who in retail. They include Liz Claiborne, Talbots, Toys ‘R’ Us; Levi, Timberland, Sanrio (the Japanese merchandiser of Hello Kitty), Mervyns, KB Toys, Cannon sheets, Tommy Hilfiger; Restoration Hardware, L’Oreal cosmetics, Nike, Wear Me Apparel (maker of clothing for companies such as Calvin Klein), Hurley, and Unilever.
Li & Fung manages their design, manufacturing and delivery of all kinds of products. The group develops specifications for garments, including fabric weight, dye shade, and the finish and style of trim. These are then outsourced to some 45 countries to some 15,000 suppliers, with whom Li & Fung negotiates prices and inspects quality. Although the bulk of its business is in Asia, Li & Fung continues to expand its sourcing network into new markets such as Latin America and Africa, where executives believe could replace China as the world’s low-cost maker of consumer goods.
Li & Fung also works with retailers such as Talbots, the Gap, Marks & Spencer, Wal-Mart and Target. In January, it entered into a series of agreements with Wal-Mart to establish a “mutually beneficial” sourcing arrangement. In the first year, Li & Fung expects to act as a buying agent for US$2 billion of goods.
“Competition is no longer company against company,” Li & Fung Chairman Victor Fung commented. “It’s network against network.”
With so much activity across so many product lines, Li & Fung has been able to manage its increasingly complicated supply chain through its distribution group, IDS. IDS, which realized US$1.68 billion in revenue in 2008, carefully manages the inventories for Li & Fung and other customers. IDS, in particular, has transformed Li & Fung from being a traditional Asian distributor to a global pioneer of value-chain logistics offering a menu of integrated distribution services.
Li & Fung has been involved in logistics since it acquired Inchape in 1998 to complement its export trading business. It launched IDS in 2003 as the single brand name for the Group.
“When Li & Fung bought Inchape, logistics was just distribution and 92 percent of our activities were for Li & Fung,” commented Lui.
Today 90 percent of IDS’s business is for other customers, thereby indicating how IDS is becoming a prominent logistics company in Asia.
Over the past decade, IDS has transformed into four broad categories: logistics, distribution, manufacturing, and international services.
“Clients can choose which category is applicable for their needs,” said Emmanuel D. Bautista, area managing director – Hong Kong & Philippines, IDS.
Using a three-year strategic plan, the company has aggressively phased its development by unbundling common distribution methods into a “menu of services” that involved manufacturing, marketing, and logistics. IDS integrates that menu into end-to-end solutions.
In the process, IDS has made major investments in logistics and information technology (IT), and