The Supply Chain Social Network
Is Li & Fung's business model in trouble?
The company has lost an astounding US$10 billion in value over the past 8 months, and their issues appear to stem from 2 major problems. One, their business has slowed because the majority of their clients are in the struggling European or US economy. And two, their sourcing base is largely in China, a country that continues to experience tremendous rising costs of business.
What are the biggest flaws in Li & Fung's business model?
What should Li & Fung be doing to add sustainability to their business?
What kind of value-added services are sourcing clients demanding but Li & Fung not offering?
Have all the acquisitions benefited or hurt Li & Fung's long-term outlook?
Will sourcing giants like Li & Fung eventually disappear in favour of smaller, more specialized firms?
To submit your comments for this feature story or to set up a brief phone interview, please contact Kevin Foehner at editor@supplychain.cn
If you email the editor, comments for this feature story can be given full credit or kept completely anonymous.
Tags: &, Fung, LI, apparel, business, fashion, loss, models, profit, trading, More…
Views: 486
Replies to This Discussion
-
Permalink Reply by James Cranford on -
Kevin.
In short yes Li&Fung is in trouble.
For years they have relied on the pervasive ambiguity of the Chinese production model. To offer services that 1. provide a level of information that companies feel they need, 2. To provide a level of plausible deniability to companies using thier service.
As companies become better equipped to perform sourcing activities in Asia the need for institutions like Li&Fung to navigate the murky waters of China sourcing has become less prevalent.
If we simply look at the consumer environment it should be fairly easy to see that the cost to benefit ratio for engaging companies like Li&Fung is not longer present.
I think we can consider this the normal cycle of supply chain, The margins are getting thinner and thinner causing companies to squeeze out the layers that reside between the consumer and the manufacturer.
At this point I would advise L&F to form many smaller companies within it’s organization. Take a snap shot and see which ones are performing over the next year or two and download the divisions that struggle.
There is no way around it, to survive L&F will need to downsize in order to compete with a margin thin economy.
-
Permalink Reply by ujendre.ramautarsing on -
Kevin,
As the margins become thinner L&F has to find new ways to add value in the supply chain. In the good times the business was growing and process improvement opportunities in the supply chain were not on top of the list, as profitability was growing with the volume.
Now it’s time to really map the supply chain with customers and suppliers, stock levels, lead times and planning and volume flexibility information. With a co-operative mindset improvement opportunities in the lead times and in the interface with customers and suppliers have to be explored. My experience is that with the right approach significant efficiency improvements are possible. And even compensating the cost increases due to “uncontrollable factors”.
In general this requires people with different skills and experience. I hope L&F is able to find the right solutions to get back in shape.
© 2012 Created by Chain Media.
 |
 |
 |
 |
 |
 |
