Abstract

The case discusses global supply chain giant Li & Fung Limited’s (Li & Fung) evolution from a regional sourcing agent to a global supply chain manager supplying apparel, accessories, and other products to global retailers. The company became a ‘one-stop shop’ for Western retailers by delivering a ‘global value-added package’, including product design and development, raw material and factory sourcing, production planning and management, quality assurance, and shipping consolidation. While the company tasted success as a supply chain manager, its inability to grasp e-commerce and several digital trends proved to be catastrophic for the company and led to a decline in its revenues. The rapid expansion of fast-fashion brands such as Spanish apparel retailer Zara SA (Zara) and Swedish multinational clothing retail company Hennes & Mauritz AB (H&M), also shook up Li & Fung’s traditional sourcing business as retailers began directly communicating with factories to reduce their costs. To add to its troubles, the US announced trade restrictions on Chinese imports in mid-2018. Though the trade war had a huge impact on Li & Fung, it maintained that it was prepared to weather the storm. The company said that its global network of production in 50 countries, decades-long relationships with factories outside China, and its ability to quickly move to production countries would enable a smooth transition out of China. Despite Li & Fung’s optimism, analysts wondered how the company would tackle the challenge of the US-China trade war and continue with its supply chain management dominance in global markets.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the evolution of Li & Fung’s business.
• Study the supply chain management process at Li & Fung.
• Examine the challenges faced by Li & Fung in general and with regard to the US-China trade war in particular.
• Explore strategies that Li & Fung can use to reduce its dependence on China and continue with its dominance as a successful supply chain management company.

Keywords

Supply chain; Integrated supply chain management; regional sourcing; global supply chain; value chain; production planning; ‘dispersed manufacturing’; quality assurance; Logistics; e-commerce; US-China trade war; Supply Chain Management; International Management; International Business