Purchasing and Supply
“To what extent can Li & Fung achieve steady growth and sustainable competitive advantage?”
I. Executive summary Strategies for sourcing have always been an integral focus for organisations with respect to their supply chain management. Keeping the end goals of competitive advantage and sustainable growth in mind, this report aims to analyse how a leading sourcing company such as Li & Fung (LF henceforth) can achieve and maintain these targets, while accounting for various challenges that they may face in the global sourcing market. Three key theoretical pillars, namely outsourcing, supply chain strategies and sustainability, have been used to demonstrate LF’s capacity to achieve the desired goals and to emphasize on those valueadded competencies that reveal their scope in increasing profit and satisfying customers.
In the span of 30 years, the way Supply Chain Management was studied has evolved.
Scholars, economists and businessmen have sought out frameworks and models that could contribute to the way that firms optimize their capabilities and reach full potential alongside new trends that arise in this fastpaced market. Value added operations have evolved drastically with time and now require organisations to be flexible and highly responsive to potential fluctuations in the global industry.
Based and founded in Hong Kong in 1906, LF is the biggest worldwide company to company business and has been successfully operating in the market locally and overseas as a trading company between retailers, manufacturers and suppliers.
During its inception, LF was built on the idea of globalization. Through linking the
Chinese markets with the Western markets, LF aimed to introduce a buyer to a seller and also provide translation services between them (Mcfarlan et al, 2012). Additionally, the increase in the importance of globalization as well as the degree of dependency among economies and the reduction in trade barriers (price often depends on the restrictions) have enabled this Asian giant to expand and amplify its prospects by utilizing “state of the art” technology, networks, workforce and information. They now have a well organized network of 15,000 suppliers (emphasizing the need for effective flexibility during supplier selection) with distribution centers in more than 40 countries, which provide soft and hard goods such as garments, toys, furniture and beauty products (58% of customer orders went to the U.S.) respectively (i.b.i.d.).
The objective of this report is to evaluate LF’s current business models and practices using both academic research and practical data. This research has focused on highlighting LF’s competitive advantage, especially in the Supply Chain Management area and Sustainability. Moreover, recommendations and reflections are made to point out where the company has room for improvement.
In order to reach these objectives, the literature review will explore how academics have established their research concerning Supply Chain Strategy, Outsourcing and
Sustainability practices. External findings on LF’s past and current economic, social and environmental situation will then allow for indepth examination and reflection on how LF will can achieve competitive advanvatage through continuous sustainable growth.
III. Literature Review
Supply chain management is the active and effective management of all the activities involved in the supply chain process in order to maximize customer value and achieve sustainable competitive advantage (Handfield, 2011). It revolves around the ideology that getting the right product or service to the right place at the right time will have a direct impact in…