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Li & Fung Streamlines Acquisitions and Supply Base with IT
By Padma Nagappan
Li & Fung Limited ("Li & Fung"), a part of the Hong Kong-based Li & Fung Group, is a global trading company that supplies high-volume consumer goods including apparel (the bulk of its business), fashion accessories, home products, handicrafts, promotional merchandise, gift items, toys, sporting goods and travel goods.
Earlier this year, Li & Fung acquired the sourcing operations of Liz Claiborne, with the aim of strengthening its sourcing platform for brands and widening its customer base. It will act as the primary global apparel and accessories sourcing agent for all Liz Claiborne brands, including Lucky Brand, Juicy Couture and Kate Spade.
Li & Fung's operations span more than 40 economies and employ more than 14,000 people. Revenues for 2008 were US$14.2 billion. When it acquires companies, Li & Fung's strategy is to integrate incoming staff and streamline operations seamlessly within 100 days.
Given that Li & Fung does not own any of the factories through which it sources, it functions as a supply chain manager, distributing orders for its retail clients and for its own retail stores across the thousands of vendors it contracts with around the globe. IT solutions play a big role in managing the flow of information through its supply chain and its many offices.
The Three-Year Plan
Li & Fung works to a Three-Year Plan that addresses strategies across the board and in recent years has set and met the goal of doubling its size with each plan. It is currently in the middle of its 2008-2010 plan, for which it set a target of increasing in size to US$20 billion, from the 2007 level of US$11.9 billion.
In the role of CTO of Li & Fung Group, Manuel (Manny) Fernandez assists the public companies within the group in setting IT strategies that align with the business strategy. He says the company is very committed to the Three-Year Plan.
"For the IT support plan, we look at the numbers, where the new offices are opening, what IT infrastructure they need, and whether there is a new business model. For the current plan, we decided to focus on our vendor base and established that we needed a new vendor portal," Fernandez explains.
IT goals within the current plan included creating transparency and collaboration, focusing on upgrades to the core platform and extending the supply chain platforms.
The Three-Year Plan
Before the current plan, Li & Fung had utilized many different, smaller portal platforms, because it had many customers who used different solutions. Now it deploys ecVision's platform across the spectrum, as a single solution that integrates vendor information.
Iselin, NJ-based ecVision provides a platform for retailers and private-label companies that integrates product lifecycle management (PLM) and supply chain execution (SCE) systems, combining key data and functionality into one solution. Among ecVision's clients are JCPenney, New Balance, Phillips-Van Heusen, Abercrombie & Fitch and Timberland.
Li & Fung has deployed this platform to support its internal sourcing teams and its vendors, in order to facilitate collaboration in managing its global supply chain and shipping tasks. Initially, it piloted a different solution, but switched to ecVision because both the business and the vendor base were growing quickly, so it needed a system that would not just adapt, but do so quickly.
"We chose ecVision because its platform is quite open. We tend not to go with the biggest player, because we can get things done faster if we can influence priorities. Also, a lot of our customers were already using it. It is the new front end of our system," Fernandez says.
He explained that the company took the core technology from ecVision and built new modules on top, including system integrations and vendor compliance modules.
Typical of the speed with which assimilation occurs within Li & Fung: ecVision began building the solution in April 2008 and it was launched in June of the same year. The company has gradually extended the rollout, adding suppliers each week, in an incremental fashion. By the end of 2009, it expects to support more than 11,000 suppliers on the portal.
(Fung Capital USA, a private-equity partnership of Victor and William Fung, acquired a stake in ecVision in June of this year.)
Software solutions deployed within the overall system
Li & Fung utilizes one core system across the board for its internal operations, a proprietary technology called XTS that was developed in-house 15 years ago.
It uses SAP software for the wholesale division in the United States and plans to extend it to the European wholesale division as well. For financials, it utilizes Oracle software solutions.
To integrate information with its customers, it uses Sterling GenTran GIS as a communication bridge for all the systems. GIS is an EDI solution that helps the company with structured communication such as orders, amendments and invoicing.
For unstructured communications, Microsoft Sharepoint addresses any ad hoc needs, such as storage and sharing of data with customers. Fernandez explains that customers often have their own PLM solutions but that the company rarely needs to work on its customers' systems, except during the collaboration stage.
Creating visibility and improving efficiency via mobile technology
Li & Fung employs a large number of quality control/assurance inspectors who conduct factory visits and inspections on a routine basis.
Many of its vendors are located in far-flung areas, so in order to keep on top of progress with individual orders, it has deployed mobile PDA technology and a web-based platform to enable inspectors to receive customized questions for each factory and to input their audit results in real time.
"When inspectors arrive at factories, they do an audit for vendor compliance and then they ask specific questions, which differ for each customer. We manage this using templates that guide them. The information they capture is fed into our central database via the PDA or the web," says Fernandez.
As a result of deploying mobile devices and the web platform, Li & Fung is able to track whether a factory passes inspection the first time or not, which helps improve the quality of information it receives at its central offices. QC inspectors are also able to conduct a greater number of inspections in a day, improving productivity.
With the information being fed into the online database, the company conducts more audits in less time and is able to qualify factories much faster as well.
Aside from quality control, Fernandez cited examples of how visibility has been improved for the production process as well. Li & Fung is able to track whether a vendor has begun cutting or stitching and then build customer "events" into a template for event tracking by the inspectors.
Production tracking enables the company to find out when an order was accepted by the vendor, when it was shipped, if it was shipped too quickly, and so forth.
Fernandez says the company kept the tracking system and vendor portal very simple and multi-lingual, requiring little training on the part of the vendors.
"We train our vendors when they come on board, through Webex and workshops, and we take their feedback into consideration and adapt the systems accordingly," he says.
The ROI: Reduction in costs, time and miscommunication
The main challenge on the vendor side has come from the sheer volume of Li & Fung's suppliers. On the customer side, the challenge has been in dealing with specific systems. But with the investment in new technology and software solutions, Li & Fung has achieved its milestones a lot faster, while keeping costs down.
Aside from the supplier portal and mobile technology, the company also has set up the infrastructure for web conferencing between all of its offices. The use of video and web conferencing has increased dramatically, reducing the costs of travel and telecommunications via phone.
IT also has played a big role in the pre-production process, where the amount of physical sampling has decreased and the company has managed to reduce order miscommunications.
Recently, the company fast tracked some of its IT projects, particularly those relative to infrastructure that will offer improved collaboration, says Fernandez, such as VOIP phones, Webex, Sharepoint for internal and customer collaboration, videoconferencing and EDI. "These cut costs and increased productivity," he says.
Summing up how Li & Fung goes about meeting its goals and dealing with issues, Fernandez says that, while there are always challenges, breaking them up into small goals makes it simpler to implement the larger plan.
Padma Nagappan is a San Diego-based free-lance business writer who frequently writes about the apparel industry, sustainability, renewable energy and CSR.
systems at a glance
Data sharing and storage: Microsoft
ERP (internal operations): proprietary
ERP (U.S. wholesale division): SAP
Financial Management: Oracle
Vendor Portal: ecVision
Current rating: 4.5 (13 ratings)
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