Evolution & Innovation of Global Supply

Chains
2022-10-13

Gordon Lam
Adjunct Professor, HKUST Business School, Renmin University of China Business School, Zhejiang University School of Management &
CUHK (Shenzhen) School of Economics & Management
Vice President, Guangdong Society of Commercial Economy
Vice President, Asia E-commerce Research Institute, Guangdong Province
Deputy Secretary-General, Society of Guangdong Logistics & Supply Chain
Committee Member & Vice Chairman of Youth Section of China Commerce & Economy Society
Appointed Member of China State Council's Chinese Association of Hong Kong & Macau Studies
Committee Member, Chinese People's Political Consultative Conference 12th Guangdong Committee
Ex Part-time Member of the Central Policy Unit, The Hong Kong SAR Government

Grades
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 Supply Chain Management (SCM)
Consumers’ Product
demand design

Product
Consumers developmen
t

Online/ Vendor
Offline compliance
retailers

Material
sourcing
Wholesaler/
distributors
Supply chain orchestrator
Vendor
selection

Total
logistics Order
solutions management

Customs
clearance Production
management

Warehouse
management Fulfillment
Inventory
arrangement
management

Quality

Speed Cost

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 Network Orchestration

The Network: Universe of Suppliers

Order Fabric Cutting Sewing Packaging & Delivery

Dispersed Manufacturing / Borderless Manufacturing

Lining
Crystal

Design Assembly

Leather Zipper

yarn Shell

Performing ‘production slicing’ to identify the best location/ country to

undertake each stage of process, adding value along the way &
integrating the entire supply chain

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 Soft $3

Orchestrate and discover value along the supply chain

Product Sourcing
Distribution
Logistics /Wholesale Information Management
Design

$1 The cost that is spread throughout the distribution

channels – the “Soft $3”
$4

“Smiling Curve”

Value Added
Product design

Development
Product

Assembly
Manufacturing
Innovation

Parts

Logistics

Marketing

Brands

Value
Chain

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 Key Takeaways

• Highly adaptive and agile supply chain (comparable to fast fashion)

• High level of automation and robotics in factory (versus traditional

perception of “cottage craftsmanship” for heritage brands)

• Very detail attentive to customer service, big and small customers alike

• Copycats and fake very common, no production in China

• “Secretary Syndrome”

• Brand banality is a challenge for all brands at certain time of their brand
life cycles

• Ultra-luxury and Super-ultra-luxury as a counter strategy

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Supply Chain
Innovation & Digitization

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 Cosmetics Total Supply Chain Solution

服务包括设计，工程，制定，包装，制造，质量控制，
物流和销售点展示台

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Furniture Supply Chain Management

品牌设计 造价工程
设计师
打样

生产
物流
检测
库存管理

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 Supply Chain Innovation: Wearables

LF

Data Warehouse
Data Collection Data Management Analytics

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Supply Chain Innovation : Functional Fabrics & Sensors

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 Supply Chain Innovation : Functional Fabrics & Sensors

‣ 心率
‣ 卡路里
‣ 呼吸
‣ 步數
‣ 體溫
‣ 紫外线
‣ 定位

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 Digital Supply Chains

Product Factory Raw Value-

Design & Complianc Material Manufacturi DC & added
Wholesal Retail Consume
Developme e Sourcing ng Control Shipping Services
e rs
nt

Potential Digitized
Digitization

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Digitized Sampling & 3D Virtual Prototypes

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 Fashion Supply Chains Digitization

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Fashion Supply Chains Digitization

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 Fashion Supply Chains Digitization

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Fashion Supply Chains Digitization

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 Fashion Supply Chains Digitization

老式
新式

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Fashion Supply Chains Digitization

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 Fashion Supply Chains Digitization

利丰与客户在数字产品开发，协作设计和产品创新等方面展开全方位合作：
- 技术支持和突破地理限制
- 汇集各方面专家，例如：数字化设计，数字化试装，图案制作，3D建模，3D动
画，数字可视化和渲染
- 标准化流程，有能力扩大规模
3D 虚 拟 设 计 技 能 组 累 积

LF 3D Virtual Design Skillsets

Customer Adoption of 3D

Sep 2017 Dec 2019

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Fashion Supply Chain Digitization: From Fabric to Store

虚拟化数据库和应用软件 RFID

虚拟化数据库 虚拟化数据库 虚拟化数据库 虚拟化数据库 虚拟化数据库 虚拟化数据库 虚拟化数据库 虚拟化数据库

RFID RFID
RFID RFID RFID RFID RFID RFID
系统 系统 系统 系统 系统 系统 系统
系统

多种遗留
多种遗留 多种遗留 多种遗留 多种遗留 多种遗留 多种遗留 多种遗留
系统
系统 系统 系统 系统 系统 系统 系统

嵌入

棉花 纱线 布料 生产/品质管理 供应链 零售商 消费者 再循环

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 Digitized Fashion Supply Chains: What’s been done?

Big Data
Analysis
实时优化监控

VR/AR
减少产品研发
成本和时间

3D Printing
加强产品研发
效益

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Digitized Fashion Supply Chains: What could be done?

Automation New Material Innovation

跨境电商时代企业战略思考与对策 -13-

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 3D Fitting

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LF Logistics

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 LF Logistics

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LF Logistics in China

Ø190,000m2 DC Footprint Haerbin

Ø24 distribution centers across China
Ø160 million Units Dispatched p.a Changchun
Ø1,000 staff, and growing rapidly
Shenyang
Beijing

Qingdao

Xi’an
Suzhou
Chengdu Zhangjiagang
Chongqing Shanghai
Wuhuan

Central DC Guangzhou
Regional DC Zhongshan
Shenzhen
Bonded DC

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 Shanghai Baoshan Logistics Park

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E-Commerce Logistics

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 E-Commerce Logistics

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Jiangsu Taichang Nike-IDS

Warehouse

Building Features:
• 2 x 1 level bulk storage areas
• 2 x 3 level order processing buildings
• Site size: 460 Mu
• Building foot-print: 120,000 m2
• Operating area: 190,000 m2
• Cafeteria serving: 200 people
• Fitness Room, Basketball and Employee Store

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 Regional Hubbing & SCM For Timberland

Europe / USA

Korea

Japan

China

Asia
Pacific Hub Taiwan
- HK Hong Kong
India

Thailand

MalaysiaOrders

Singapore

Indonesia
Australia / NZ

§ Reduced Inventory by over 30% and warehousing costs by over 20%

§ Shortened order leadtime and improved responsiveness & fulfillment
§ More efficient supply chain, leading to improved profitability
§ Visibility of inventory and orders tracking leading to better control and decision
making

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China Offshore DC For Pacific Brands

n Moving distribution centre

operations to China reduce
inventory holding, and
warehousing & transportation
costs
n Pick and pack operations in
China, cross-dock in Australia for
direct delivery to retailers
n Estimated pilot program cost
savings from warehousing,
transportation and inventory
reduction estimated US$1.5M
Offshore DC p.a.
Domestic n Increased sales due to more
cross-dock efficient and responsive supply
depot chain

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 Postponement Strategy For Diageo

Improve Diageo’s Asia-Pacific

supply chain through a
“Postponement” strategy at IDS
bonded ASRS facility

• Final market specific labeling & packaging on

bespoke, high-speed, semi-automated production
lines
• Throughput of 3.5 million cases in Year 1 increasing
to 6 million in Year 2 initially servicing 11 countries in
Asia
• Lead time to market cut from 10 weeks to 2 weeks
• Regional markets can now also arrange for special
promotions/packing for other than main line brands
• Increase market sales with reduction in overall stock
position

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 Brand Licensing /
Distribution

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Brand Licensing / Distribution

Licensed Brands: Brands like Quiksilver, UnderArmour, Disney, and Calvin

Klein, which we license the intellectual property from the brand owners or
licensors for use in select product categories and geographies.

Controlled Brands: Brands such as Frye and Juicy Couture, which we either
own or control the intellectual property under a long-term license, giving us
control over development and marketing.

Brand Management: Brands like Mercedes-Benz, Jeep, and Coca-Cola, who

we help expand into new product categories and geographies by identifying
suitable product lines, third-party production and potential licensee partners, as
well as overseeing production, marketing and sales.

Retail Partnerships: We pride ourselves on world-class relationships with the

top retailers in the Americas, Europe and Asia, working hand-in-hand with them
to make our brands even bigger and better.

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 Cases

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 Li & Fung’s Organization &
Management

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Li & Fung’s Organization & Management

(1) Entrapreneurship (i.e. Little John Wayne)

(2) Follow 30/70 Rule to manage loosely coupled network
(3) Asset-light Model
(4) Business drives IT
(5) 3-Year Plans
(6) Merger & Acquisitions
(7) Learning & Talent Development
(8) Corporate Social Responsibility / Sustainability
(9) Corporate Governance

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 (1) “Entrapreneurship” (i.e. Little John Wayne)

(1) Building the company around the customer

n Customers evoking supply chains

– Build network around the potential needs of future customers
– Evoke a specific supply chain from this network based on
the needs of specific customers
n Cosourcing with customers
n Understanding and anticipating customers
– Increasing customization
– Engaging in Co-Development
n The need for thick connections – a combination of human
relationships, business processes, and technology

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(1) “Entrapreneurship” (i.e. Little John Wayne)

(2) Think like a big company, act like a small one

Nimble Organization Design

a. Customer-Centric Divisions
§ Designed around customers
§ Creates a customized value chain for each of the customer’s
orders
§ Encourages Entrepreneurship – Little John Wayne
§ Optimizes the supply chain by better fulfilling customers’
needs, maximizing performance & maintaining high quality
level

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 (1) “Entrapreneurship” (i.e. Little John Wayne)

b. Operation Support Group (OSG)

§ Centralizes and maintains tight control over the financial
control & operating procedures
§ Set up an OSG to serve as the back-office hub
administering 3 functions: IT, finance & human resources
§ Marries the strengths of being both small and big at the
same time: being flexible and responsive, and having rich &
powerful resources

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(2) Follow 30/70 Rule to Manage Loosely Coupled Network

Manage a loosely coupled network

n Follow the 30/70 rule to create loose-tight organizations

n Becomes the orchestrator of the entire production process
n Share responsibilities with suppliers

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 (3) Asset-light Model

n One of the best embodiments:

– Virtual Manufacturing
n Maintains minimal financial leverage. Almost no debt on the
balance sheet
n Minimum fixed assets: Sales and lease back office buildings and
warehouses
n Li & Fung continues to deliver a return on equity of more than 20%
n Employee productivity: close to US$1 million in sales per
employee

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(4) Business Drives IT

§ Li & Fung has established sophisticated & Internet-based

systems to link up all its business partners, including
customers, producers, distributors, logistics service
providers, etc.
§ Lead time is reduced from 3 months to 5 weeks
§ Process re-engineering

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 (5) 3-Year Plans

n Trade off between “salability” and “responsiveness”

n 3 years – stable and can be measured
n After 3 years – zero-based
n The power of stretch
n A new organization every three years
– Zero-based
– Fixed 3-Year plans

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(6) Merger & Acquisitions

n Creating a plug-and-play enterprise

n This requires the appropriate technology and the modular
structure
n This approach has led to a very high retention rates of
managers after acquisition and best practices of acquisitions are
absorbed to improve the overall business
n Acquire new talents and new capabilities – product range,
technology, customers
n “100-Days Acquisition”
n 40+ acquisitions since early 2011 with 100% successful rate of
integration

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 (7) Learning & Talent Development

§ Building Skills For Growth – Design Associates Program

§ Merchandising Trainee Program
§ Management Trainee Program
§ Program for Management Development (Management
Associates)
§ MIT & HKU Leadership Program
§ Stanford Leadership Program

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(8) CSR & Sustainability

n Interest of the stakeholders

n Vendor compliance
n Supplier Code of Conduct
n Green Supply Chains
n Sustainability

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 (9) Corporate Governance

n Legal and Listing compliance

n Emphasize information transparency
n Independent Financial Reporting & Auditing
n Internal Audit and Independent Compliance
n Investor Relations

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