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BY Group:4


than a need to expand, what other reasons would Wal-Mart have for opening stores globally? Why would the company want a strong centralized control of its stores? Why would it want strong local control of stores?

Reasons for opening stores globally To diversify its market - reduces risk against poor market conditions To decrease competitions penetrate other markets and gain market share To reach out to more customers To increase revenue To develop optimal and efficient supply chain across global To develop unique logistics network To take advantage of low cost countries To utilize effective labor sources from around the world

Reason for a strong centralized control of its stores To allow Wal-Mart to obtain demand forecast to its warehouse and to its suppliers giving ability to adjust production and inventory to meet the demand

Reasons for strong local control of stores To cater with fierce local competition To deliver goods directly to stores on time To reduce price haggling with suppliers


were the major problems Wall- Mart faced during the initial years of operations in South America ?What were the major drivers of these problems?

1) Brutual competition and markets that dont support Wal-Marts ability to achieve economies of scale. 2) Suppliers umbrage at Wal Marts aggressive pricing policies 3)The biggest issue Wal-Mart is shipping product on time and getting on the shelf 4)Wal-Marts troubles in South America stem partly from its own mistakes , mainly because analysts failed to do its homework before entering South America (i)Some goods are useless in San Paulo Ex Live trout, American footballs, Cordless tools (ii)Wal-Mart brought in stock-handling equipment that didnt work with standardized local pallets. (iii)Installed a computerized bookkeeping system that failed to take into account Brazils wildly complicated tax system. iv) slow to adapt to Brazil fast changing culture.


dispersed production forced us to get smart about dissecting the value chain". Explain.

Dissecting value chain Borderless manufacturing


up the value chain- dispersed manufacturing

high cost hubs- sophisticated planning look for new and better sources





intensive work to China


and look for best solution at each step


which country can do best job but optimizing each step, globally


large manufacturing companies managing their own supply chain, how does it help to lower markdown for the retailers?


can involved in making a decision which product we should buy or which is not. Retailers were participating in product designing process they are also managing supplier through Li & Fung and are even reaching down to their supplier they were able to manage their inventory in a better manner and lower markdown in the store.

Explain the role of Li & Lung in shortening the buying cycle and how does it help them to lower the cost in the supply chain?

They outsource all the finished good or component which required to produce a complete garment and take the advantage of satisfying its customer by shortening the delivery time. Assembling of product at a single place Due to short buying cycle the problem of obsolete inventory decreases. Saving in inventory markdown Shortening buying cycle consists of flexibility, response time, small production runs, small minimum order quantities and move along with the trend

Buyer informs Li & Fung 5 weeks before the requirement of yarn without complete specifications (colour & design) Good relation and trust of Li & Fung with its suppliers help in reserving the undyed yarn for the buyer Lock up capacity at mills for weaving and dying of yarn by promising order of specified size Factory receives fabric and have 3 weeks for producing the garments Reduction in cost by introducing the concept of trackling the soft of $ 3 in the cost structure


is the organization of Li Fung different from others in the industry? How does this help to achieve its strategic objectives?


2) 3) 4)

Li Fung organizes around the customers, as their basic operating unit is division , while others are only customer focused as they have country units as their profit .Their country units are competing against one for the business. Compliance and ethical sourcing are more hot topic here. They always abide by local rules and regulations, in whichever country they operate. Emphasized the relevance of dispersed manufacturing in order to meet the needs of its customers

Achieving customer demand and specifications Develop a close, risk- and profit-sharing relationship with business partners.. Spread out geographically in order to maximize supply chain profit through the concept of dispersed manufacturing. The company has better bargaining power Meeting customer lead times in the competing environment Ensure long term sustenance through ethical sourcing , compliance and abiding by local rules and regulations.

What were the basic changes that took place in Li & Fung as it grew over the years both in size and geographic scope? What effort did the company take to hold the organization together?


from Hong Kong based Chinese company to regional multinational company From 99.5% Chinese and 80% Hong Kong Chinese into a regional multinational Diverse workforce and now have workforce from at least 30 countries Positioned as Hong Kong-based multinational trading company


company managed on a day to day basis by product group managers. Formation of policy committee which consists of about 30 people. Meeting is done every five to six weeks. People fly in and around the region to discuss and agree on policies. The committee of 30 not only shapes the policies but also translates them into operating procedures that they think will be effective in field.

With advent of IT, doing business became both easier and difficult for the company. How did the company envisage reconciling with the new systems and also retaining the traditions they had built over the years?


an information node with flipping between

that with phone calls, faxes and on site

350 customers and 7500 suppliers



there will be sophisticate information

system with very open architecture to

accommodate different protocols from suppliers & from customers

Creating a database to track systematically all the

supplier relationships.

Everyone in the company can use to review the performance history of all the suppliers

Continue to read faxes from customers to keep in

personal touch with the customers & operations on

daily basis

Think like a big company and act like a small one