Challenges in Global Textile and Apparel Sourcing: Focus on Li & Fung

Hong Kong-based Li & Fung is regarded as the market leader in sourcing consumer goods. Its customer base comprises the leading retailers in 100 markets across all continents. It has a 100-year tradition as a trading company, and has gone through different strategic phases over time. Today, it has established a highly successful business model which turns the challenges of a complex and fast changing environment into opportunities. One measure of the company’s success is the growth in its sales and profits. Between 1992 and 2005 its sales increased at a compound annual growth rate of 22% per annum while its net profits rose by an annual 23%. Li & Fung’s main strategic advantage is its ability to manage a large network of vendors and suppliers across traditional and newly upcoming sourcing markets in a way which creates significant efficiencies for the benefit of its customers. The company manages the flow of raw material and finished goods through a process which it calls “borderless manufacturing”. This concept enables Li & Fung to meet the requirements of its customers in terms of quality, cost price, product development and speed to market. Li & Fung sources about 46% of its apparel and hard goods from China. In apparel alone, however, Li & Fung’s sourcing base is more diversified. In fact South-East Asia and Bangladesh are as important as China for Li & Fung when sourcing apparel. Furthermore, rising costs are likely to make China even less important in the future.