Li & Fung

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Li & Fung Limited
Type Public company
Traded as SEHK0494
Industry Global sourcing
Founded 1906 (Guangzhou)
1937 (reincorporated in Hong Kong)
Headquarters Hong Kong
Key people William Fung, Executive Chairman, Bruce Rockowitz, President & CEO, Spencer Fung, Chief Operating Officer
Products Apparel, household goods, furnishings, toys, health and beauty products
Revenue IncreaseUS$20 billion
Website www.lifung.com

Li & Fung Limited (Chinese: 利豐有限公司) is a global sourcing firm, based in Hong Kong, that supplies high-volume, time-sensitive consumer goods from an extensive global network of suppliers and distributors. Garments make up around two-thirds of the Li & Fung business which also covers the sourcing of hard goods such as fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandise, toys, sporting goods and travel goods.

As a supply chain manager across many producers and countries, Li & Fung provides product design and development, raw material and factory sourcing, production planning and management, quality assurance and export documentation to shipping consolidation.

History[edit]

The company was co-founded in 1906 by Fung Pak-liu (d. 1943), a school teacher using capital saved from his job teaching English, and partner Li To-ming, local merchant whose family owned a porcelain shop.[1] Li eventually sold his share in 1946,[2] leaving the company in the hands of the Fung family.

Based in Guangzhou (Canton), it was then an export trading operation, dealing in porcelain, fireworks, jade handicrafts and silk, mainly to the United States.

In 1937 the firm incorporated in Hong Kong by Fung's son Fung Hon-chu to take advantage of the British colony's oceangoing ships. After World War II, China closed for international business and the company refocused as an exporter of Hong Kong manufactured goods.[2] It was now led by Fung Hon-chu, son of the founder and father of the present controlling brothers, William and Victor. Li & Fung became a big exporter of garments, toys, wigs and plastic flowers.

William and Victor Fung were educated in the US and followed business careers there, before returning to join the family business in the early 1970s, as Li & Fung's broker role was being squeezed by both manufacturers and importers. They remade the company to provide value-added services in manufacturing, sourcing throughout Asia, including going back into re-emergent China.

Later, sources from countries closer to target markets were sought out: Mexico, Honduras and Guatemala, for the US; Turkey, Egypt and Tunisia for Europe.

Li & Fung Ltd. went public on the Hong Kong Stock Exchange in 1992.[3] Then the firm nearly tripled its size with the HK$475 million acquisition of Inchcape Buying Services (formerly known as Dodwell & Co.) in 1995. It was part of Inchcape plc, a British trading company with a network of offices in India, Pakistan, Bangladesh, and Sri Lanka. The acquisition of Inchcape Buying Services, with its European customer base and sourcing points across the Indian subcontinent, balanced Li & Fung's American customer base and East Asian sourcing network.[4]

In his chapter entitled Li & Fung, Ltd.: An agent of global production (2001), Cheng used Li & Fung Ltd. as a case study in the international production fragmentation trade theory through which producers in different countries are allocated a specialized slice or segment of the value chain of the global production. Allocations are determined based on "technical feasibility" and the ability to keep the lowest final price possible for each product. In 1995 Li & Fung, following its acquisition of an established British trading company, Inchcape Buying Services, expanded its customer network in Europe and its producer network in South Asia, including Bangladesh, India, Pakistan, and Sri Lanka. [5]

Recent business activities[edit]

Li & Fung is headquartered in Hong Kong from where it co-ordinates the manufacture of goods through a network of 300 offices and distribution centers in 40+ countries.[6] The firm owns no looms, sewing machines, or textile factories; all work is contracted through an extensive network of third parties.[7] While cost considerations have resulted in the concentration of manufacturing activities in Asia, recent years have seen an expansion of Li & Fung 's quick-response capabilities in areas like the Mediterranean, Eastern Europe and Central America that are closer to customers in Europe and the US. Instead of owning production facilities, Li & Fung manages a large number of independent producers (15,000 as of 2012[6]). It is the leading firm in the sourcing field with a volume of $20 billion annually and has great bargaining power which it uses aggressively, often utilizing a "take it or leave it" posture when it makes offers. The firm is dependable: when things go wrong it has the resources, contacts, and know how to correct errors and unexpected glitches and complete contracts and deliver the goods.[7]

Li & Fung Limited (利豐有限公司) company logo

Li & Fung is a member of the Fung Group of companies, which also includes privately held retailing and publicly listed consumer-goods distribution businesses in Asia such as Toys "R" Us and Circle K franchises.[8] With an annual turnover of US$20 billion in 2011, Li & Fung (Trading) Limited employs about 28,000 people worldwide.[9]

Li & Fung is an investor and partner of Future Supply Chains of the Future Group in India.

Control of the company remains focused in the hands of the founder's grandsons, Victor and William Fung, often known simply as ‘the Fung brothers’. Together they own 32% of the publicly traded company, as well as stakes in the private parent company.[10]

Shiu Fung Fireworks, Ltd., producer of Black Cat brand fireworks, is located in Hong Kong and is a division of Li & Fung.[11]

As of July 2013, Fung Capital USA invested in Olapic as a means to increase returns on its brands' social media investments.[12]

External links[edit]

References[edit]

  1. ^ http://blog.citigroup.com/2012/08/citi-turns-200-client-relationship-lasts-over-a-century.shtml
  2. ^ a b http://www.scribd.com/doc/45030897/Case-Study-Li-Fung
  3. ^ Stitches in time, Forbes, 1999
  4. ^ [1] Li & Fung Limited Company-History on www.fundinguniverse.com
  5. ^ Cheng, Leonard K. (2001). Leonard K. Cheng, Henryk Kierzkowski, ed. Li & Fung, Ltd.: An agent of global production in Global Production and Trade in East Asia. Springer. pp. 317–323. ISBN 978-1-4613-5647-9. 
  6. ^ a b http://www.lifung.com/eng/company/fastfacts.php
  7. ^ a b Ian Urbina; Keith Bradsher (August 7, 2013). "Linking Factories to the Malls, Middleman Pushes Low Costs". The New York Times. Retrieved August 8, 2013. 
  8. ^ http://www.funggroup.com
  9. ^ http://www.lifung.com
  10. ^ Billionaire Brothers Tie Up With Walmart, Forbes, 29 Jan 2010
  11. ^ "Black Cat Fireworks - Shiu Fung Fireworks, Ltd.". Retrieved 13 Jul 2012. 
  12. ^ Strugatz, Rachel (30 July 2013). "Fung Capital Backs Olapic's Bet on Image-Driven Returns". WWD. Retrieved 8 August 2013.