First Day in Hong Kong: Friday, March 26th

Friday: March 26th
Written by: Sarah Ackerman, Angela Armeli, Whitney Bauer, and Joe Antolik

1. LF Trading and Kohl's Sourcing
    Today was our first full day in Hong Kong.  Marc Compagnon, Rick Darling, and Deborah Vinson all spoke with us and gave us a tour of the corporate headquarters.  We began the day with an amazing brunch, getting to know Deborah and Rick some more. 
    Marc Compagnon, executive director of the Li & Fung Trading Group, gave us a presentation with a lot of interactive dialogue.  The Li & Fung company is over 100 years old.  Today, the Fung brothers who are the 3rd generation of Fung owners own it.  LF employs 14,000 people, has 15,000 suppliers, and has 2,000 customers.  We were all shocked by how many of its customers we all know!  Among the many are:

Kohl’s
Bed Bath and Beyond
Disney
J. Crew
Heineken
Kraft
Zara
Liz Claiborne
Givenchy
Lord and Taylor

    LF strives to be dominant in the supply chain industry.  Marc showed us a pie chart that broke down into hard goods and soft goods.  70% of Li & Fung’s business is within the soft goods market, and 30% is within the hard goods market.  The top 4 production and sourcing areas are: China, Vietnam, Indonesia, and Bangladesh.  It was fascinating to hear they can virtually work on a 24-hour clock.  Companies in the West can send information to these regions and while it is night for one, it is day for the other—no time is lost!
    Specific to Li & Fung’s supply chain techniques, Marc stressed they focus on five: orchestration, borderless manufacturing, parallel processing, store ready, and cross docking.  All of these help to ensure large orders with a short lead-time.  Since the company is so large, each component is essential for the success of the company and its clients. 
    LF’s largest client, today, is Kohl’s.  While many of us know a lot about Kohl’s, it was interesting to hear how it partners with LF.  The Li & Fung/Kohl’s relationship began around 1996.  Since then, LF has grown with the company and now overseas a great deal of Kohls’ private and exclusive brands, such as Simply Vera, Food Network, and Dana Buchman.  LF USA in New York City deals with a great deal of the product development for such brands.  Production and sourcing are dealt in Hong Kong and Shenzhen with the help of LF.  Since Kohl’s is so large, Marc informed us about KAG, Kohl’s Apparel Group.  Li & Fung has a designated team that works only on Kohl’s efforts.  Marc oversees these efforts that take place in 22 countries!


The Li & Fung Corporate Headquarters

 
Eating Brunch at the Office with Deborah Vinson!

Marc Compagnon with Sourcing summary chart

Deborah Vinson presenting to students

 Marc Compagnon, Jerry O'Brien, Rick Darling

2. LF Research Strategy
       Li and Fung continually seeks new avenues through which to grow their business.  In an effort to involve the company in every facet of the supply chain from concept to consumer, Li and Fung launched their onshore business model with LF USA in 2004.  Through acquisition, LF USA bolstered their portfolio with highly talented New York designers as well as licensing rights to entertainment-themed brands.  This positioned LF USA to target and satisfy the needs of the top ten US retailers by approaching them as a wholesaler.  Previously, Li and Fung (as a trading company) struggled to do business with these lucrative customers since they either sourced in-house or had a relationship with another third-party sourcing partner.  Now, Li and Fung is replicating onshore model success with LF Europe and eight-month old LF China.

      In addition to varying business models, Li and Fung diversifies among the product categories it develops.  Their newest venture, LF Beauty, aims to double the company’s revenue from the Health, Beauty and Cosmetics (HBC) area.  LF Beauty offers customers a full-service solution, from product development/sourcing to point of sale promotions, in order to outsource an HBC line.  This business component gains importance as HBC takes off in Asia.

Students gathered in the Li & Fung Showrooms






3. Business Observations

    Our first official day in Hong Kong was jam packed with interesting and informative presentations about Li & Fung Limited.  We observed quite a few things in regards to the Li & Fung corporate culture, as well as insights into the business world of Hong Kong.  Most striking of all was definitely the amount of people we met, from all over the world, who spoke impeccable English.  After anticipating and expecting the language barrier to be an obstacle in our travels, we were all surprised with how easy it was to discuss almost anything with the people we met in Hong Kong.  I was so impressed at how fluidly and easily these people flowed from English to Cantonese (or Mandarin) that I have begun to attempt to study and learn Chinese so that one day I will be able to do the same.  Although many people in Hong Kong are proficient in the English language, after speaking with Deborah Vincent she emphasized how crucial it was when doing business in Asia to have at least some knowledge of the Chinese language, as it can be a huge hindrance without it.

                Another observation that stood out to us on our first day was the relaxed, and yet impeccably professional attire of the Li & Fung associates we met.  Many were dressed smartly in jeans and blazers, and looked polished, but approachable.  This was a reflection on the personalities we found at Li & Fung.  Everyone we met was enthusiastic about our visit and extremely welcoming, answering any and all of our questions and providing us with extensive knowledge about all their company does and stands for.

                Along these lines, one of the major differences we saw, just when briefly walking the streets that first day, was that the people walking around Hong Kong were dressed very professionally, in high heels, nice suits, etc.  There were hardly any tennis shoes in sight!  This more formal culture of dressing appears to be common in Asia and seems to contrast significantly with what we see just when walking around our own campus.

Easter decorations in one of the many mall entrances

4. Cultural Observations
       Whenever a person travels to a foreign country, they are warned about culture shock, and our first day in China provided a definite shock. After having an evening to recover from our 15-hour flight from Chicago, our first day was filled with opportunities to really experience the local culture.

The first thing on many people's agendas for the day was obtaining money. As a Special Administrative Region of China, Hong Kong has its own monetary system, and we found ourselves needing to trade in our USD's (U.S. Dollars) for HKD's (Hong Kong Dollars). Though the word "dollar" was familiar, the exchange rate took a bit of getting used to and our fast math skills were put to the test. The language barrier was not too great to overcome, luckily for us. Because Hong Kong was a former British colony, the English language and many more "Western" customs are present in the region. When visiting the train station near our hotel, we saw this juxtaposition of culture as a cafe displaying full roasted ducks sat only steps away from a Starbucks. Even McDonald's was serving variations of their classics to include a menu of both "Happy Meals" and "Rice Burgers."

While the day appeared to be beautiful and bright at the start, we all noticed the difference in visibility caused by local air-pollution, which hit a record high only days before our arrival. The poor air quality in the area is attributed to the high manufacturing activity in the nearby Pearl River Delta, and this only amplified the importance of our discussion on environmental concerns and sustainability for that day and the days to follow.