Contents

INTRODUCTION................................................................................................2

1. Outline issues for Li & Fung and the need of Internet Issues..........................3

2. The supply chain management and its relationship with Technology..............5

2.1. The Supply Chain and the Supply Chain Management (SCM).................5

2.2. The supply chain management of Li & Fung.............................................6

2.3. Influences of technology on the Supply Chain...........................................7

3. Critical evaluation for “Bubble in” and Turnkey solutions............................11

4. The security issue in implementing the e-commerce system.........................13

4.1. Security issues of the e-commerce system...............................................13

4.2. Applying security issues to Li & Fung.....................................................14

CONCLUSION...................................................................................................15

REFERENCE.....................................................................................................16

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INTRODUCTION

Today, with the diversity of business activities, the management and

administration of business activities have become more complex, requiring

accuracy and higher efficiency. You could not do better while the amount of

information is getting much more and the requirement for accuracy as well as

processing time is increasing. Even if you are a management, that requirement

becomes more important. Besides your daily works, you always work with

accounting, finance, human resources issue - or the salaries of the production or

marketing. With Managing Information Systems (MIS), the amount of

information decreases dramatically because complex issues of the organization

would be resolved.

There is no universally definition of MIS but in general, this is a system which

converts data from internal and external sources into information and to

communicate that information, in an appropriate form, to manager at all levels

in all functions to enable them to make timely and effective decisions for

planning, directing and controlling the activity for which they are responsible

(Lucey, 2005).

Nowadays, with the boom of information technology and its applications as:

Internet, extrane… MIS is considered an indispensable system of the

organization. Applying MIS to Li & Fung, we would understand its advantages

as well as importance.

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1. Outline issues for Li & Fung and the need of

Internet Issues.

Internet is defined as a global network formed from smaller networks, linking

millions of computers around the world via telecommunication infrastructure.

Internet started as a means for researchers and scientists in different institutions

and different countries can share information. Internet provides you

infrastructure to be able to present direct routes and allow everyone in the world

access the World Wide Web (www).

During the development process of Li & Fung, the company had to face with

the appearance of some problems that have resolved just by the application of

Internet.

First the company began changing its role from the buying agency to sourcing.

According to Victor Fung, most buyers can build their sourcing part in a

country, but it more difficult when operating on a more complex area. With new

role, early in 1970, by setting up offices in Taiwan, Korea, Singapore, the

company expanded its operation as a sourcing representative of the entire Asia

region. It also expanded customer base in Europe. Scale of Li & Fung was

increasing by its office system. With this change, the company need the linking

of critical company operation in different regions and the sourcing would be

more efficient.

In the next stage, Li& Fung approached “borderless manufacturing” when the

company provided “added -value services” through the whole supply chain.

That means performing product slicing was made in the best country. They

could offer the service package from the whole area instead of just from a

certain country. But in some cases, products were collected and moved to

another country (with less cost) because of quotas and labour conditions. And to

satisfy the delivery of requirement of customers, the company could be divided

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into some smaller orders and assigned them to different plants. After that, all of

finished products were arrived in retailers and “all looking like they came from

one factory”. The supply chain of Li & Fung was divided into many steps and

became more sophisticated, but provided higher value to customers. According

to Harvard Business Review magazine (2002), Li & Fung is a pioneer in

“dispersed manufacturing”. However, Li & Fung still managed this dispersed

manufacturing as well as help customers reduce costs although the supply chain

was longer. To solve this “speed problem”, Li & Fung had to use Internet to

speed processing of information exchange between offices worldwide and

customers, suppliers and producers.

In 1999, after acquisition of Camberley, Li & Fung began to offer “virtual

manufacturing” by offering raw material sourcing or product design services to

customers. Previous, after receiving orders from clients, Li & Fung decided the

best manufacture suited to supply goods, then that plant would source its own

raw materials. But understanding client’s high needs, the company offered raw

materials to suppliers. Clearly, the company built the flexible production model

based on linking network and machines. Compared to above, this stage required

tightly communication between the company and customers, suppliers and

producers. To implement this role, the company needed to rapidly catch

customer needs. Then, they based on data about suppliers and producers to

examine which one was suit with customer needs. Only information technology

could help Li & Fung do that.

To sum up, Li & Fung completed its changing role by tripartite growth strategy

with extension its supply chain to new markets via the Internet. After launching

intranet in 1995, extranet in 1997 and applying the e-commerce (B2B portal)

the leader realized that the integration of internet technology advanced internal

efficiency and improved communication between Li & Fung parts and

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customers. Because of this, they considered to extent “the organisation’s online

presence”.

Summary, Internet is one of the most important factors in successes of Li &

Fung. According to Rockowitz, without IT, Li & Fung definitely would not be

at size today.

2. The supply chain management and its relationship

with Technology.

2.1. The Supply Chain and the Supply Chain Management (SCM)

Today, to compete successful in any business environment, the enterprises do

not just focus on their own activities that they must be involved in the business

of suppliers as well as customers. Because, when the business wants to meet

products or services to customers, they have to care more deeply movement of

the material, method of design, packing, methods of transporting and preserving

finished product and actual expectations of customers or final customers. In the

fact, many businesses may not know how their products are used in making

final products to customers. Besides, with the increasing global competition,

life-cycled of new products is getting shorter while the level of customer

expectations is getting higher. That pushes businesses to invest and concentrate

on its supply chain. Furthermore, continuous advanced in technology and

innovation in communication and transport (eg: mobile communications,

Internet,…) has spurred the continued growth of supply chain and technique to

manage it.

There are various definitions for supply chain but in general, supply chain is

described as the system by which organisations source, make and deliver their

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products or services according to market demand. It includes not only

manufactures and suppliers but also its transport companies, warehouses,

retailers and customers.

The Supply Chain Management (SCM) is the strategic management of activities

involved in the acquisition and conversion of materials to finished products

delivered to the customers.

2.2. The supply chain management of Li & Fung

In a typical supply chain, the company purchase raw materials from one or more

suppliers. Parts, details or even products are produced in one or several

factories, then shipped to the warehouse for storage at the intermediate stage

and finally to retailers and customers. Therefore, to reduce costs and improve

the level of services, effective supply chain strategies must be considered the

relative works at different levels in the supply chain. Supply chain is also

known as logistic network including suppliers, manufacturing centres,

warehouses, distribution centres and retail stores as well as raw material

inventory during production and moving finished products between bases.

In Li & Fung, supply chain model is applied and changed appropriately in each

stage of development and becoming supply- chain customizing. The following

is the evolution of the supply chain management of Li & Fung:

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In this model, the company has been managing a complicated and creative

supply chain. From representatives of sourcing, Li & Fung has become a

manager (on behalf of clients) and made the production plan. Before customer

needs, the company has to participate in designing as well as developing

products. Besides, the company still must monitor the suppliers’ commitment

and at that time, it also implementation plans for raw material and factory

sourcing. The next step of the supply chain is manufacturing control. It is

supposed to increase the complexity of supply chain but this brings higher value

to customers. Finally, the distribution stage will end the supply chain

management of Li & Fung.

2.3. Influences of technology on the Supply Chain

The impact of technology on the economy in general and the trading in

particular is very great. SCM is concerned with the flow of products and

information between members of supply chain management. Thus, appearing

Internet and e-commerce models creates expectation that many issues of the

supply chain will be resolved by using technology. In other words, it brings

many advantages in managing the supply chain. Knowing this feature, Li &

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Fung has leveraged effectively the functions of technology in the supply chain’s

activities by applying new programs.

*The intranet introduction

In 1995, Li & Fung launched the intranet to accelerate and simplify internal

communications. This allowed the Group to connect with its many offices,

manufacturing sites around the world. As a result, that made favourable

conditions in understanding consumer needs as well as designing products- the

first steps of Li & Fung’s supply chain: “teams of product specialists focused on

the needs of specific customers and were grouped under Li & Fung corporate

umbrella that provided centralized IT…”. Through email, online images or links

and so on, the supply chain constantly improved by adding value services to

customers. This is seemed to be a strategic stage in developing Li & Fung’

perfect supply chain as the company has changed role of the trading company:

from sourcing to “borderless manufacturing”. For instance, with a jacket made

in Hong Kong, a down filling might come from China, the outer shell fabric

from Korea, the zippers from Japan,…and other trim from Hong Kong. With 48

offices in 32 countries, only intranet may do such this. Also by this system, the

company easily monitored whether the progress of orders and shipments could

be tracked in real time or not; the online inspection and troubleshooting would

be shown by high- resolution digital photos. Therefore, incurred issues would

be addressed in a timely manner and the schedule of orders was still ensured.

For example, in the past, when quality problems with Bangladeshi production

happened, the onsite Li & Fung inspector was asked to send physical samples to

Hong Kong by express mail. If this situation had occurred with more than one

client, it would have affected the company’s costs. But with the introduction of

intranet, these issues were dealt with flexibly. Clearly, technology has speeded

processing of information exchange between offices in the world and on that

basic, the supply chain has run more smoothly.

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*The secure extranet sites.

In 1997, Li & Fung continuously launched secure extranet sites. For this new

program, the company was linked directly to a key customer and customized to

customer’s individual needs.

Firstly, the company could carry out online product development and order

tracking while clients observed as well as checked their products in detail. That

meant when there were any problems with the products, the company and

customer could find solutions quickly by contacting across Internet site.

Changes would be made online instead of sending hard copies of documents

back and forth. This helped the company save necessary costs and times and

ensure progress of supply chain. Thus, in a certain aspect, extranet sites made

the supply chain run more seamlessly and effectively.

Furthermore, Li & Fung is considered as the key link between manufactures and

retailers. With this role, extranet created streamlining communications when

connecting two important elements of the value chain and this was one of

factors making success for Li & Fung’s supply chain.

Just as customers tracked a UPS delivery, clients could track an order online

with the monitoring of production. That promoted quick-response

manufacturing by changing immediately customer demands if they wanted.

“Until the fabric was dyed, the customer could change the colour; until the

fabric was cut, the customer could change the styles or sizes offered, whether a

pocket or a cuff would be added, and a number of other product specifications”.

Li & Fung turned back the value chain effectively to suit most customer

requirements but still facilitated its supply chain. Due to technology, receiving

information was updated and treated in the fastest way.

*Applying e-commerce through B2B portal

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E-commerce understood simply is associated with the buying and the selling of

consumer products over the Internet (Thanasankit, 2003). Nowadays, it is used

as one of popular strategies for development of the organisation. Especially, in

managing supply chain, it plays an important role in facilitating the supply

chain’s operations.

After venturing with Castling and implementing “Bubble in”, Li& Fung decided

to reach SME market in the United States through B2B portal. This application

is simply one organisation buying products and service from another,

intermediately by technology (J. Botha, 2004) but with Li & Fung, it is the great

tool to wide and complete the supply chain.

Researching SMEs in USA, Li & Fung realized that SMEs usually lacked

current information and in comparison to larger retailers, they lagged in

identifying fashion trends. Because orders of SME were small and in the lack of

economies scale, they had to pay high margins for importers. Moreover, they

were not concerned by suppliers and offered a “limited range of options in

product specifications”.

But everything would change via B2B portal of Li & Fung. First it provided the

convenient order process. Li & Fung offered an array of products with

customization option to clients. For example, for polo shirt on lifung.com, the

users could choose limited specifications like pockets, collars, button…and

ordered online if satisfied. Li & Fung provided the supporting program system

as: Microsystem, Broadvision, Oracle… With orders below factory minimums,

the company aggregated small orders and did not require a minimum order.

That helped SMEs reduce the inventory levels- the origin of all risks. When

market trends changed, clients could use the replenishment buying system.

Especially, to ensure the supply chain customization and innovation, Li & Fung

limited mass customization- which allowed customers to collaborate in

designing the products or services they buy (Chakrawarty & Eliashberg, 2005).

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By using B2B e-commerce portal with SMEs, Li & Fung helped SMEs manage

effectively stages of the supply chain.

Clearly, the technology has brought great changes to organisations operating in

the field of the supply chain management. For Li & Fung, the company not only

well organizes the supply chain but also take it to its customers. That is the

underlying value and the spread of the information technology.

3. Critical evaluation for “Bubble in” and Turnkey

solutions.

Turnkey solution is a very popular solution particularly in e-commerce. It

provides specialty service and tools while allowing you to control your content

at a significant cost and time savings (Thomas M. Elliott, 2008). In other words,

it could maximize the efficiency of online business, so it is one of the most

effective tools on the market.

Nowadays, e-commerce has become one of the most important strategies of the

organisation. It is a great combination between information technology and

business operations of the business. However, not all companies have a system

of modern information technology while demands for it are high. This situation

creates the company that specializes in providing IT for the business. For

instance, they would help their customers design website, advertise online

products, distribute products as well as provide online payment methods.

Because of this, the IT company could know the business activities of

customers and important information. Therefore, choosing the right provider is

very important. They must have good business ethic and practices to ensure

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customer’s transactions, especially payment transactions. Summary, when the

organisation chooses turnkey solution, they must use sources from outside.

Contrast to turnkey solutions, “Bubble in” is a concept given by Li & Fung

after the company decided to use the e-commerce strategy. According Victor, I

should come from within of the company, not outsourced. That means the

organisation does not seek out the provider but they would become provider for

themselves. But the problem is given: how to turn a global export trading

company into an information technology company and use the existing IT

department or a new team. And “Bubble in” of Li & Fung was implemented

through participating on a new IT venture.

Clearly, there are deeply differences between two concepts.

With companies using “outsourcing e-commerce” or turnkey solutions, they

must face with many difficulties as well as disadvantages from outsource

providers. For Hsieh, this is considered as “putting the fox in the chicken coop”.

First it leads to reject communications between the company and its customers.

That would affect directly to stable relationship that the company wants to build

with its clients. Then, it creates risks dependency on outsiders. For example, the

project is suddenly delayed for some reasons or products need to be changed.

This may be beyond the control of the provider but accidentally, it makes the

company dependent on the outsource provider. Moreover, the turnkey solution

the company could be at risk of disclosing proprietary information, business

strategy. In addition, many Internet companies may acquire offline competitors

or old-economy trading companies. As a result, the company has coped with

more competitors.

How about “Bubble in”? The answer is what the company worry about

outsourcing e-commerce would not exist in Bubble in. The information

technology is developed from inside of the company, so it belongs to the

company. The company does not depend on anyone and apply IT for business

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activities by itself. Besides abundant human resources, the company also makes

use of human resources from the venture. As in the case of Li & Fung, after

entering Castling, Castling “committed key managerial staff to lifung.com”.

Then, “20% of lifung.com’s initial staff was come from Castling and most of

them are experienced in implementing e-commerce strategy. It can be said with

Bubble in, the company has turned what not owned by it into its and always

hold the initiative. It is easy to see that, with Bubble in, the company will never

to bear the risk by the third party. If so, that is the risk generated from the IT

such as: virus, hacker…

Summary, “Bubble in” is a smart and effective solution for the e-commerce

strategy. It creates the security, safety as well as independences for the

company. “Bubble in” also shows that the information technology plays an

important in developing the corporation.

4. The security issue in implementing the e-

commerce system

4.1. Security issues of the e-commerce system.

The e-commerce is a business proving high efficiency for the organisation but

including potential risks. Hence, when using e- commerce, the organisation

should concern some security issues as the following:

Security of transaction: in commercial transactions in general and e-

commerce transactions in particular, ensuring absolutely confidentiality

of transaction is most important. Otherwise, the company may face risks

such as: eavesdropping, forgery, impersonation or apparent origin…

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To ensure the confidentiality of transaction, the company could use measures

like: data encryption, electronic signatures, digital envelope.

Check the correctness and authenticity of the information in transactions:

the online transaction is borderless and parties do not see each other.

Thus, after receiving the information, users should check the correctness

and genuineness of the information.

Place data storage by various forms: to prevent the risk due to natural

disaster incidents or acts of terrorism, the data of e- commerce is stored in

many places with many forms. That makes the safety and continuity of

business operation online.

Install anti-virus software: viruses are always threats to enterprise

network. The destruction of the virus is unable to measure. When

installing on the system, it will destroy the database of the enterprise

stored in the computer or steal the information and transfer them to the

virus sender. Therefore, to combat the attack of virus, businesses need to

install effective anti-virus software.

4.2. Applying security issues to Li & Fung

Like any organisation using the e-commerce system in the world, Li & Fung

always must face with security issues being as an integral part of the

information technology. To protect the benefits of users as well as the company

from risks, hackers, intruders, Li & Fung should examine some suggestions:

The company should have a mechanism for the distributed database

This is kind of data having the similar information and relating to each other. Li

& Fung should have different ways to control them instead of managing them

by the only policy. It makes sure that if one of them is attacked, the rest still

operate normally and is not affected by others.

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Li & Fung must use the effective protecting software, especially gateway

internet

Li & Fung is the global company so the data system is very huge. To prevent

hackers or intruders from unauthorized accessing, the company have to put

software as firewall. Moreover, the company also use the best antivirus software

and update them regularly.

The company have to enhance awareness for staffs

At first listen, this hint does not seem reasonable but it is really essential. Many

hackers have stolen information by losing awareness of information technology.

That even happens to many famous technology companies and it is one of ways

hackers often use.

CONCLUSION

From an export trading company, Li & Fung has become a global export trading

company and famous for the supply chain management. That is because the

company has used a reasonable strategy especially strategy relating to the

development of information technology. Li & Fung also know that

technological advances have allowed business to take advantage of growing

market opportunities (Sloman. J, 2005). The companies have continuously

applied new software to serve businesses as well as complete the supply chain.

Therefore, the management of Li & Fung decided the technology should come

within the company. This concept leads goals of Li & Fung in the following

years. It is can be said, Li & Fung is the typical company in applying MIS

successfully.

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REFERENCE

1. Chaffey. D & Wood. S., (2005) Business Information Management:

Improving Performance using Information Systems. England: Marketing

Insights Limited and Steve Wood.

2. Elliott. G., (2004) Global Business: Information Technology. England:

Pearson Education limited.

3. Lucey. T., (ed.) (2005) Managing Information Systems. London:

Thompson

4. Botha. J., (2004) E-commerce. Republic of South Africa.

5. Thanasakit. T., (2003) E-commerce and Culture Values. USA: Idea

Group Publishing.

6. Chakravarty. A & Eliashberg. J., ( 2005) Managing Business Interfaces:

Marketing and Engineering Issues in The Supply Chain and Internet

Domains. Germany: ISQM

7. Elliott. T., (2008) Website 411: Business Survival in the Internet

Economy. USA: Infinity.

8. Sloman. J., (2005) The Economic Environment of Business. England:

Pearson Education Limited.

9. Harvard Business Review, 01 October 2002.

10. Palmer. A & Hartley. B., (ed.) (2002) The business environment.

Berkshire: Mc Graw- Hill education

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