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Critical thinking Assignment on Supply Chains

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Critical thinking Assignment on Supply Chains

Global operations and global supply chains are becoming a reality in the current economy. Classical economic theory suggests that every nation has some comparative advantage that allows it to specialize and perform an activity relatively more efficiently than other nations. What if a company could be run so as to send activities along its supply chain to the country that holds a comparative advantage in that area?

Modern online communication and transportation capabilities have rendered this ideal possible. But expanding the supply chain of a firm in such a manner over such a great expanse requires more than the communications and transportation infrastructure. The enormous complexity of such a task calls for a specialist who can manage this type of system.

According to a news article in The Economist, Li & Fung is a Hong Kong firm that manages these types of supply chains for clothing designers and retailers. Victor and William Fung, the brothers running the business, decided years ago that increasing globalization implied more specialization, just as classic international economic theory suggested. And where supply chains might have “once consisted of five links, they might soon have dozens or even hundreds” (page 62). They determined that their firm, operating in Asia where a number of suppliers in the chains were located, might have a profitable niche in managing these links for retailers. The Economist article tracks an unnamed garment from yarn in South Korea to weaving and dyeing in Taiwan, from zippers in China to sewing in Thailand. All this must be arranged with capacity constraints, national textile quotas, shipping, financing through letters of credit, and quality in mind.

Similarly, another news piece in The Industry Standard discusses how a parka coat is created with components from different parts of the world as shown in the figure below.



Li & Fung has connections with 7,500 suppliers in 37 countries, including Canada, Mexico, and Guatemala when speed to the U.S. market is a priority. The company has no ownership of its far-flung network but is the information provider, steering an order for a retail customer to the right suppliers and right factories to provide the efficiency, speed, quality, and whatever else is needed. Li & Fung is literally an information intermediary that has found a nice business in the supply chains it can construct for clients. Its only real assets are its staff of 3,600 and its network. But if a retailer or fashion house wants to find Bangladeshi women to sew shirts on their home machines, it makes a lot more sense to contact Li & Fung rather than try to do such work on its own.

Write brief but well-thought out answers to the questions (associated with Li & Fung news articles) below:

  1. What current trends affecting operations are reflected in the success of a firm such as Li & Fung?
  2. Li & Fung operates on an international scale. How does this factor affect the firm, both positively and negatively?
  3. How would you characterize the supply chain configuration of fashion houses and retailers that use Li & Fung’s services? Is this an example of vertical integration or outsourcing?

Make sure NOT to write one long essay but rather itemize answers for specific assignment questions. 


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