FAST, GLOBAL, AND ENTREPRENEURIAL - SUPPLY CHAIN MANAGEMENT, HONG-KONG STYLE - AN INTERVIEW WITH FUNG,VICTOR

Li & Fung, Hong Kong's largest export trading company, has been an inn ovator in supply chain management-a topic of increasing importance to many senior executives. In this interview, chairman Victor Fung explai ns both the philosophy behind supply chain management and the specific practices that Li & Fung has developed to reduce costs and lead times , allowing its customers to buy ''closer to the market.'' Li & Fung ha s been a pioneer in ''dispersed manufacturing.'' It performs the highe r-value-added tasks such as design and quality control in Hong Kong, a nd outsources the lower-value-added tasks to the best possible locatio ns around the world. The result is something new: a truly global produ ct. To produce a garment, for example, the company might purchase yam from Korea that will be woven and dyed in Taiwan, then shipped to Thai land for final assembly, where it will be matched with zippers from a Japanese company. For every order, the goal is to customize the value chain to meet the customer's specific needs. To be run effectively, Vi ctor Fung maintains, trading companies have to be small and entreprene urial. He describes the organizational approaches that keep the compan y that way despite its growing size and geographic scope: its organiza tion around small, customer-focused units; its incentives and compensa tion structure; and its use of venture capital as a vehicle for busine ss development.As Asia's economic crisis continues, chairman Fung sees a new model of companies emerging - companies that are, like Li & Fun g, narrowly focused and professionally managed.