Li & Fung

Virtual Lean Selling Machines

Can you imagine a business that can reach sales of $9bn per year without having to purchase, store or make any products? This is the question posed by Phil Jones in a recent post on the success of ebay. In our ever flattening world, specialist supply chain experts will continue to be a growth area for businesses new and old.

Take Li & Fung as an example of old businesses that has achieved huge success in optimising global distribution networks. Founded in 1906, Li & Fung has diversified into product design, raw material sourcing, quality assurance, manufacturing and distribution and has grown to 15,000 employees worldwide and its annual sales revenues now tops $12bn – yet it doesn’t own a single manufacturing nor storage facility. It optimises price, quality and speed to market by applying the company’s management expertise and specialist knowledge to manage third party outsourced producers and facilities. This is a virtual business built for the 21st century. (If you’re interested in learning more about Li & Fung, I highly recommend reading Competing in a Flat World).

Closer to home (and as an example of a new company in this space), I recently met up with the owners of a Manchester based company that had started a supply chain management business in the electrical and white goods market and had managed to built sales to £12m in their first year of trading and should top £25m turnover in year 2! This is phenomenal growth yet they operate with a team of just 10 staff, a handful of desks, chairs, laptops (plus bags of ambition and enthusiasm).

This all ties up with comments made by Julie Meyer at a recent BVCA Digital Age event about the emergence of ecosystem economics (Jyoti Banerjee of KiteBlue provides a nice summary of this concept here) and how the game changers of the next decade will be those entrepreneurs and businesses that can organise the global systems and technologies to optimum effect.

To effectively harness ecosystem economics and build successful businesses you can be big or small – the playing field’s probably never been more level.

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