How to adapt your supply chain workflows to digitalize efficiently? Learn from the best: Li & Fung, masters of transformation

Vjeran Ortynski,
Chief Business Development Officer

We are living and conducting business in rough but interesting times, most of which nobody expected even a month ago.

Businesses nowadays are faced with the task of adjusting their operations to extreme conditions. Supply chains are sporadic and unreliable because of the disconnect between production and demand, and further hampered due to unpredictable transportation and processing dynamics. Markets are reeling with less certainty than ever, and demand is fluctuating wildly for countless products, as consumer and business needs rapidly develop as a function of their geographical location and the strike of the coronavirus pandemic. 

Problems with delivering documents of title

In February, when the coronavirus outbreak was mostly under control and being handled properly in China, Bloomberg published a telling article entitled Coronavirus is Wreaking Havoc on Global Mail Delivery. They reported what we have been pointing out ever since we developed the CargoX platform - that businesses need a more reliable way to transfer documents of title and other sensitive documents, as well as a way to prove ownership thereof. 

The logistics industry, especially ocean shipping, relies heavily on essential documents (mostly paper), delivered by courier services - even in a world where airlines are shutting down, and parcel and document courier services are facing extreme challenges. Rail and road connections are meanwhile too inefficient and too slow. 

Documents of title (bills of lading, letters of indemnity, letters of credit, etc.) right now just cannot find a speedy enough delivery channel to be carried securely from origin to destination. All this is happening in times when business employees are highly accustomed to using digital means to communicate, coordinate, react to problematic situations, and shape their business data flows. 

In the end, the result for shipping companies and carriers can be that the transported goods are not released to the buyers if they do not present the right documentation: “It’s another example of the challenge posed by the coronavirus in physical commodity markets, and shows the problem of relying on hand-delivered paper documents in a complex, global supply chain,” state Mark Burton, Annie Lee, and Krystal Chia in the Bloomberg article.

The digital transformation challenge of Li & Fung

It is no secret that by now, all global businesses are in an early or main stage of digitalization. They either start big, with a wide platform-style approach, or they choose their solutions out of a palette of individual, laser-focused solutions available on the market today. 

But how to decide on the approaches, how to find a good direction in the abundance of options, technologies, methodologies, and competing solutions?

This is where we always like an agile and rapid approach to learning. One of the best cases is described in this interview with Mr Spencer Fung, Li & Fung CEO, in strategy+business, where he explains how he actively championed the digital transformation of one of the world’s most influential supply chain solutions platforms. 

Li & Fung’s vast network of manufacturers and distributors of consumer goods and clothing has grown out from a traditional 1906-founded exporter of Chinese porcelain and silk to a corporation of 18,000 employees. They started their total digitization project in 2017, after years of decline, and amid fierce competition growing in China - and today they are the leaders of a small pack of advanced logistics companies, and most of their competitors are following in their footsteps, three or four years behind. 

We summarize some of the highlights, but I can only recommend that you take the time and read the whole piece about this Hong Kong frontrunner. 

How the world is changing

Spencer Fung explains they started by looking at where the world is heading and realizing that their company is not where it needs to be to face a new reality - so they created a three-year plan and focused on creating the Supply Chain of the Future, focusing on speed, innovation, and digitalization. 

• To kick off, they reorganized their office to be able to shift rapidly from one organizational model to another - with the help of movable walls and furniture. 

• Furthermore, they sped up services for the benefit of their customers, to enable rapid responses to market demands. 

• The hardest part was influencing a change of mindset within the organization - starting at the management team level, then with employees, and continuing with customers and suppliers. That’s how he enabled the company to compete with startups.

• He introduced rapid innovation, so the company adapts to customers’ new needs when identifying trends, building software tools, and innovating products. 

• “I know the people in my sector. I’m better than they are.” That’s an attitude you simply cannot have, he emphasizes.

• The solution he came up with was composed of three parts: Being humble and looking for disruption outside the industry, and being extremely agile at the same time.

• Because of the disruption in the China-U.S. trade corridor, a massive disruption and rearrangement of the global supply chain is expected for most of their product categories.

• China is probably the most advanced country in the world today, he says. Chinese consumers run their everyday life with one phone and a few apps: “Everything is done digitally. Every few months, you see a completely new innovation and rapid adoption by consumers.“

• “For the next 20 years, there will be an advantage in being asset-light. Flexibility and speed of change are key,” he points out the key skill needed for the future.

How they approach blockchain and other new tech

The company is establishing a completely open platform, with multiple competitors connected, even their own, Fung says. “Right now, if a new technology like blockchain appears, it takes an established company a few years to analyze it, internalize it, and make it work. At a startup, it may take a few weeks to a few months. I’m configuring our company so that it moves like a startup.” 

But how to absorb all these new principles, and how to learn? Fung’s answer is simple: “There are new tools, new skill sets, new ways of doing business. So all individuals have to constantly re-skill themselves. Learning has to be constant, daily, and multi-medium. It’s not just going back to school. It’s online. It’s learning from people. Learning from startups. It’s a constant journey.”

It is probably hard to maintain such a learning process at a corporation, especially if it is a new process. Fung has a simple answer: “We tell our employees that the company will have more and more bite-sized learning modules. But that’s not all. You have to take the initiative yourself to learn as well. I watch a lot of YouTube [videos], just to learn about topics like blockchain. I cannot wait for the company to train me or enroll [me] in a course to learn about blockchain. Continuous lifelong learning is definitely key.”

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So, by now you must have reflected on how your company tackles digitalization? Are you working on becoming agile and flexible, fixing legacy issues and moving forward? 

The CargoX Platform can help you by redefining the management of sensitive documents and documents of title, including their sending, storing, and ownership transfer with the help of our Blockchain Document Transfer to avoid delays, outfall, and absolutely unnecessary costs. 

Give us a call, even if you just wanna talk about document issues in supply chain and other industries!