Li & Fung has just launched our new Three-Year Plan for 2017-2019, where our goal is to build the Supply Chain of the Future to help our customers navigate the digital economy.
In developing this Three-Year Plan, we scanned the environment around us for the rapid changes that are causing disruptions in the industry and the world around us. We see that the retail industry globally is going through a seismic shift where many traditional brick and mortar retailers are experiencing an unprecedented era of change. There is a lot of pressure coming from different sectors including pure e-tailers, fast fashion, clubs, off-price, value and discount sectors. Retailers are increasingly looking for supply chains that are optimized for speed rather than the traditional low-cost model. Technology is also changing the way consumers behave by using new mobile and cloud-based tools to discover and shop for products.
Apart from changes in the industry, we also scanned the broader environment to understand the new technologies and tools that allow traditional businesses to transact in ways that was never possible before. Several areas that we are exploring include the use of data and analytics, 3D printing, artificial intelligence, and blockchain to drastically improve the transaction cost, speed and automation of our existing supply chain processes. Many of these technologies are exponential as opposed to the linear nature of our traditional industry and offer plenty of opportunities as well as risks to all traditional companies engaged in supply chains.
With the understanding of the new environment, we then adopted a zero-based approach and asked ourselves what it would take to transform Li & Fung into a company that successfully capitalizes on all the changes and new exponential technologies by 2019. The supply chains of today are mostly analog and fragmented and there are a lot of inefficiencies. Our goal is to build the Supply Chain of the Future by fully digitalizing the current supply chain and synchronizing the data end-to-end to drive new efficiencies that were not possible before in an analog world.
Guiding our Three-Year Plan execution is a focus on three specific areas: speed, innovation and digitalization.
With the world now moving at a higher speed and still accelerating, we expect the world to be moving a few times faster by 2019. Our traditional supply chain is built to optimize for cost, but now we see most retailers focusing on supply chains that are optimized for speed. From our experience of working with a large variety of global retailers, we are now providing more value-added services to our customers to advise them on improving the speed of their supply chain and as a result allowing them to improve their sales, margin, mark-down and inventory. Internally, we are also becoming more agile and we have an aspiration to move as fast as a small start-up company, reducing processes from months down to hours. We believe that in the future, companies who are able to move fast and react to changes in the environment quickly will win.
Because of the speed of the environment, innovation is becoming more critical. We want to help our customers innovate their products, to ensure that they always have something new and differentiated in their stores so that they can improve their margin and sell through. Furthermore, we want to differentiate and to innovate new business models and new ways of working with our customers. As a traditional industry, we need to constantly reinvent our business models to adapt to the fast-changing environment.
Finally, with consumers becoming ever more digital, our industry’s supply chains must be upgraded. We are leading the effort to digitalize our global supply chain, resulting with an end-to-end stream of synchronized supply chain data where we will use advanced analytics to improve speed, cost, lead time, working capital, inventory, sustainability and traceability for all the partners in our ecosystem. This end-to-end digital supply chain, coupled with a better speed-to-market business model, will allow our customers to transform the value chain into a responsive demand chain that can “pull” on-trend products to sell at full prices with lower mark-downs.
Our Three-Year Plan requires a change in mindset and a digital transformation of our business from developing new digital skillsets and employing high-caliber digital natives from inside and outside our industry, to working with uncommon partners in our ecosystem. We are all very excited about the transformation our business is undertaking. As we start to create the Supply Chain of the Future, we are also looking forward to making a positive impact to the lives of a billion people in the supply chain. We are all extremely excited about this new journey and I look forward to sharing more progress with you in the near future.