Spencer Fung is thinking about how to be big and fast while creating the supply chain of tomorrow for fashion.
Fung is chief executive officer of Li & Fung, overseeing the Fung Group’s trading and logistics operations. The trading portion of the business covers the sourcing of goods, while the logistics piece includes the company’s roughly 230 Asian warehouses that help keep commerce flowing.
The company connects thousands of retailers and brands with more than 10,000 factories in more than 50 countries and was founded by Fung’s great grandfather in 1906.
In some ways, it’s that scale and history that Fung is working to transcend now as industry after industry sees legacy powerhouses pressured by techie start-ups with new approaches and supersteep growth curves.
“Most companies that disrupt incumbents come from outside the space,” Fung said. “We are definitely the turtle that is not moving very fast. We are a big company.”
But Fung showed a picture of a turtle with a rocket strapped to its back racing past a swift rabbit and told the fashion-savvy audience that was the big takeaway from his presentation.
Li & Fung is on the move — and fast.
And while Fung said he’s racing against all his traditional competitors in the space, he’s also expecting unexpected challenges.
“As I try to convert the company into a newer company to create a supply chain of the future, I’m always trying to look out to say, ‘OK, who are my other competitors, my future competitors,’” he said. “Who are the next Amazons and Alibabas of our industry?”
To keep up, and get ahead, the company is tracking about 1,000 big and small companies to see how they develop as the industry moves forward in areas such as blockchain.
On that technology — which is the backbone of Bitcoin but is being looked at as a potential for everything from payments to the authentication of luxury goods — Fung said, “There is no winner yet, we’re still going through the filtering process.”
All of this is relatively new.
“We have been living in an analogue world for 112 years,” Fung said, noting the drive now is to “digitize.”
In essence, Li & Fung is aiming to push the back-end of the fashion business to catch up to the front end, where shoppers have rapidly adopted digital technologies to shop.
For the 2017 to 2019 period, Li & Fung, which is big on setting goals, is aiming to “create the supply chain of the future,” while helping customers navigate a disruptive economy and improving the lives of one billion people in the process.
“This is a complete reinvention of the company,” Fung said. “It’s a scary journey.”
But it’s a journey that’s happening fast — and in more than one way.
While cost has traditionally been the main focus for many in fashion for decades, the emphasis is tilting to speed.
“The rest of the industry is actually waking up to the fact that the Zara model is not a bad model,” Fung said. “Everybody knows the Zara [fast-fashion] model, but it’s not easy to do.”
And, coming full circle, being quicker today can be accomplished by becoming more digital.
“Ninety-five percent of our customers are talking about speed,” he said. “Digitization is something that we think will happen. No matter whether we like it or not, everything will have a digital component to it.”
Fung pointed to the company’s 3-D virtual design capability, which lets designers mix and match fabrics and colors, check fit digitally and see new looks on a virtual runway, dramatically speeding up the whole process.
“A year-and-a-half ago, we though we were just going to save some sampling costs,” he said. Instead, the technology can dramatically change how brands react to the market.
“Within 24 hours of coming up with a new product, we can put it on the catwalk for different departments inside the company to see. You can save a lot of time in prototyping…up to three months,” Fung said. “If we’re successful, we’re going to create an eco-system that is connected both in the analogue world and the digital world.”
And Li & Fung is working to embrace the digital shift wholeheartedly.
Fung said it used to take 18 months to make a software module and while that fell to 12 months and then six and is now just two to three months, that’s still too long.
“We’re trying to develop a prototype within an hour,” he said. “How do you think about a new software module and start to prototype within an hour?”
But even as the landscape shifts rapidly, it is moving in many ways at once — and speed, cost and the sweeping trend toward digital technology are just part of the equation.
“Today the hot topic is the trade war,” said Fung, noting that his company has a broad base and is prepared to adjust if necessary.
“My recommendation to my customer is to be prepared, get ready, but don’t panic yet,” he said. “You never know what the President is going to tweet tomorrow.”
He said if tariffs on Chinese-made goods come in at 10 percent, companies would absorb the prices one way or another. But if duties spike 25 percent, Fung said things would “get a little stickier.”