HKUST Business School Magazine

Biz@HKUST Biz@HKUST 4 5 // Cover // Thought Leader Changing Times Founded in 1906 as one of the first companies financed solely by Chinese capital to export to the West, Li & Fung stands the test of time. Leading one of the most extensive global supply chain networks in the world, Dr William FUNG, Deputy Chairman of Fung Group, shares the secret of his company’s long-term success spanning four generations. During his 49 years of leadership, Dr Fung has seen the company through many setbacks, and he can identify three huge shocks that have impacted the industry in the last four to five years. These are the impact of technology, the geopolitical environment, and the COVID-19 pandemic. “The most pervasive and long-term impact on the world is technology. I would say for the medium term, it’s the geopolitical situation, and the short term is COVID-19. That’s how I would categorize the challenges that we now face,” he says. “The one thing that is constant is change,” Fung continues. “All of these shocks have one common theme, and it’s a common theme for the whole world. We are facing an era of great changes, frequent changes. The only way we know how to deal with these changes is diversification, and to have a very resilient supply chain.” Take a long-term view Talking about the current geopolitical climate, Fung says that it would be prudent for businesses to take a long-term view. Li & Fung has survived wars, economic upheavals and everything else that the last 115 years has thrown at it. The ability to manage change is the true secret to survival, he says. “You cannot deal with changes on a quarterly basis. If you’re driven by quarterly earnings and dividends, then you are usually forced into knee-jerk reactions,” he says. “Businesses should have a much longer-term view and stay the course.” Li & Fung has traditionally taken a long-term view when executing its goals, and this is why it has gone public and private several times in the past. At the moment, Fung feels that for the company to move forward, it needs to be less reliant on the equity market, because the trends are not healthy. “The rewards tend to be short-term, and often times not based on economic fundamentals. People are buying based on trend and momentum,” he says. But technology remains the biggest challenge. “Most recent technological changes that relate to our consumer goods business have occurred at the level of the consumer interface, and the impact of e-commerce was the biggest change,” Fung says. E-commerce primarily impacted Li & Fung’s customers (retailers) in a big way, and they are now having to compete aggressively with other new online retailers and even their branded suppliers going directly to consumers. Supply chains Most of the impact is at the consumer interface. Retailers must rethink how to reach and communicate with customers, as well as meeting the demands of home delivery in addition to just offline and in-store sales. There is a lot of pressure to service the new customer via omni- channel or online-to-offline (O2O) sales channels. While all these changes are taking place, supply chains often remain unchanged, and that can cause problems. “You have generally a situation where analogue supply chains are trying to service a very digitalized marketplace, and obviously that does not work very well, and cannot satisfy the need for speed, and quick response,” he says. Under the leadership of Fung’s nephew Spencer Fung, the company decided to privatize, reorganize and streamline decision-making and rapidly digitalize its supply chain to create ‘The Supply Chain of the Future’ in consumer goods. It was at this very moment that the company was hit hard by two global events – the rise in geopolitical tensions between the US and China, and COVID-19. The only way we know how to deal with changes is diversification, and to have a very resilient supply chain William Fung Deputy Chairman of Fung Group