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Contents
INTRODUCTION................................................................................................2
1. Outline issues for Li & Fung and the need of Internet Issues..........................3
2. The supply chain management and its relationship with Technology..............5
2.1. The Supply Chain and the Supply Chain Management (SCM).................5
2.2. The supply chain management of Li & Fung.............................................6
2.3. Influences of technology on the Supply Chain...........................................7
3. Critical evaluation for “Bubble in” and Turnkey solutions............................11
4. The security issue in implementing the e-commerce system.........................13
4.1. Security issues of the e-commerce system...............................................13
4.2. Applying security issues to Li & Fung.....................................................14
CONCLUSION...................................................................................................15
REFERENCE.....................................................................................................16
1
INTRODUCTION
Today, with the diversity of business activities, the management and
administration of business activities have become more complex, requiring
accuracy and higher efficiency. You could not do better while the amount of
information is getting much more and the requirement for accuracy as well as
processing time is increasing. Even if you are a management, that requirement
becomes more important. Besides your daily works, you always work with
accounting, finance, human resources issue - or the salaries of the production or
marketing. With Managing Information Systems (MIS), the amount of
information decreases dramatically because complex issues of the organization
would be resolved.
There is no universally definition of MIS but in general, this is a system which
converts data from internal and external sources into information and to
communicate that information, in an appropriate form, to manager at all levels
in all functions to enable them to make timely and effective decisions for
planning, directing and controlling the activity for which they are responsible
(Lucey, 2005).
Nowadays, with the boom of information technology and its applications as:
Internet, extrane… MIS is considered an indispensable system of the
organization. Applying MIS to Li & Fung, we would understand its advantages
as well as importance.
.
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1. Outline issues for Li & Fung and the need of
Internet Issues.
Internet is defined as a global network formed from smaller networks, linking
millions of computers around the world via telecommunication infrastructure.
Internet started as a means for researchers and scientists in different institutions
and different countries can share information. Internet provides you
infrastructure to be able to present direct routes and allow everyone in the world
access the World Wide Web (www).
During the development process of Li & Fung, the company had to face with
the appearance of some problems that have resolved just by the application of
Internet.
First the company began changing its role from the buying agency to sourcing.
According to Victor Fung, most buyers can build their sourcing part in a
country, but it more difficult when operating on a more complex area. With new
role, early in 1970, by setting up offices in Taiwan, Korea, Singapore, the
company expanded its operation as a sourcing representative of the entire Asia
region. It also expanded customer base in Europe. Scale of Li & Fung was
increasing by its office system. With this change, the company need the linking
of critical company operation in different regions and the sourcing would be
more efficient.
In the next stage, Li& Fung approached “borderless manufacturing” when the
company provided “added -value services” through the whole supply chain.
That means performing product slicing was made in the best country. They
could offer the service package from the whole area instead of just from a
certain country. But in some cases, products were collected and moved to
another country (with less cost) because of quotas and labour conditions. And to
satisfy the delivery of requirement of customers, the company could be divided
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into some smaller orders and assigned them to different plants. After that, all of
finished products were arrived in retailers and “all looking like they came from
one factory”. The supply chain of Li & Fung was divided into many steps and
became more sophisticated, but provided higher value to customers. According
to Harvard Business Review magazine (2002), Li & Fung is a pioneer in
“dispersed manufacturing”. However, Li & Fung still managed this dispersed
manufacturing as well as help customers reduce costs although the supply chain
was longer. To solve this “speed problem”, Li & Fung had to use Internet to
speed processing of information exchange between offices worldwide and
customers, suppliers and producers.
In 1999, after acquisition of Camberley, Li & Fung began to offer “virtual
manufacturing” by offering raw material sourcing or product design services to
customers. Previous, after receiving orders from clients, Li & Fung decided the
best manufacture suited to supply goods, then that plant would source its own
raw materials. But understanding client’s high needs, the company offered raw
materials to suppliers. Clearly, the company built the flexible production model
based on linking network and machines. Compared to above, this stage required
tightly communication between the company and customers, suppliers and
producers. To implement this role, the company needed to rapidly catch
customer needs. Then, they based on data about suppliers and producers to
examine which one was suit with customer needs. Only information technology
could help Li & Fung do that.
To sum up, Li & Fung completed its changing role by tripartite growth strategy
with extension its supply chain to new markets via the Internet. After launching
intranet in 1995, extranet in 1997 and applying the e-commerce (B2B portal)
the leader realized that the integration of internet technology advanced internal
efficiency and improved communication between Li & Fung parts and
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customers. Because of this, they considered to extent “the organisation’s online
presence”.
Summary, Internet is one of the most important factors in successes of Li &
Fung. According to Rockowitz, without IT, Li & Fung definitely would not be
at size today.
2. The supply chain management and its relationship
with Technology.
2.1. The Supply Chain and the Supply Chain Management (SCM)
Today, to compete successful in any business environment, the enterprises do
not just focus on their own activities that they must be involved in the business
of suppliers as well as customers. Because, when the business wants to meet
products or services to customers, they have to care more deeply movement of
the material, method of design, packing, methods of transporting and preserving
finished product and actual expectations of customers or final customers. In the
fact, many businesses may not know how their products are used in making
final products to customers. Besides, with the increasing global competition,
life-cycled of new products is getting shorter while the level of customer
expectations is getting higher. That pushes businesses to invest and concentrate
on its supply chain. Furthermore, continuous advanced in technology and
innovation in communication and transport (eg: mobile communications,
Internet,…) has spurred the continued growth of supply chain and technique to
manage it.
There are various definitions for supply chain but in general, supply chain is
described as the system by which organisations source, make and deliver their
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products or services according to market demand. It includes not only
manufactures and suppliers but also its transport companies, warehouses,
retailers and customers.
The Supply Chain Management (SCM) is the strategic management of activities
involved in the acquisition and conversion of materials to finished products
delivered to the customers.
2.2. The supply chain management of Li & Fung
In a typical supply chain, the company purchase raw materials from one or more
suppliers. Parts, details or even products are produced in one or several
factories, then shipped to the warehouse for storage at the intermediate stage
and finally to retailers and customers. Therefore, to reduce costs and improve
the level of services, effective supply chain strategies must be considered the
relative works at different levels in the supply chain. Supply chain is also
known as logistic network including suppliers, manufacturing centres,
warehouses, distribution centres and retail stores as well as raw material
inventory during production and moving finished products between bases.
In Li & Fung, supply chain model is applied and changed appropriately in each
stage of development and becoming supply- chain customizing. The following
is the evolution of the supply chain management of Li & Fung:
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In this model, the company has been managing a complicated and creative
supply chain. From representatives of sourcing, Li & Fung has become a
manager (on behalf of clients) and made the production plan. Before customer
needs, the company has to participate in designing as well as developing
products. Besides, the company still must monitor the suppliers’ commitment
and at that time, it also implementation plans for raw material and factory
sourcing. The next step of the supply chain is manufacturing control. It is
supposed to increase the complexity of supply chain but this brings higher value
to customers. Finally, the distribution stage will end the supply chain
management of Li & Fung.
2.3. Influences of technology on the Supply Chain
The impact of technology on the economy in general and the trading in
particular is very great. SCM is concerned with the flow of products and
information between members of supply chain management. Thus, appearing
Internet and e-commerce models creates expectation that many issues of the
supply chain will be resolved by using technology. In other words, it brings
many advantages in managing the supply chain. Knowing this feature, Li &
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Fung has leveraged effectively the functions of technology in the supply chain’s
activities by applying new programs.
*The intranet introduction
In 1995, Li & Fung launched the intranet to accelerate and simplify internal
communications. This allowed the Group to connect with its many offices,
manufacturing sites around the world. As a result, that made favourable
conditions in understanding consumer needs as well as designing products- the
first steps of Li & Fung’s supply chain: “teams of product specialists focused on
the needs of specific customers and were grouped under Li & Fung corporate
umbrella that provided centralized IT…”. Through email, online images or links
and so on, the supply chain constantly improved by adding value services to
customers. This is seemed to be a strategic stage in developing Li & Fung’
perfect supply chain as the company has changed role of the trading company:
from sourcing to “borderless manufacturing”. For instance, with a jacket made
in Hong Kong, a down filling might come from China, the outer shell fabric
from Korea, the zippers from Japan,…and other trim from Hong Kong. With 48
offices in 32 countries, only intranet may do such this. Also by this system, the
company easily monitored whether the progress of orders and shipments could
be tracked in real time or not; the online inspection and troubleshooting would
be shown by high- resolution digital photos. Therefore, incurred issues would
be addressed in a timely manner and the schedule of orders was still ensured.
For example, in the past, when quality problems with Bangladeshi production
happened, the onsite Li & Fung inspector was asked to send physical samples to
Hong Kong by express mail. If this situation had occurred with more than one
client, it would have affected the company’s costs. But with the introduction of
intranet, these issues were dealt with flexibly. Clearly, technology has speeded
processing of information exchange between offices in the world and on that
basic, the supply chain has run more smoothly.
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*The secure extranet sites.
In 1997, Li & Fung continuously launched secure extranet sites. For this new
program, the company was linked directly to a key customer and customized to
customer’s individual needs.
Firstly, the company could carry out online product development and order
tracking while clients observed as well as checked their products in detail. That
meant when there were any problems with the products, the company and
customer could find solutions quickly by contacting across Internet site.
Changes would be made online instead of sending hard copies of documents
back and forth. This helped the company save necessary costs and times and
ensure progress of supply chain. Thus, in a certain aspect, extranet sites made
the supply chain run more seamlessly and effectively.
Furthermore, Li & Fung is considered as the key link between manufactures and
retailers. With this role, extranet created streamlining communications when
connecting two important elements of the value chain and this was one of
factors making success for Li & Fung’s supply chain.
Just as customers tracked a UPS delivery, clients could track an order online
with the monitoring of production. That promoted quick-response
manufacturing by changing immediately customer demands if they wanted.
“Until the fabric was dyed, the customer could change the colour; until the
fabric was cut, the customer could change the styles or sizes offered, whether a
pocket or a cuff would be added, and a number of other product specifications”.
Li & Fung turned back the value chain effectively to suit most customer
requirements but still facilitated its supply chain. Due to technology, receiving
information was updated and treated in the fastest way.
*Applying e-commerce through B2B portal
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E-commerce understood simply is associated with the buying and the selling of
consumer products over the Internet (Thanasankit, 2003). Nowadays, it is used
as one of popular strategies for development of the organisation. Especially, in
managing supply chain, it plays an important role in facilitating the supply
chain’s operations.
After venturing with Castling and implementing “Bubble in”, Li& Fung decided
to reach SME market in the United States through B2B portal. This application
is simply one organisation buying products and service from another,
intermediately by technology (J. Botha, 2004) but with Li & Fung, it is the great
tool to wide and complete the supply chain.
Researching SMEs in USA, Li & Fung realized that SMEs usually lacked
current information and in comparison to larger retailers, they lagged in
identifying fashion trends. Because orders of SME were small and in the lack of
economies scale, they had to pay high margins for importers. Moreover, they
were not concerned by suppliers and offered a “limited range of options in
product specifications”.
But everything would change via B2B portal of Li & Fung. First it provided the
convenient order process. Li & Fung offered an array of products with
customization option to clients. For example, for polo shirt on lifung.com, the
users could choose limited specifications like pockets, collars, button…and
ordered online if satisfied. Li & Fung provided the supporting program system
as: Microsystem, Broadvision, Oracle… With orders below factory minimums,
the company aggregated small orders and did not require a minimum order.
That helped SMEs reduce the inventory levels- the origin of all risks. When
market trends changed, clients could use the replenishment buying system.
Especially, to ensure the supply chain customization and innovation, Li & Fung
limited mass customization- which allowed customers to collaborate in
designing the products or services they buy (Chakrawarty & Eliashberg, 2005).
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By using B2B e-commerce portal with SMEs, Li & Fung helped SMEs manage
effectively stages of the supply chain.
Clearly, the technology has brought great changes to organisations operating in
the field of the supply chain management. For Li & Fung, the company not only
well organizes the supply chain but also take it to its customers. That is the
underlying value and the spread of the information technology.
3. Critical evaluation for “Bubble in” and Turnkey
solutions.
Turnkey solution is a very popular solution particularly in e-commerce. It
provides specialty service and tools while allowing you to control your content
at a significant cost and time savings (Thomas M. Elliott, 2008). In other words,
it could maximize the efficiency of online business, so it is one of the most
effective tools on the market.
Nowadays, e-commerce has become one of the most important strategies of the
organisation. It is a great combination between information technology and
business operations of the business. However, not all companies have a system
of modern information technology while demands for it are high. This situation
creates the company that specializes in providing IT for the business. For
instance, they would help their customers design website, advertise online
products, distribute products as well as provide online payment methods.
Because of this, the IT company could know the business activities of
customers and important information. Therefore, choosing the right provider is
very important. They must have good business ethic and practices to ensure
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customer’s transactions, especially payment transactions. Summary, when the
organisation chooses turnkey solution, they must use sources from outside.
Contrast to turnkey solutions, “Bubble in” is a concept given by Li & Fung
after the company decided to use the e-commerce strategy. According Victor, I
should come from within of the company, not outsourced. That means the
organisation does not seek out the provider but they would become provider for
themselves. But the problem is given: how to turn a global export trading
company into an information technology company and use the existing IT
department or a new team. And “Bubble in” of Li & Fung was implemented
through participating on a new IT venture.
Clearly, there are deeply differences between two concepts.
With companies using “outsourcing e-commerce” or turnkey solutions, they
must face with many difficulties as well as disadvantages from outsource
providers. For Hsieh, this is considered as “putting the fox in the chicken coop”.
First it leads to reject communications between the company and its customers.
That would affect directly to stable relationship that the company wants to build
with its clients. Then, it creates risks dependency on outsiders. For example, the
project is suddenly delayed for some reasons or products need to be changed.
This may be beyond the control of the provider but accidentally, it makes the
company dependent on the outsource provider. Moreover, the turnkey solution
the company could be at risk of disclosing proprietary information, business
strategy. In addition, many Internet companies may acquire offline competitors
or old-economy trading companies. As a result, the company has coped with
more competitors.
How about “Bubble in”? The answer is what the company worry about
outsourcing e-commerce would not exist in Bubble in. The information
technology is developed from inside of the company, so it belongs to the
company. The company does not depend on anyone and apply IT for business
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activities by itself. Besides abundant human resources, the company also makes
use of human resources from the venture. As in the case of Li & Fung, after
entering Castling, Castling “committed key managerial staff to lifung.com”.
Then, “20% of lifung.com’s initial staff was come from Castling and most of
them are experienced in implementing e-commerce strategy. It can be said with
Bubble in, the company has turned what not owned by it into its and always
hold the initiative. It is easy to see that, with Bubble in, the company will never
to bear the risk by the third party. If so, that is the risk generated from the IT
such as: virus, hacker…
Summary, “Bubble in” is a smart and effective solution for the e-commerce
strategy. It creates the security, safety as well as independences for the
company. “Bubble in” also shows that the information technology plays an
important in developing the corporation.
4. The security issue in implementing the e-
commerce system
4.1. Security issues of the e-commerce system.
The e-commerce is a business proving high efficiency for the organisation but
including potential risks. Hence, when using e- commerce, the organisation
should concern some security issues as the following:
Security of transaction: in commercial transactions in general and e-
commerce transactions in particular, ensuring absolutely confidentiality
of transaction is most important. Otherwise, the company may face risks
such as: eavesdropping, forgery, impersonation or apparent origin…
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To ensure the confidentiality of transaction, the company could use measures
like: data encryption, electronic signatures, digital envelope.
Check the correctness and authenticity of the information in transactions:
the online transaction is borderless and parties do not see each other.
Thus, after receiving the information, users should check the correctness
and genuineness of the information.
Place data storage by various forms: to prevent the risk due to natural
disaster incidents or acts of terrorism, the data of e- commerce is stored in
many places with many forms. That makes the safety and continuity of
business operation online.
Install anti-virus software: viruses are always threats to enterprise
network. The destruction of the virus is unable to measure. When
installing on the system, it will destroy the database of the enterprise
stored in the computer or steal the information and transfer them to the
virus sender. Therefore, to combat the attack of virus, businesses need to
install effective anti-virus software.
4.2. Applying security issues to Li & Fung
Like any organisation using the e-commerce system in the world, Li & Fung
always must face with security issues being as an integral part of the
information technology. To protect the benefits of users as well as the company
from risks, hackers, intruders, Li & Fung should examine some suggestions:
The company should have a mechanism for the distributed database
This is kind of data having the similar information and relating to each other. Li
& Fung should have different ways to control them instead of managing them
by the only policy. It makes sure that if one of them is attacked, the rest still
operate normally and is not affected by others.
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Li & Fung must use the effective protecting software, especially gateway
internet
Li & Fung is the global company so the data system is very huge. To prevent
hackers or intruders from unauthorized accessing, the company have to put
software as firewall. Moreover, the company also use the best antivirus software
and update them regularly.
The company have to enhance awareness for staffs
At first listen, this hint does not seem reasonable but it is really essential. Many
hackers have stolen information by losing awareness of information technology.
That even happens to many famous technology companies and it is one of ways
hackers often use.
CONCLUSION
From an export trading company, Li & Fung has become a global export trading
company and famous for the supply chain management. That is because the
company has used a reasonable strategy especially strategy relating to the
development of information technology. Li & Fung also know that
technological advances have allowed business to take advantage of growing
market opportunities (Sloman. J, 2005). The companies have continuously
applied new software to serve businesses as well as complete the supply chain.
Therefore, the management of Li & Fung decided the technology should come
within the company. This concept leads goals of Li & Fung in the following
years. It is can be said, Li & Fung is the typical company in applying MIS
successfully.
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REFERENCE
1. Chaffey. D & Wood. S., (2005) Business Information Management:
Improving Performance using Information Systems. England: Marketing
Insights Limited and Steve Wood.
2. Elliott. G., (2004) Global Business: Information Technology. England:
Pearson Education limited.
3. Lucey. T., (ed.) (2005) Managing Information Systems. London:
Thompson
4. Botha. J., (2004) E-commerce. Republic of South Africa.
5. Thanasakit. T., (2003) E-commerce and Culture Values. USA: Idea
Group Publishing.
6. Chakravarty. A & Eliashberg. J., ( 2005) Managing Business Interfaces:
Marketing and Engineering Issues in The Supply Chain and Internet
Domains. Germany: ISQM
7. Elliott. T., (2008) Website 411: Business Survival in the Internet
Economy. USA: Infinity.
8. Sloman. J., (2005) The Economic Environment of Business. England:
Pearson Education Limited.
9. Harvard Business Review, 01 October 2002.
10. Palmer. A & Hartley. B., (ed.) (2002) The business environment.
Berkshire: Mc Graw- Hill education
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