Navigating through an uncertain tariff landscape and building an end-to-end digital supply chain of the future

Transcription

1 Supply chain in 2019 and beyond: Navigating through an uncertain tariff landscape and building an end-to-end digital supply chain of the future Marc Compagnon, Group President, Li & Fung ICR Conference Grande Lakes, Orlando, Florida January 2019

2 About Li & Fung 2

3 Li & Fung Global Network Over 230 offices, a network of suppliers in over 50 economies and 17,000 employees Trading EUROPE Logistics Hong Kong Headquarters Bulgaria France Germany Italy Jordan Lithuania Netherlands Portugal Romania Spain Turkey UK THE AMERICAS Brazil Chile Dominican Republic Guatemala Honduras Mexico Nicaragua Peru USA AFRICA Egypt Madagascar Mauritius Morocco South Africa 3

4 Li & Fung Ecosystem Our ecosystem of partners reaches more than US$2 trillion dollar of retail sales 4

5 Global trade jitters and retail disruption: The new norm 5

6 Global trade jitters and retail disruption how to drive growth? Changing Global Economics Emergence of new Low Cost Countries Exchange rate fluctuations Trade agreement realignment Rising Costs Rising Wages Greater margin pressure Inventory Risk The Online Effect Acceleration of consumer s shift to online for one-stop shopping Online businesses focus on growth instead of profits Sudden & unpredictable shifts in global trade need geographic agility Need to optimize sourcing footprint, leverage scale and eliminate waste Need improved product & design to counter the online channel s scale advantage Omni-Channel Acceleration Combinations of online and offline in offering Assortment complexity with channel-specific product Wholesale channel conflict Speed to Market Wins Speed and agility lifting margins more than ever before Fast-fashion retailers leading in profitability Off-price retailers gaining share Data, Data, Data Digital! Big Data enabling more accurate product and marketing decisions Better able to both predict and respond More SKUs, lower order size & MOQ New speed models & calendar impact Integration of consumer analytics into design and supply chain 6

7 Zooming into the shifting global sourcing landscape: The trade dispute The US announced tariffs of 10% on a range of products made in China worth US$200B. A second step of 25% tariffs on all imports may follow in 2019, although talks are still under way Jul 6 Aug 7 Sep 24 Could take effect 2019 No. of Tariff Lines ,031 All Amount Impacted US$34B US$16B US$200B Remaining US$523B Additional Tariff % 25% 25% 10%, potentially rising to 25% Relevant Impacted Items: n/a n/a Broad array of consumer items, including certain lines of apparel, furniture, and accessories 25% All consumer items 7

8 Diversified sourcing strategy Global network of 50+ production countries to mitigate the impact from US-China trade dispute Strategic relationships going back decades with local vendors and business communities Proven ability to move quickly among countries of production The Americas Brazil Canada El Salvador Guatemala Haiti Mexico Nicaragua USA Venezuela Europe Austria France Germany Italy Latvia Luxembourg Macedonia Poland Portugal Romania Spain Switzerland Turkey Ukraine UK Africa Egypt Kenya Lesotho Madagascar Mauritius Tunisia Asia Australia Bangladesh Cambodia China Hong Kong India Indonesia Israel Japan Jordan Macau Malaysia Myanmar Pakistan Philippines Korea Singapore Sri Lanka Taiwan Thailand Vietnam 8

9 Diversification away from China Total Sourcing Business from China 2016: 54% 2017: 53% 2018: 49% Apparel Footwear Hardgoods From China to other countries: Bangladesh Vietnam India Pakistan Central America Vietnam India Indonesia Italy Spain Cambodia Indonesia Philippines Taiwan Jordan Philippines Turkey Eastern Europe 9

10 Case Study Production Migration Over a 5-year horizon, lowered China dependency to offset cost pressure Continues to expand in Vietnam, India, Bangladesh and Indonesia 10

11 Li & Fung s answer: A Digital Supply Chain to drive agility and speed

12 Our digital journey is core to our strategy a central part of this is making it easier for our supply chain partners to do business 12

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14 LF as the Catalyst 14

15 Where are we in the Transformation of the Apparel Supply Chain 15

16 We are Building 6 Integrated Tools to be Fast and Innovative Materials Marketplace Mills Selecting Fabrics Sharing Collections Fabric Data Overview Fabric Evaluation Digital Libraries Digital Assets Collection Avatar Fabrics Trims Blocks and Patterns Collaborate Project / Style Tracking Organize Digital Assets Design Collaboration Virtual Line Selection Dynamic Costing Cost breakdowns Pre-costing Multiple quotes Final cost for production Capacity Management Capacity requirements Rolling 13 months Searching and releasing capacity to meet demand Quality Management Resource scheduling optimisation Transparent quality and inspection risk management 16

17 These 6 Tools Provide the Foundation to Support Speed and Creativity 17

18 Introducing LF Speed Models Significant speed improvement leveraging digital Includes time for fabric development & production Allows options for physical sampling / fit LF ACCELERATE 20 WEEKS DESIGN TO SHIP Offering 4X speed operating fully digital process Fabric managed through postponement structure E2E digital journey supplemented by in-house sourcing LF EXPRESS 10 WEEKS DESIGN TO SHIP Matches available designs, fabric and cut & sew E2E digital journey supplemented by in-house sourcing LF SELECT 4-5 WEEKS DESIGN TO SHIP 18

19 We can deliver the following results utilizing the integrated digital platforms Speed Cost Innovation 25% 3% 15% Calendar reduced from 40 weeks to 30 weeks Fabric 3 5% reductions Construction 1 3% reductions Number of options and colorways considered per style 19

20 In conclusion the Li & Fung digital platform will GALVANIZE our supply chain partners into a FAST, EFFICIENT and INNOVATIVE way of working 20

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22 Li & Fung in numbers Turnover * Number of Employees Exporting from Investment Grade US$13.5B >17,000 >50 countries *FY17 Results (Continuing Operations) 22

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24 Thank you. Questions? 24

25 Disclaimer The information contained in this presentation is intended solely for your personal reference. Such information is subject to change without notice and no representation or warranty express or implied is made as to, and no reliance, should be placed on, the fairness, accuracy, completeness or correctness of the information contained in this presentation. This presentation does not intend to provide, and you may not rely on this presentation as providing, a complete or comprehensive analysis of the Company s financial or trading position or prospects. None of the Company nor any of its respective affiliates, advisors or representatives shall have any liability (in negligence or otherwise) whatsoever for any loss or damage howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. This presentation contains projections and forward looking statements that may reflect the Company s current views with respect to future events and financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements which are subject to various risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities or financial instruments or the provision of any investment advice, and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation thereto, nor does this presentation constitute a recommendation regarding the securities or financial instruments of the Company. 25