Dr Victor Fung, chairman of high profile Hong Kong trading company Li & Fung, sees this region as the driving force for the Chinese mainland's export activities

Hong Kong has a critical role to play in supply chain management (SCM) for China, the head of one of the city's largest trading firms told a recent logistics conference.

Dr Victor Fung, chairman of Li & Fung, was giving a keynote speech at the 2005 Logistics Cooperation and Development Conference, attended by over  440 SCM professionals from Hong Kong, the Chinese mainland, Taiwan and Macau. He spoke about the changing face of global distribution, and examined the roles played by Hong Kong, the mainland, Macau and Taiwan in regional SCM.

Dr Fung said information technology was the key in a world moving towards "export logistics", where "assortment and pre-packing are done from this side of the ocean" - processes that include "just open the container and truck out" with "loaded duty paid".

"Ten years ago we talked about vertical integration where everything is done in one location. But the world is going in the opposite direction now with smaller and smaller consignments," Dr Fung said. "What's happening right now is that all value-added services from pre-ticketing to price tags are done from our side and put in pre-packed pellets before shipment, so that once the goods touch down in the US or Europe, they are loaded onto trucks and go straight to the individual stores." 

Delivering efficiencies

This Li & Fung successful model of "landed-in store delivery" results in substantial savings in SCM. Additionally, low production costs, fast turn-around and compressed delivery time cut out the two to three weeks that the goods are stuck in the warehouses in the US or Europe.

Against this backdrop of export logistics, Dr Fung spoke about the different roles played by Hong Kong, the mainland, Taiwan and Macau.

"We are all in a win-win situation. I see Hong Kong, Taiwan and Macau being the driving force of the mainland's export activities. All the places perform the same SCM functions but they emphasise different products. For example, Hong Kong is more into moving consumer products while Taiwan is into technology products," Dr Fung said.

"Our concern," he added, "is to think hard how to make the entire SCM work from the raw materials to the consumer. This region has all the right ingredients to make it work and I want it to be a test ground for these SCM ideas."  

Details in "In store delivery" and "export logistics" the new buzz