Competing in a Flat World: Building Enterprises for a Borderless World

by Victor K Fung, William K Fung and Yoram (Jerry) Wind

                                                              
 

This book is basically about Li and Fung which is a company based in Hong Kong that facilitates networks in the global garment manufacturing and retailing industries. Without owning any factories they have managed to grow in turnover from US$531 million in 1992 to US$8.72 billion in 2006. It is an amazing and compelling story of how global supply chains now work and what skills are needed to orchestrate and manage a network within those global chains.

Li and Fung has over 3000 manufacturing suppliers that it deals with on a regular basis and it creates temporary, medium term or long term networks to deal with a customer. If for example you wish to place an order for a certain number of garments then the network that you get to supply those garments will vary depending on which day or week you contact Li and Fung with the order. The companies that supply the raw materials, the design capabilities, the manufacturing process and the logistics support will all be different depending on your needs and how busy the various suppliers are the day or week they are contacted.

By not investing in manufacturing plants Li and Fung have freed up capital to expand rapidly and not be tied down to any one location or factory. This has given them phenomenal growth. While a Sci-Fi novel may not be a business reference book, the ideas contained in this amazing novel help us shift our perspectives on ideas of humanity using a simple idea that human minds can be digitised and stored. This idea leads to a number of possible changes in how humans can live:

    • Reduced their core vendor numbers by 40%
    • Reduced average manufacturing costs by 15%
    • Increased on time deliveries from 40% to 95%
    • Reduced lead times by 21 days
    • While improving overall quality

The book gives amazing insight into the overall strategy but understandably little operational detail as to how this all works in practice. The overall story is compelling although the second half of the book is much less interesting and slides into a few stories that do not have much value and rely on platitudes rather than hard facts and research. One question that shines through though is what effect will climate change and carbon trading have on the supply chains described which are often extended and tortuous in order to access the lowest costs at each step and get around trade laws. Extra costs in transport will reshape how this works but I am sure that Li and Fung and their ilk will nimbly change what they do, albeit leaving behind quite a lot of wreckage in the form of invested manufacturing capital which is no longer in the right place.

I would heartily recommend this book to anybody who wishes to understand how these global supply chains and their orchestrators work. It is worth the price and the effort for just that information and understanding.

If you are genuinely interested in this area then I would also recommend reading The World Is Flat 3.0: A Brief History of the Twenty-first Century by Thomas Friedman. It is referenced several times in the text of Competing in a Flat World and gives a more detailed and nuanced discussion of the drivers that underpin some of the change.