The Tommy Hilfiger – Li & Fung case study demonstrates how firms can reap immense competitive benefits from adopting a more strategic and integrated approach to the concept of global sourcing (Chiang et al., 2012).
In the discussed case study, Tommy Hilfiger, the reputed U.S. based designer and marketer of casual fashions, sold its global sourcing group to Hong-Kong based Li & Fung, with the view to benefiting from substantial synergies with the expansive network of Li & Fung’s especially in the Chinese market.
On its part, Li & Fung was expected to benefit competitively from the purchase of the global sourcing group not only in terms of reinforcing its portfolio of sourcing business, but also in ultimately availing the required leverage to work with other global brands (Coyle et al., 2013).
Kocabasoglu and Suresh (2006) cited in Chiang et al (2012) argued that “the notion of strategic sourcing is defined as a construct consisting of four sub-constructs: strategic purchasing, inter-functional integration of purchasing, information sharing with suppliers, and supplier development” (p. 50).
The case study illuminates two of these constructs, namely strategic purchasing and inter-functional integration of purchasing information involving the two firms, with the view to improving supply chain agility and business performance in the context of resource- and efficiency-seeking international expansion strategy (Chiang et al., 2012).
This means that while Li & Fung benefits from strengthening its portfolio of sourcing business as well as leveraging its brand through working with other internationally recognized companies, Tommy Hilfiger benefits immensely from the integration of its purchasing offices within the greater network of a company that has over 70 offices in over 40 countries worldwide and territories, including many locations in mainland China (Coyle et al., 2013).
As a matter of fact, Tommy Hilfiger stands to benefit from such a transaction in that sourcing from the Chinese market is proving to be an attractive option due to the country’s abundant resources and cheap labor (Jiang & Tiang, 2009).
Put in another way, the integration of Tommy Hilfiger’s offices within the greater network of Li & Fung can be described as an effective global strategy that will enable Tommy Hilfiger to leverage its own unique competencies and at the same time benefit immensely from the locational advantages not only in China (Li & Fung has 19 offices in China), but also in other Asian and global countries.
Consequently, it is justifiable to argue that global sourcing in supply chain and logistics operations is one of the highly relevant strategies that a firm can use to attain competitive advantage.
Overall, although it is clear from the case study that Tommy Hilfiger will benefit from the sale of its global sourcing group to Li & Fung in terms of minimizing prices and enhancing quality, fulfillment, production cycle times, responsiveness and financial conditions (Jiang & Tian, 2009), and that Li and Fung will benefit from strengthening its portfolio of sourcing business as well as providing leverage to work with other brands (Coyle et al., 2013), both firms need to deal with the several challenges that continue to face global sourcing operations.
These challenges, according to the available supply chain management literature, include transportation, technological and capacity deficits in sourced locations, lack of adequate management systems and qualified personnel, language barriers, cultural variations as well as diverse trade regulations (Chiang et al., 2012; Jiang & Tian, 2009).
References
Chiang, C.Y., Kocabasoglu-Hillmer, C., & Suresh, N. (2012). An empirical investigation of the impact of strategic sourcing and flexibility on firm’s supply chain agility. International Journal of Operations & Production Management, 32(1), 49-78.
Coyle, J.J., Langley, C.J., & Novack, B.J. (2013). Supply chain management: A logistics perspective (9th ed.). Mason, OH: South-Western Cengage Learning.
Jiang, C., & Tian, Y. (2009). Problems and challenges of global sourcing: A study of Chinese manufacturing enterprises. Web.