Hero Honda Case Study

suppliers of various goods with the traders from all around the world and secondly, it has its own manufacturing sites where it manufactures various goods. The most important asset of this company is its strong relationship with more than 2000 suppliers in over a dozen of East Asian countries. The Network, coupled with its trader knowledge, capabilities and strength of the countries and individual factories in it, provided its customers with a wide variety of manufacturing options which has enabled them to achieve better price and quality. Network constitutes of two important but intangible assets, relationship with factory owners and managers and knowledge of manufacturing capabilities, specially skills and business practices of each country and each supplier. And this relationship conferred its credibility with suppliers. Suppliers too, gave priority to orders from Li & Fung as the suppliers believe that they would pay on time and would not reject finished goods for spurious reasons.

Without common identity as Li & Fung, customers, foreign buyers would have had to use the same factory for several orders, or do so even without the benefit of mutual trust. Through Lu & Fung, they gained access to good relationship with many factories and contributed to the maintenance of these relationships. Knowledge allowed Li & Fung to help customers choose among the manufacturing options, its network provided. There are various features that helped the company to provide values to both the customers and suppliers, some of which are as follows:

a) Sourcing: With their knowledge and expertise, they efficiently matched suppliers with customers and even recommend several suppliers to choose from to their customers.

b) Value Added Services: They themselves monitor the whole process of production to meet desired quality and on-time delivery.

c) Quality Assurance: They sent their experts to visit the suppliers at least 4 times during the production process. The first visit is done before the production begins. It is done to inspect raw material and collect each sample for laboratory test. The second visit is done to catch flaws in the cutting and sewing process. The third visit is done to check pressing and packing activities. The final visit is given when 4/5th of the packaging is done. Few samples are taken randomly and tested to access whether they meet the standards or not. If the standard is not met, they would return the good and then ask the supplier to check it themselves. This way, they ensure that the required quality is being met.

d) Production monitoring: To speed up the delivery of the goods, they often work with the suppliers to create a production schedule. They would sent their engineers to work with the suppliers and they would even provide the required expertise to the supplier and even suggest them the way of getting the raw material for the production.

e) Raw material and component sourcing: They are often found advising suppliers on how to obtain raw materials at a quality and price that suite each customer preferences.

f) Customized service offerings: They always work with the customers through the whole process of product development, right from the designing session.

Most of the products that they produce are labor intensive. So, the cost of labor always plays the most important role in the production process. Their main focus has always been to find the ways of cutting costs on labor without compromising the quality of the product. The product should meet the standard mentioned by the customers and at the same time will have to be cheap enough to be competitive in the market. In order to meet these needs, they search for the manufacturing site where the cost of production in minimum (where the labor cost is minimum). And, since they have the good knowledge on the cost of labor in different countries, they are able to meet the desires of their customers. So, to have the knowledge of the labor cost on various countries is crucial for them to maintain the cutting edge.

2. Should Charles Ho (Li & Fung's HX division manager) send Classique's order to Qingdao, China, or the Philippines? If he sends the order to China, should he ask the HV division to supervise it? If he sends it to China and has his own staff supervise it, how many visits should they make to the factory--two, three, or four? Consider the division manager's personal interests, as well as those of the customer and of Li & Fung.

Charles Ho has considered two production sites for the