Fung Group CTO on the critical importance of making sure your supply chain can handle holiday season demands
This story is part of our #SupplyChainHero series. This holiday season, we’re shining a spotlight on the behind-the-scenes heroes who make event seasons possible for their companies year-round.
November marks the unofficial start of the holiday shopping season in the United States, when savvy shoppers swarm stores and websites on and after Thanksgiving to nab discounts and exclusives. But it’s China’s Singles’ Day – celebrated a few weeks earlier, on November 11 – that officially ignites the holiday retail frenzy.
These retail events generate massive volumes of transactions within a short period of time. Speed and accuracy are non-negotiable. Having scalable, tested and reliable supply chain management solutions in place to accommodate sudden, substantial spikes in activity is critical.
Hong Kong-based supply chain solutions company Li & Fung oversees logistics for Singles’ Day and encountered an issue during the event two years ago. Manuel Fernandez, Group Chief Technology Officer, Fung Group, shares how the team refined their supply chain solutions, and adapted their technology strategy to address these challenges for the 2018 holiday season and beyond, and offers advice for companies facing similar issues.
What services does Li & Fung provide to its clients?
Li & Fung is probably one of the largest supply chain companies in the world. In our logistics business, our customers come to us most for our reliability and meeting service levels. That’s why it’s so important that our infrastructure runs smoothly and is scalable. We work with 15,000 suppliers and thousands of customers, and service excellence is what they have come to expect – it’s why they choose us.
What does the Singles’ Day shopping event mean for Li & Fung?
For those who don’t know Alibaba, they have a Singles’ Day on 11/11 in China – it’s the Cyber Monday of Asia. Imagine Cyber Monday and Black Friday added together and then double it. That was last year’s Alibaba’s Singles’ Day. We’ve seen growth there every year, three to four times the volume, specifically on logistics. We’re serving B2C in China, and so we get requests from Alibaba and all the brands around them and get to deliver – which is great for business but puts a lot of strain on our applications and infrastructure.
Li & Fung encountered a snag on Singles’ Day in 2017. Can you expand on that?
We had a slight issue – we get about 50% of the orders within the first hour, and then about the other 50% over the next 12-14 hours and then we get three days to deliver. We had done testing and were ready for the volume, but not the spike. We hit a snag over the first 12 hours that reduced performance and slowed down incoming orders. That caused us chargebacks and other issues, and unfortunately some slow and late deliveries. That was a very big challenge – we came under a lot of scrutiny, as you can imagine. Luckily, we still were able to meet all our KPIs and service level agreements.
What measures did you to take to ensure this wouldn’t be an issue in the future?
The experience prompted us to do a massive amount of testing with our customers and suppliers for 2018 and beyond. We worked with IBM services and development teams to address the performance issues, we looked at scaling further, and at debugging and improving performance.
Did the preparation pay off?
Yes, the following year was much, much better. After the issue in 2017, we had about six months of performance testing in 2018 with all our partners. Over that period, we were able to handle more volume than we expected — about 1.5 million transactions an hour, sustained over 6-8 hours.
When we went into 11/11 in 2018, we processed quite close to that per hour for a prolonged period — six, seven hours. In fact, our solution processed 12 million inbound and 17 million outbound transactions that day, peaking at 750,000 per hour — almost four times the 3.3 million inbound and 4.6 million outbound processed the previous year, which had peaked at 180,000 per hour.
What advice can you share for companies looking to prepare their supply chain for upcoming holidays or events?
When you find a product that matches your needs, make sure to test it for scalability. We thought we were covered in that area when we first bought the product, but we never imagined we’d have 400 times the volume in one day than we had when we purchased.
Also, stay involved with the product development team. We were functioning alone for a few years thinking everything was fine. When we got into a bit of trouble with scaling and worked with the IBM services and development teams on tuning, we found we’d probably gone off mark in how we were using the product.
What’s next for your supply chain strategy?
Our goal is to create the supply chain of the future that helps our customers navigate through the digital economy. One thing we’re doing now is digitizing the supply chain.
And while reliability is great, it’s really about scaling and performance for us. One of the things we’re looking at doing with our infrastructure is moving into cloud and containerizing. We see that as helping us in many ways – one is reliability, the other is scalability at lower cost. It’s not just the amount of transactions that flow through, but the quality and speed at which they flow through as well.