Best Trade/Supply Chain Finance Solution Highly Commended: Li & Fung Limited

Published: Apr 2021


Photo of Ed Lam and Denis Savastano, Li & Fung Limited.

Denis Savastano

Group Treasurer

Li & Fung Limited is an integrated global supply chain leader in consumer products, including apparel, footwear, accessories, furniture and household products. Li & Fung is owned by the Fung family and Singapore-headquartered GLP Pte Ltd, a leading global logistics warehouse operator and investor.

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Supplier payment services solution achieved in record time

The challenge

The unprecedented COVID-19 pandemic brought many production countries into lockdown and the global supply chain came to a grinding halt. Factories had to close or minimise production to keep workers safe, while also being faced with a stoppage of orders as retailers delayed deliveries. Amidst this difficult situation, factories continued to have payment obligations for operating expenses. Domestic financing options that were available before the pandemic quickly became scarce and suppliers were faced with tight liquidity. Li & Fung wanted additional solutions that would provide support to its long-term suppliers and cement its relationship as a valued partner throughout the crisis.

The solution

Li & Fung worked with DBS to provide a solution that would enable its suppliers to gain access to short-term liquidity in their supply chain quickly.

DBS offered an early payment scheme for suppliers to obtain funds against Li & Fung’s receivables via the supplier payment services (SPS) product. Obtaining liquidity was time-critical for suppliers. To achieve a swift turnaround in releasing funds to the suppliers under this programme, DBS adopted a simplified know-your-customer (KYC) process and developed in-house digital onboarding tools that reduced a one-week set-up process to a matter of hours.

Best practice and innovation

Fast execution of the solution was key for Li & Fung to ease its suppliers needs,given that it was critical for the suppliers to gain access to liquidity quickly amidst the pandemic.

A central agreement with Li & Fung and simplified documentation requirements enabled faster activation of the programme. Supplier documentation was kept to a minimum, with key payment information submitted and accompanied by Li & Fung’s recommendation for onboarding to the programme.

DBS also developed an in-house digital bulk supplier onboarding tool which facilitated supplier set-ups and replaced a manual sequential process that took up to a week with a straight-through process that took within an hour. The simplified documentation and seamless onboarding process enabled the bank to expedite delivery of this time-critical programme.

Li & Fung was able to position itself as a reliable and supportive partner for its suppliers throughout the crisis, providing liquidity to the company at a competitive price and helping it to overcome working capital constraints.

Key benefits

  • Unlock trapped liquidity at competitive pricing.
  • Simplified documentation and ease of supplier onboarding.
  • Scalable, and a key solution for Li & Fung to provide liquidity support to its partners.

“This initiative further supported our suppliers, while maintaining our strong relationship with our key suppliers during unprecedented times. The suppliers have been able to unlock liquidity amidst the COVID-19 pandemic and receive early payment at a competitive rate. The programme also lays a foundation to our Group’s initiative to develop and unlock potential in the trade finance space,” says Ed Lam, Group CFO.

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Wanshun Kwak

Vice President, Asian Corporates, Global Transaction Services
DBS Bank Ltd

Amid the unprecedented COVID-19 crisis, Li & Fung wanted to support its long-term suppliers as valued partners. DBS worked with Li & Fung to provide a solution that would enable its suppliers to gain access to short term liquidity in their supply chain quickly.

As a purpose-driven bank, DBS was also committed to standing by our client in their time of need. We designed a balanced solution that combined ease and speed of implementation to enable suppliers to obtain liquidity quickly against Li & Fung receivables.

DBS continues to support Li & Fung in strengthening and maintaining relationships with key suppliers through the ongoing pandemic.

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