Cross-Border Intermediation
Trading companies had traditionally played the primary role in orchestrating the physical flows
of apparel from factories in exporting countries to retailers in importing countries. They continued to
be important cross-border intermediaries, although the complexity and (as a result) the specialization
of their operations seemed to have increased over time. Thus, Hong Kong’s largest trading company,
Li & Fung, derived 75% of its turnover from apparel and the remainder from hard goods by setting
up and managing multinational supply chains for retail clients through its offices in more than 30
countries.
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For example, a down jacket’s filling might come from China, the outer shell fabric from
Korea, the zippers from Japan, the inner lining from Taiwan, and the elastics, label, and other trim
from Hong Kong. Dyeing might take place in South Asia and stitching in China, followed by quality
assurance and packaging in Hong Kong. The product might then be shipped to the United States for
delivery to a retailer such as The Limited or Abercrombie & Fitch, to whom credit risk matching,
market research, and even design services might also be supplied.