1. Company background
of TAL.
TAL is the world leader in the production of innovative clothes that combine style, comfort and functionality. TAL headquartered in Hong Kong. TAL specializes in the manufacture of quality men’s and women’s garments for the world’s leading brands. Currently TAL produces 1 out of 6 dress shirts sold in the USA. The annual production is 30million pieces of shirts, 10 million pieces of polo shirts, 10 million pieces of pants.
TAL uses several methods with technology to shorten the lead time and enhance the efficiency, which are X-docking, VMI, CPFR, Speed to market, FRM, Made to measure. For more details about the technologies and methods, please refer to question 5 & 6.
From wrinkle free and stain resistant treatments, to every aspect of garment manufacturing technology TAL leads the way and sets the industry standards. With over 60 years of industry experience TAL understands the needs of our customers and tailor our processes to meet those specific needs. TAL applies the same commitment to innovation to our Supply Chain Solutions as to its product development, ensuring that it delivers consistently high quality garments quickly and effectively, to any market in the world.
Every TAL garment reflects its ongoing commitment to product innovation, quality and value. TAL works closely with its customers and top designers to ensure its clothes combine the style, comfort and performance that today’s consumers demand.
TAL's product range includes convenient washable and non-iron wool or cotton pants, high quality dress shirts, superb polo shirts, functional outerwear, and tailored suits with traditional hand stitching. Plus, of course, our world-renowned, and unsurpassed, wrinkle free shirts and blouses.
Annual Production Capacity
Shirts - 30 million pieces
Polo Shirts - 10 million pieces
Pants - 10 million pieces
Blouses - 5.6 million pieces
Outerwear - 0.9 million pieces
Suits 220,000 sets
Here is a brief timeline about TAL.
Shirts - 30 million pieces
Polo Shirts - 10 million pieces
Pants - 10 million pieces
Blouses - 5.6 million pieces
Outerwear - 0.9 million pieces
Suits 220,000 sets
Here is a brief timeline about TAL.
In 1994: first garment manufacturing company to win the governor’s award for industry
In 1996: won Hong Kong for Export Marketing
In 1999: outsourcing ERP solution
In the following parts, we are going to introduce more about TAL.
In the following parts, we are going to introduce more about TAL.
2. The dynamics of the apparel value
chain and how the global apparel industry is classified as a buyer-driven
industry.
Dynamics:
China joined the WTO
After China has joined WTO, the barrier of import and export has been lowered. Therefore, the competition of global apparel industry has become more keen than before.
Empowered consumer
Since many options for customers, the customers can easily to shift to the other companies, therefore they have a larger bargaining power. And the Internet provides the a larger amount of information for customers, then customers can have full information of all products and they can make comparison. among their options.
Globalization
Globalization is a large trend that the companies outsourced some production processes to developing countried for lower labor and other costs.
Since many options for customers, the customers can easily to shift to the other companies, therefore they have a larger bargaining power. And the Internet provides the a larger amount of information for customers, then customers can have full information of all products and they can make comparison. among their options.
Globalization
Globalization is a large trend that the companies outsourced some production processes to developing countried for lower labor and other costs.
Technology
Since the technologies became more advanced, manufacturers can also get the sales data from the stores through some systems e.g. Point-Of-Sales. Also, they can use ERP to control the production process, and others technologies to provide more value-added services to enhance the efficiency.
Government policy and regulation
For most of the developing countires, they are less regulated then the manufacturers can easily establish the plants there and hire more labor with lower costs and rent or buy more lands for the plants. It is an attractive point for companies to set up production plants in developing countries. China is an good example in 1990s, and now, some are moving to western part of China for the same reasons because the cost increased in Shanghai and other countries had become more developed.
Buyer-driven industry (Pull-strategy):
Since the technologies became more advanced, manufacturers can also get the sales data from the stores through some systems e.g. Point-Of-Sales. Also, they can use ERP to control the production process, and others technologies to provide more value-added services to enhance the efficiency.
Government policy and regulation
For most of the developing countires, they are less regulated then the manufacturers can easily establish the plants there and hire more labor with lower costs and rent or buy more lands for the plants. It is an attractive point for companies to set up production plants in developing countries. China is an good example in 1990s, and now, some are moving to western part of China for the same reasons because the cost increased in Shanghai and other countries had become more developed.
Buyer-driven industry (Pull-strategy):
Since the consumers have lots of information about wide range of fashion or clothing, and the product life cycle of fashion has become shorter and shorter. The tastes of consumers change frequently. The change is from the designers to design the style or fashion for the season and push to customers to designers to guess and match the tastes and desires of the consumers of the season to pull the customers to them. We can say, the global buyers determine what, where, how, when to produce and the price. Therefore, retailers is the part which is the closest to the end-customers and they are more professional and have latest information to know or estimate what they need and want. Therefore, the manufacturers still need to follow to the retailers and we can imagine that the backward relationship in the supply chain.
When the WTO had established, the elimination of all textile quotas also arise the competition from countries around China and Mexico. Hong Kong manufacturers therefore needs to shift its expertise to higher value-added activities, which leads to merge the branding and marketing side of the business, shifting from OEMs (Original Equipment Manufacturers) to OBMs (Original Brand Manufacturers). Even though some manufacturers try to create some new features to attract the customers, some new technolgies are not generally accepted or needed by customers. We can see how large the bargaining power of customers is.
3. Based upon the Porter’s value chain model, describe how the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network with its major customer such as JC Penny.
We take JC Penny as an example in the below tables,
Tradition Value Chain:
New Value Chain:
Vendor-managed inventory
A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributor’s inventory levels. The manufacturer has access to the distributor’s inventory data and is responsible for generating purchase orders.
Vendor-managed inventory (VMI) was receiving increased attention as a means of supply chain collaboration in the retail industry.
VMI was a continuous replenishment program whereby the vendor created the
purchase orders based on the demand at the store or warehouse level.
It could be viewed as a backward replenishment tool whereby the vendor did the demand creation and fulfillment based on real-time front-line sales information. Reduced inventory and shorter replenishment cycles were the primary benefits offered by a VMI program.
Advantages of using VMI
After using VMI, TAL manages and controls the inventory of JC penny, then it can reduce the inventory, and shorter the replenishment cycles. Also, it can avoid back-order because TAL is very sensitive to the inventory. Then JC Penny can save much more time to concentrate on its own business, and save costs to control it.
After using VMI, TAL manages and controls the inventory of JC penny, then it can reduce the inventory, and shorter the replenishment cycles. Also, it can avoid back-order because TAL is very sensitive to the inventory. Then JC Penny can save much more time to concentrate on its own business, and save costs to control it.
4. How did Porter and Millar (1985) classify the impacts of IT on competition? Discuss the benefits and impacts of the use of IT initiatives to TAL, and how these initiatives have contributed to the strategic repositioning of the company in the apparel value chain.
1. Changing industry structure
Minimize threat of new entrant:
- Erect entry barriers by tying up distribution channels in the integrated value system.
- Increase entry barriers by using MTM, as it require tighter integration with the user’s value chain
Balance the power of buyers:
Erode supplier power by controlling major recourses in the value system (i.e manufacturing technologies and customer relationship)
2. Creating competitive advantages
3. Spawning new business opportunities
Benefit to TAL
Impact to TAL
Contribution to the strategic repositioning
- Increase switching cost by demanding exclusive supplier relationship in VMI
- Gain customers information to understand sales pattern at the store level
Erode supplier power by controlling major recourses in the value system (i.e manufacturing technologies and customer relationship)
2. Creating competitive advantages
- Create highly differentiated services offering
- Provide full-package supply solutions to transform the traditional commodity-like generic products
- Bundle information with physical product package, creating barriers to limitation.
- MTM system product provides additional source of differentiation.
3. Spawning new business opportunities
- Creation new business opportunities
- Providing logistics and supply chain management as stand-alone service offerings
- Venture into design and marketing activities in the apparel industry
Benefit to TAL
- Gain the exclusive supply contracts from its retailer
- Study the sales information, engaged other customer in the retailer business
- Able to provide other value-adding services
Impact to TAL
- Increase the cost of maintenance the I.T. system
- Capital-intensive
- Involve huge human-resource (e.g. need to set up extra IT department and hire expertise)
- Cost involved to train staff to be multi-skill
- Hard to coordinate the staff from different educational background
Contribution to the strategic repositioning
- Lowering cost
- Enhancing differentiation
- Changing competitive scope
5. Go to www.talgroup.com, find out more about the Company’s latest development on new technologies and business innovation. Report your findings.
Innovative Supply
Ensuring the the shelves are always stocked with the garments that customers desire is essential to our customer.With TAL's continous replenishment model, fabrics and accessories are procured based on demand forecasts provided by the customer. Appropriate levels of JIT material enables TAL to streamline the production process and continuously deliver the right products at the right time avoiding lost revenue due to lapses in product availability.
X-Docking system
- Working in close relationship with their customers to produce a “ replenishment model” based on relevant sales data, market trends and seasonal variations.
- An automated system sends alerts to TAL and customer when there are deviations from the replenishment model.
- TAL and customer then collaborate to reach a consensus of the “correct replenishment quantity.
- Working in close partnerships with their customer and combining their industry expertise, they can able to help their customers to realize the full benefits of an effectively managed supply chain.
- In a VMI setting, inventory on the customer’s side, either at the warehouse or in the store, is monitored directly by TAL. Stock is then replenished to achieve inventory turn and service level that is most appropriate for the business nature of the customer.
- With our advanced Store VMI service, direct POS links with our customer’s stores combined with TAL’s sophisticated pack and ship-to-store systems, mean that we can deliver our products direct to each store before our customers even know they need them, and offer costs savings of up to 15% through reduced inventory and operational costs.
Technologies:
An innovative sewing technology utilizes adhesives along the seams to prevent pockets, cuffs, arm-holes and plackets from puckering.
With EZCOOL treatment moisture is easily drawn away from the body to keep you cool and comfortable. The applied treatment allows the garment to dry twice as fast as a normal cotton garment with the additional benefits of being wrinkle-free.
TAL’s patented expandable waistband technology imparts just the right amount of natural elasticity to provide better breathing and comfort throughout the day. Designed for maximum performance the natural elasticity lasts for the lifetime of the garment.
TAL’s cutting-edge DriXpert treatment provides excellent moisture management to keep you cool and dry regardless of the day’s activities. Using a one-way transportation process, moisture on the skin is wicked through the garment onto the outer surface of the fabric where it quickly evaporates.
6. Definition of terms:
a) Forward Integration vs Backward Integration
A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it will result in improved efficiency and cost savings. For example, backward integration might cut transportation costs, improve profit margins and make the firm more competitive.
By way of contrast, forward integration is a type of vertical integration that involves the purchase or control of distributors.
b) Push vs Pull
In logistics chains or supply chains the stages are operating normally both in push- and pull-manner. Push production is based on forecast demand and pull production is based on actual or consumed demand. The interface between these stages is called the push–pull boundary or decoupling point.c) Producers driven vs buyers driven
Buyer-driven GCC. They tend to have low barriers to entry. Producers are bound to the decisions of buyers through the functions of design and marketing, notably when retailing and brand names are concerned. The most significant sectors concern agriculture, garments, footwear and toys.
An original equipment manufacturer, or OEM, manufactures products or components that are purchased by another company and retailed under that purchasing company's brand name. OEM refers to the company that originally manufactured the product. When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part.
An original brand manufacturer, or OBM, is typically a company that sells an entire product made by a second company or including a component thereof from a second company sources as its own branded product. Selling the product of the second company under its own brand just adds a virtual extrinsic value to the product.
e) Economies of scale vs Economies of Scope
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, input, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.
Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well.
Economies of scope are conceptually similar to economies of scale. Whereas economies of scale for a firm primarily refers to reductions in the average cost(cost per unit) associated with increasing the scale of production for a single product type, economies of scope refers to lowering the average cost for a firm in producing two or more products.
f) EDI, VMI, MTM, CPFR, X-docking
Electronic data interchange (EDI) is an electronic communication system that provides standards for exchanging data via any electronic means. By adhering to the same standard, two different companies, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others).
Electronic data interchange (EDI) is an electronic communication system that provides standards for exchanging data via any electronic means. By adhering to the same standard, two different companies, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others).
Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product (business) provides certain information to a vendor (supply chain) supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location (usually a store). A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps.
Made to measure (MTM) typically refers to clothing that is sewn from a standard-sized base pattern. A tailored suit is a common example of a made-to-measure garment. The fit of a made-to-measure garment is expected to be superior to that of a ready-to-wear garment, because ready-to-wear garments are constructed to fit the manufacturer's definition of an average customer, while made-to-measure garments are constructed to fit each customer individually.
Collaborative Planning, Forecasting and Replenishment (CPFR) is a concept that aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain. Information shared between suppliers and retailers aids in planning and satisfying customer demands through a supportive system of shared information. This allows for continuous updating of inventory and upcoming requirements, making the end-to-end supply chain process more efficient.
Cross-docking (X-docking) is a practice in logistics of unloading materials from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between. This may be done to change type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles (or containers) with the same, or similar destination.
7. Conclusion
7. Conclusion
For TAL, the main concepts are accuracy, quick response, and innovative. TAL does more steps for the customers and keeps trying to provide more and the CEO said, some new technological features are ready already but they are just waiting for the maturity and needs of these new technologies. Within the company, employees showed their team spirit, and leadership. The senior employees are willing to teach the junior employees. To keep the operations success, internal communication is highly important too.
TAL succeeded because the customers realized that the quality services by TAL can let them focus on their own core business and TAL is professional in supply chain management and also the network and technologies are already built. Economically, both of them can share the benefits of specialization. TAL, as an innofacturer, it keep spending money on R&D about new technologies on clothing and also seizing the trade of the customization. Therefore, it achieved the glory that every 6 clothes were sold in US, one of them is made by TAL.
Reference:
1) Technologies. TAL Group - The Innofacturer. Retrieved on Mar 20, 2014. from http://www.talgroup.com/en/popups/tal_technology_popup.html
2) "Backward Integration." Investopedia. Retrieves on Mar 27, 2014. from http://www.investopedia.com/terms/b/backwardintegration.asp
3) "Push vs Pull." Wikipedia, the free encyclopedia. Retrieved on Mar 27, 2014. from http://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy
4) "Producer and Buyer-driven Value Chains." Producer and Buyer-driven Value Chains. Retrieved on Mar 20, 2014. from http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/producerbuyergcc.html
5) "OEM." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/OEM
6) "Original Brand Manufacturer." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Original_brand_manufacturer
7) "Economies of Scale." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Economies_of_scale
8) "Economies of Scope." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Economies_of_scope
9) "Electronic Data Interchange." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Electronic_data_interchange
10) "Vendor-managed Inventory." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Vendor-managed_inventory
11) "Made to Measure." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Made_to_measure
12) "Collaborative Planning, Forecasting, and Replenishment." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Collaborative_planning,_forecasting,_and_replenishment
13) "Cross-docking." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Cross-docking
Reference:
1) Technologies. TAL Group - The Innofacturer. Retrieved on Mar 20, 2014. from http://www.talgroup.com/en/popups/tal_technology_popup.html
2) "Backward Integration." Investopedia. Retrieves on Mar 27, 2014. from http://www.investopedia.com/terms/b/backwardintegration.asp
3) "Push vs Pull." Wikipedia, the free encyclopedia. Retrieved on Mar 27, 2014. from http://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy
4) "Producer and Buyer-driven Value Chains." Producer and Buyer-driven Value Chains. Retrieved on Mar 20, 2014. from http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/producerbuyergcc.html
5) "OEM." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/OEM
6) "Original Brand Manufacturer." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Original_brand_manufacturer
7) "Economies of Scale." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Economies_of_scale
8) "Economies of Scope." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Economies_of_scope
9) "Electronic Data Interchange." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Electronic_data_interchange
10) "Vendor-managed Inventory." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Vendor-managed_inventory
11) "Made to Measure." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Made_to_measure
12) "Collaborative Planning, Forecasting, and Replenishment." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Collaborative_planning,_forecasting,_and_replenishment
13) "Cross-docking." Wikipedia. Retrieved on Mar 24, 2014. from http://en.wikipedia.org/wiki/Cross-docking
