Q1. Background of TAL

TAL Apparel Limited is a Hong Kong-based apparel manufacturer which established in 1947. It is the world leader in the production of innovative clothes that combine style, comfort and functionality. It specializes in manufacturing quality men’s and women’s garment for the world’s leading brands. Currently they produce 1 out of 6 dress shirts sold in the USA. TAL owned and managed a network of factories where located in Hong Kong, Thailand, Malaysia, China, Taiwan, Mexico and Indonesia. The main products produced by TAL include shirts, polo shirts, pants, blouses, outerwear and suits. Its major customers included department stores (J.C. Penney), specialty clothing stores (Brooks Brothers, Liz Claiborne, Polo Ralph Lauren and Banana Republic), and catalogue retailers (Lands’ End and L.L. Bean).

TAL has regarded itself as an “innofacturer”, as it is committed to innovation and supply chain solutions to ensure that it delivers high quality garments quickly and effectively.

The continuous innovation through investment in research and development has given TAL the technological edge that guarantees its garments deliver enhanced performance, and look great! From wrinkle free and stain resistant treatments, to every aspect of garment manufacturing technology TAL leads the way and sets the industry standards. TAL’s technologies also guarantee to offer customers the value-added clothes they need.

T

 
AL offer the following range of technologies:

- SofTAL Process ®
- TAL Pucker Free ® Seam Technology
- Dot.TAL ®
- WOR - nano technology
- DriXpert ®
- EZCOOL ™
- Emboss
- SofTAL ® Wool
- Expandable Waistband
 

TAL is adding value to its products through advanced supply chain solutions. This properly managed supply chain provides its customers with the speed and efficiency that TAL need to stay ahead in a competitive market. TAL is looking for shorter lead time, quick response to market trends, effective inventory management and reduced costs. So, it has worked in close partnership with its customers to develop innovative and highly responsive supply chain solutions. TAL has tailored its technologies and processes to meet each individual’s need in order to deliver products more effectively, anywhere in the world.

TAL applied the following supply chain techniques:

- Made to Measure

- FRM
- Speed to Market
- CPFR

- VMI

- X-Docking

- Replenishment

 

 

Q2. The dynamics of the apparel value chain and how the global apparel industry is classified as a buyer-driven industry

The dynamics of the apparel value chain and how the global apparel industry is classified as a buyer-driven industry

1.     The dynamics of the apparel value chain

1.1 Two types of value chains

Ø   based on the concentration
of power between buyers and suppliers

1. producer-driven value chains

2. buyer-driven value chains

In the past

q  Producer-driven value chains

q  In producer-driven value chains, usually transnational, manufactures play the central roles in coordinating production networks.

Ø  push system

Present

q  Buyer-driven value chain

q  Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks

Ø  power shift to downstream

Ø  pull system

1.2 Other dynamics

Ø   Globalization

q  Highly competitive

q  Globally decentralized factory systems

q  Low entry barriers

Ø   China’s accession into the WTO

q  Elimination of all textile quotas

 

 

 

 

 

2.     How the global apparel industry is classified as a buyer-driven industry.

2.1 Buyer-driven industry

Ø   buyers (retailers, marketers and branded manufacturers) play the key role in setting up decentralized production networks

Ø   in a variety of exporting countries such as some developing countries

2.2 Retailer:

Ø  exercise the main role at the design and retail stages

Ø  have higher power concentration

Ø  develop a higher entry barrier among members of the value chain

Ø  high entry barriers at the branding and retail stages will result in higher market power and profitability

2.3 Use of IT

Use of advanced information systems, retailers can:

Ø   gain real-time market knowledge from the front line

Ø   streamline supply chain operations at the back end

Ø   manage their extensive global sourcing networks

2.4 Suppliers and manufacturers:

Ø  weak members in the value chain

Ø  they have to compete in highly competitive and globally decentralized factory systems with low entry barriers

Ø  resulted in an ill-balanced and highly buyer-driven apparel industry on a global scale.

Q3. How the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network

Overview of Traditional model and TAL's VMI Model
In traditional model, the value chain activities between the two organizations are linearly and sequentially linked. Information quality degrades down the value chain, and coordination problems appear between the activities in the various stages.

The VMI model changes the traditional customers-initiative ordering process. With VMI system, TAL able to obtain the real time and front- line sale data from retailer. Then TAL can forecast demand on either store or warehouse level and automatically create purchase order. After checking the sufficiency of inventory, production will be started. Finally, products will be transited to retailer(J.C Penny) without confirmation of retailer.
With the VMI system, the sequential value chain between TAL and J.C. Penney has been transformed into an integrated and synchronized value network. The value activities of the two organizations are intertwined and allowing for multiple touch points for collaboration and information exchange.

Porter’s Value Chain Model: Traditional VS Integrated

JC Penney(TAL’s clients) can be used as example to show the difference between tradition value chain and value chain integrated by VMI.

Traditional Model:

Traditional Model:	Inbound Logistic	Operations	Outbound Logistic	Marketing and Sales	Service
TAL	Demand forecasting Forecast the demand of raw material based on past data. Purchase and receive Purchase and receive raw material in warehouse before having sales order. Shorten the order-delivery cycle	Production Manufactures garment based on JC Penney’s specification and needs Product packing Pack garment in proper way to ship	Delivery Delivers garment to  JC Penney
JC Penney	Order and receive Place order from TAL based on its own forecasting of sales. Receives garment from TAL	Control Monitor the sales and have inventory control. Placing  replenishment orders based on the customer demand	Distribution After re-packing, distribution centers deliver garment to retail outlets	Use traditional advertising to boost the sales	-Collecting feedback for product Enhancement. -Provide after-sale service.

Integrated Model:

New Model:	Inbound Logistic	Operations	Outbound Logistic	Marketing and Sales	Service
TAL	Ordering  order material based on front-line sales requirement	Create purchase order: The system create purchase order for JC Penny automatically -Start to manufacture garment without JC Penny’s confirmation -check inventory level and replenish	Pack and deliver product to JC Penny’s warehouse or retail stores	-based on the front-line sale information, TAL predict new demand trend -Give useful suggestion or idea to JC Penny	Allows a hands off approach for JC Penney
JC Penney		monitor the sales	Re-pack and deliver garment to retailer stores	Use traditional advertising to boost the sales	-Provide after Sales Service -Exchange the sales information with TAL

Porter’s value chain model can be divided into (1) primary activities and (2) supporting activities.

(1)The primary activities:
Inbound Logistics - involve relationships with suppliers and include all the activities required to receive, store, and distributing inputs.
Operations - are all the activities required to transform inputs into outputs for products and services.
Outbound Logistics - include all the activities required to collect, store, and distribute the output.
Marketing and Sales - activities inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase.
Service - includes all the activities required to keep the product or service working effectively for the buyer after it is sold and delivered.

(2) The supporting activities:
Procurement - is the acquisition of inputs, or resources for the firm from vendors
Human Resource management - consists of all activities involved in recruiting, hiring, training, developing, compensating and laying off personnel.
Technological Development - involve the equipment, hardware, software, procedures and technical knowledge to bear in the firm's transformation of inputs into outputs.

Infrastructure - functions or departments to serves the company's needs and link various parts together

References:

http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html

http://www.mindtools.com/pages/article/newSTR_66.htm

Q4 The benefit and impacts of VMI and MTM initiatives to TAL, and how these initiatives have contributed to the strategic repositioning of the company in the apparel value chain

A. Benefit of IT initiatives to TAL

1. Decrease the cost
Integrate and synchronize its operation with the major customers


2. Streamline internal operations
IT can avoid repetition so that it can streamline operations.


3. Manage external relationship with trade partner across the supply and demand chains of TAL

TAL take the main role of the supply chain as it is the sole of supplier of the product. It controls the whole of inventory monitoring and replenishment.


4. Facilitate financial transactions
Raw material purchase from suppliers garment sales to customers


5. Exclusive supply contracts from its retailer customer

By using VMI that block out all the competitors, it decreases the threat of substitute products and MTM allows mass customization that differentiate the products


6. Gain access to the real-time sales information at the store level

It can store lots of marketing information so that TAL can take reference.


7. Difficult entry barriers

The threat of new threats decrease. TAL is the first mover applied IT in the industry so they gain competitive advantages and avoid pure price-based competition in the intense apparel production sector.

 

 

 B. Impact of IT

Porter and Millar (1985) highlighted that IT can impact competition among business organizations in three ways:

1. Changes the industry structure (e.g. online stores: lower cost, enhance differentiation- MTM )

2. Develops competitive advantage (reach greater heights of competency)

3. Establishes/Spawning new businesses (variety of products or markets)

 

 

C. The impact and results of TAL’s info imitative

1. Changes of the industry structure
Minimize the threat of new entrants

Using MTM, which requires integration in value chain which brought close partnership with the retailers and IT solution providers to streamline the entire order-fulfillment process


Secondly, as the large investment in IT (VMI, MTM, ERP, etc.) so the entry barriers increased




Thirdly, reduce the power of buyers since it can gain the customers information to understand sales pattern at the store level so that they can engage other customer in the retail business
and also demanding exclusive supplier relationship in VMI so that increse the switching cost.


2. Creating product & service differentiation
(Competitive advantage)



Create highly differentiated services offerings

First, new IT provides full-package supply solution to transform the traditional commodity, like generic products.
Second, physical product package will be sold to customer by bundling more information

Third, MTM (Made-to Measure) also enhance differentiation in products and services, increase variety of products and provide more value added services.



3. Spawning new Business


Creating new business opportunities


Make new businesses technologically feasible
New venture into the design and marketing business of the apparel industry
Created demand for new product TAL began to design new shirts and handle the market testing
Create new businesses within old ones in which excess capacity and skills can be sold outside Provide an integrated logistics and supply chain management service to the others