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