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