Smarties: Q6. TAL - Definition of terms

Ø Forward Integration

Forward integration refers to a situation when a company controls distribution centers and retailers where its products are sold. In other words, forward (downstream) vertical integration refers to a situation when a company makes a decision to carry out distribution and/or retail functions within the distribution channel. A typical advantage of forward integration is that producers can cut steps in the distribution process and sell higher up in the distribution process. Producers can also keep more control over the distribution and pricing of their goods by selling to retailers or consumers directly.

Ø Backward Integration

Backward integration refers to a situation when a company controls subsidiaries which produce a few of the inputs used in the production of its goods. In other words, backward (upstream) vertical integration is a situation where a consumer of raw materials acquires its suppliers, or establishes its own facilities to guarantee a more reliable or cost-effective supply of inputs. Backward integration means the company is integrating in the direction away from the customer.

Ø Push System VS Pull System

Push system is a system in which we produce goods based on our best projections of what the market wants. Essentially the production of goods is scheduled and based on a plan with deadlines. We then push these goods to the market.

Pull System is a system in which the production of goods is initiated by the person or organization who consumes that good.

Essentially, push describes a situation where inventory is pushed to the consumer of the good, and pull describes a situation where inventory is pulled from the producer by the consumer.

Ø Producers driven value chains VS Buyers driven value chains

In producer-driven value chains, large, usually transnational, manufacturers play the central roles in coordinating production networks including their backward and forward linkages. This is typical of capital- and technology-intensive industries such as automobiles, aircraft, computers, semiconductors and heavy machinery.

Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries.This pattern of trade-led industrialization has become common in labour-intensive, consumer-goods industries such as garments, footwear, toys, handicrafts and consumer electronics.

Ø Original Equipment Manufacturer (OEM)

An original equipment manufacturer, or OEM, manufactures products or components that are purchased by a 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. In this usage, OEM means "original equipment from manufacturer".

Ø Original brand manufacturer (OBM)

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.

Ø Economies of scale

Economies of scale, in microeconomics refer to the cost advantages that a business obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

Ø Economies of Scope

Economies of scope is relatively a new approach to business strategy, and is heavily based on the development of high technology. Economies of scope, as defined by using same processes for producing similar products, can fit the batch-flow or group-technology processes; nevertheless, for best results the flexible-manufacturing should be adopted. Computer Integrated Manufacturing (CIM) allows lowering the setup-time and required tuning between products, so to be economically efficient for small batches of non-standardized products. In other words, companies can compete on product customization and short lead-time.

Ø Electronic Data Interchange (EDI)

EDI stands for Electronic Data Interchange. It is a standard communication protocol for system-to-system integration. Companies in a variety of industries use EDI to transmit business information electronically. Organizations that handle large volumes of data often use EDI to minimize data entry and share information with other systems within their organization.

Ø Vendor Managed Inventory (VMI)

Vendor Managed Inventory (VMI) is a streamlined approach to inventory management and order fulfillment. VMI involves collaboration between suppliers and their customers (e.g. distributor, retailer, OEM, or product end user) which changes the traditional ordering process.

Instead of sending purchase orders, customers electronically send daily demand information to the supplier. The supplier generates replenishment orders for the customer based on this demand information. The process is guided by mutually agreed upon objectives for the customer's inventory levels, fill rates, and transaction costs.

The goal of VMI is to align business objectives and streamline supply chain operations for both suppliers and their customers. The business value is a direct result of increased information flow:

Ÿ   Improved Inventory Turns
Ÿ   Improved Service
Ÿ   Increased Sales

Ø Made-to-Measure (MTM)

MTM is a complete mass customization solution with powerful software interactivity. This solution provides intelligent automation that allows you to update several pieces in all sizes simply by entering new measurement specifications in the system.

MTM is also a great solution for Custom-Made Tailoring, as the designer can easily customize a pattern by specifying the personal measurements of any given client.

Ø Collaborative Planning, Forecasting and Replenishment (CPFR)

A collaborative process whereby supply chain trading partners can jointly plan key supply chain acidities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods.

Ø X-docking

Cross docking is a logistics procedure where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with marginal to no handling or storage time. Cross docking takes place in a distribution docking terminal; usually consisting of trucks and dock doors on two (inbound and outbound) sides with minimal storage space. The name ‘cross docking’ explains the process of receiving products through an inbound dock and then transferring them across the dock to the outbound transportation dock.

Conclusion and self-reflection

TAL Group, as the synonym of innofacturer, they are the leader in the production of innovative clothes that combine style, comfort and functionality. In each year, they put a huge among of money and resources in developing their newest technology, in order to keep their service level and satisfy the need of their customer. And such kind of investment has given them the technological edge in improving the functionality and appearance of their product, which can maintain their competitive advantages and become success.

TAL is not only an innofacturer, but also the professional in supply chain. With over 60 years of industry experience, they understand the importance of supply chain network very well. Therefore, they has invested a lot in the innovation on their Supply Chain solutions, for the purpose that they can deliver their garments to any market in the world quickly and stably.

After doing the cause study of TAL, we found that the key factors of operating a company are innovation and experience. Besides, it is reasonable to understanding why their customer are so rely on the services provided by TAL.