Company Visit: Hactl

Date: 24 February,2014

Background:
Hong Kong Air Cargo Terminals(Hactl), one of the leading air cargo terminal operator in the world, located at the HK International Airport. It has operated cargo logistics nearly 40 years since 1976, mainly supporting the import, export and transshipment of air cargo in Hong Kong. Under their terminal, there are 3500 Container Storage System positions (CSS) and 10000 Box Storage System positions. Up to  3.5 million tonnes of air cargo can be handled every year. Their SuperTerminal 1 is the single largest multi-level air cargo terminal in the world.

Beside the scale of the company, Hactl has many competitive advantage in cargo logistic business. They recognize the importance of talented so they put a lot of resource for training and retaining their best employees. In fact, most of their employees work for Hactl more than 10 years, which can provide a stable and high quality service to their customers. Also, they have their own innovative technology - COSAC-Plus, which can assist the company to work more efficient and effective, such as enhance the accurate of information sharing, cargo tracking etc. According to Hactl, more than 3500 users and more than one million transactions is handled my this innovative technology.

According to our visit guide, with their largest customer, Cathay Pacific Airways, began operating their own new cargo logistic business, Hactl lose nearly 30% of their business. Before the lose of the business, Hactl handled 80% of HK cargo business. However, they are still optimistic for their future since they have more capacity and resource for the new business in new market share. They also think that they can keep the competitive advantage by delivering goods from HK International Airport to China in truck service, Hacis.

Visit Record:
On 24 February,2014, five of our groupmates, Ivy, Christy, Alex, Ivan and Tommy were represented to visit the Hactl terminal in Hong Kong International Airport.

Model of the Hactl SuperTerminal 1.

During the visit, we can directly see the advanced technology of Hactl, for example, the automatic machine to transfer the cargo inside the terminal; the professional packing in order to maximize the usage of the capacity of the plane.

The automatic machine to transfer the cargo

The company do their best for the environmental friendly issue. Most of their vehicles are designed in environmental friendly. The fuel of the vehicles is biodegradable and electricity which can reduce the air pollution. By using the recyclable and reusable material for packaging and using e-fight instead of paper for recording the things, the company can reduce the waste.

Upper Left figure: electricity car charger;
Bottom Left figure: electricity car; 
Right figure: shovel loader using biodegradable fuel

Under Hactl management, packaging and storage are one of the professional procedures for their customer. All the employees work for packaging are trained to deal with the dangerous goods and maximize the usage of the plane capacity. More than 1000 CCTV are installed inside the terminal for the security purpose with 24 hrs security center so customers do not need to worried for their goods. All the goods need to send to the x-ray check before transfer to plane. For some good with the special storage requirement, Hactl can provide the large space in express center, the temperature control or horse house for delivering the horse etc.

In future, the infrastructure in Hong Kong will also increase the demand of cargo logistic, especially the third airport runway and Hong Kong–Zhuhai–Macau Bridge would expand the market share of Hong Kong cargo logistic. In addition, with the increasing demand, Hactl still think optimistic of their business.

Reflection of Hactl visit:
This is the first time for us to visit the real working factory of the company in workshop. It is an amazing experience since we can explore the high technology level machine work automatically in a short distance. Also, it is a precious moment to explore the working flow of the air cargo logistic since we do not have many time to use the air cargo service. In short, we can learn the things that we cannot imagine before in this half an hour visit, this is an efficient and effective learning.

Case Study 2: Seven Eleven Japan

Company Background:

7dream.Com which was founded in 2000 and is based in Tokyo owns and operates an e-

business Web portal. The company is under Seven-Eleven Japan which is a reputable

convenience chain stores. It was the biggest B2C e-commerce website in Japan.

      
 How does 7 dream.com define and differentiates its offerings from its physical store?

    7 dream.com provides service based on technical expertise and industry knowledge.

    The major from of product and service in 7 dream is click and mortar. Customer can
     make orders in 7 dream.online and pick up from 7-eleven

    There are 8 main products and services in 7 dream.com which are travel, music, photographs,
     merchandise, gifts and mobile phones, tickets, books, car-related items and information

     7 dream.com offer several benefits to consumer via the system

     7 dream.com has low handling cost and less processing time.

     Also, the shipping and handling charged in 7 dream.com is significantly lower when comparing with other e-commerce companies.

    It is more convenient as customer cam just pick up your staff in your neighborhood after ordering online

—

7-eleven Inc can gain some advantages through the model of 7 dream.com.

The shipping cost is lower because 7-eleven has already making deliveries to 7-eleven stores. That makes the additional cost minimal.

There is low or even no inventory and warehousing cost as 7 dream.com would be dealing with wholesalers directly.

       Differentiation

	Physical store	Online
Business	l More than 8000 convenience stores l Food,drinks, cosmetic, Daily necessities, Newspaper and magazines, Cigarette  l Touchable products  and easy to handle	l Offer service in 8 areas l Travel, music, photographs, merchandise, gift and mobile phone, tickets, books, car related items and information
Target market	Consumer	l Mainly young people from teens to thirties l The generation that had taken to the Internet most enthusiastically
Payment	Pay for their purchase by cash or credit card	l Pay for their online purchase at 7-eleven store l Pay utility bills
Inventory	Rental cost	l Obtain the goods directly from the warehouse of suppliers
Delivery system	Allow get real product by face to face	l   Choose to delivery to their home or other delivery address or pick up at a 7-Eleven store l   Low delivery charge for customer

What is the role of Japan Government

       1) The Japan Government can be promoter of E-commerce.

      

       It deregulated stock commissions in 1999 and enable consumers to start trading via the Internet.

       

       It also changes the buying behavior of consumers.

       

       The Government Introduced competition into the telecommunications industry by splitting Nippon Telephone & Telegraph into 3 companies which boosts the development of the telecommunications.

       

       Moreover, it develop a common platform to work for the realization and expansion of e-commerce

       

       Through MITI, the Electronic Commerce Promotion Council of Japan (ECOM) was established in January 1996

       the US government demanded that Nippon Telephone & Telegraph lower access fees by 22.5 per cent over a two-year period starting from 2002, and ultimately by more than 40 per cent.

       The Japan government insisted that the reduction be limited to 22.5 per cent over a four-year period instead 

      2) Market Coordinator is another  role of the Government

             

            The Japan Government actively intervened in markets to promote producers' interests.

             For example, it was illegal for retailers and e-tailers based in Japan to sell music CDs at a discount because of a law that protected copyright holders. 

What is the Major Obstacles to e-commerce in Japan

1) Local Culture

       Japan had traditionally been a cash-based society. Japanese people have their own payment

       habit. It is usual to see salaries paid in bank notes and about 90 per cent of all mail-order sales were paid for with cash-on-delivery or by bank transfer

2) Buying habit

              People living in Japan purchase necessities in a small amount frequently

3) Fear of information leakage

             Japanese citizens have traditional mindset that credit card information will be stolen by hackers

4) End-fulfillment of On-line Orders

             Some Japanese people may not at home during the time to receive parcels they had ordered on-line

             They doubtful about receiving their parcels from on-line stores, either due to mailing errors or non-fulfillment on  the part of the stores

             They also prefer a tangible touch and evaluate of the online products.

5) Government Regulation

             The Japanese Government had regulated companies severely in the e-commerce industry, essentially strangling the growth of online transactions. It was also difficult for the consumer to browse internet.

6) Low Penetration Rate of Personal Computers and Expensive Connection Charge

             The number of homes with personal computers in Japan was considered low.

             According to e-Marketer, the penetration rate of personal computers in Japan was only about 20 per cent as opposed to 41 per cent in the US.

             And the world's highest combined telecommunication and ISP fees

7) Limited space

             Many Japanese homes were tiny and had no space to accommodate a personal computer.

             Also, Japanese found it difficult to store an online bulk purchase.

             They usually do not have a large refrigerator or storage space.

       8) High Accessibility of Convenience Store

     It is easy for Japaneses to access to the nearby stores as there were more than 8000 convenience stores in Japan.

9) Literacy Rates

      The growth of B2C e-commerce was slow compared to other G7 countries.

      Also,low education level of Japanese may find it hard to purchase online 

What is the Internal and External success factors of 7 dream?

Internal success factor

!) Wide range of business content

Online offer service in 8 areas which are travel, music, photographs, merchandise, gift

and mobile phone, tickets, books, car related items and information

The products to be offered on 7 dream.com  would not be sold in convenience stores

because of limited space.  

2)Great distribution network

     Orders are received from the internet and most of good ordered can be taken by the customers or their friend with a receipt in a specific store.

     With the delivery system which was already in place, orders on 7 dream.com would only  be charged a minimal cost and it is lower than the shipping and handling charges by other e-commerce companies.

3)Application of information technology

      Point-of-sale (POS) systems  will regularly updated for efficiency in the store.  

      Just-in-time inventory allowing the company to have a better resource allocation and planning sell-out schedules, shelf-stocking methods, weather, and local events.

      There is highly responsive to consumers’ shifting demand.If the weather is predicted to be bad, the company will put out the umbrellas near sales counter.

      IT system centralizes the communication among all stores by delivering products that require the same temperature range together, reducing the number of daily delivery trucks from 70 to 10 in 1975.

4)Other

             Install Fifth-generation total information system

             Link all 7-eleven stores via satellite

   Transmit large volume of information and high speed

             Have superior information- processing capability

             keep inventories at efficient level 

External success factor

 1)Technology improved & new products

      There is a new trend for e-shopping. The appearance of Debit cards and—  Smart card enhance the convenience of using e-cash. 

      Also, Japanese people start to enjoy home delivery service

  2)Wireless devices development

      Internet mobile services was on the rise. it can promote e-commerce

  3)Planning to utilize other channels to promote

       E.g. Digital broadcasting ,TV and magazine

Case Study 1 - TAL

Case Study - TAL

Background of TAL

TAL is the world leader in the production of innovative clothes that combine style, comfort and functionality, headquartered in HK. Company was set up since 1947, and has over 60 year’s industry experience. Nowadays, TAL owns 11 manufacturing factories and produces more than 55 million products to customers.
They continuous innovation through investment in research and development has given TAL the technological edge that guarantees their 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 current Products:

—Shirts

—Polo shirts

—Pants

—Blouses

—Outerwear

—Suits

Global TAL:

Office located in 7 place:

—Hong Kong

—China

—Indonesia

—Malaysia

—Thailand

—Vietnam

—USA

TAL's Timeline

—1947 - Lee family set up the very first spinning mill in HK

—1962 – Textile Alliance Limited was formed

—1983 – subsidiary garment company (Textile Apparel Limited) established

—1988 – purchased a US wholesaler, Damon Holding Inc.

—1999 – started considering an outsourced ERP solution

—2001 – TAL Global Alliance Limited was formed

—Late 2001 – partners first launched its custom apparel offering

—Mid 2002 – enriched supply chain capabilities by adopting the TradeCard’s suite of web-based financial solution’s10.

—2004 – faced with strategic challenges ( China’s accession into the WTO and the elimination of all textile quotas under such agreement)

The dynamics of the apparel value chain

Comparison Between past and now

Old apparel value chain:

Marketing and sales - make to order

Operation - transforming inputs into the final product form according to the order

Outbound logistics - Collecting, storing and distributing the products to buyers according to sales forecast on buyers' requirement.

Inbound logistics - Orders determinate the needs of resources

New apparel value chain:

Marketing and sales - buyers initiate

Operation - transforming inputs into the final product form according to prediction

Outbound logistics - plants would keep on working to achieve the continuous procurement requisition.

Inbound logistics - predict rather than wait for order

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

         Past:

—Information technology in the past did not allow for extensive data

—Could not find the trends to be recorded on consumers buying habits

—Past thought : manufacturers dictated what the consumer was likely to see in stores

—Result : produce what they thought was the right decision, but the actual demand often got mistakes

Now:

—By applying ERP system, Electric data interchanges (EDI)

—backward and forward linkages are extensive

—help to account for the large number of jobs associated with the industry

—Result: Apparel is an ideal industry for examining the dynamics of buyer-driven  value chains

Vendor Managed Inventory VMI

         VMI is a process where the vendor creates orders for their customers based on demand information that they receive from the customer. Vendor and customer are bound by an agreement which determines inventory levels, fill rates and costs. By adopting VMI, company can improve supply chain performance but reducing inventories and eliminating stock-out situations.

Traditional value chain

TAL's VMI Model

 

The way that Porter and Millar (1985) classified the impacts of IT on competition

The benefits and impacts of the use of IT initiatives to TAL, and 

the way that these initiatives have contributed to the strategic repositioning of the company in the apparel value chain.

Impact of IT:

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

—1. Changes the industry structure

—online stores

—lower cost, enhance differentiation

—2. Develops competitive advantage 

—reach greater heights of competency

—3. Establishes/ Spawning new businesses

—variety of products or markets

Benefits and impacts of use of IT initiatives to TAL:

1. the advance in technology is changing the industry structure.  

2. information technology is increasingly important lever that companies can use to create competitive advantage 

3. spawning completely new business

1) Driving change in industrial structure

Minimize threat of new entrant:

—Large investment in IT creating entry barrier

—VMI, MTM, ERP

—Erect entry barriers by tying up distribution channels in the integrated value system

—able to gain the exclusive supply contracts to block out the potential competitors

—Increase entry barriers by using MTM, as it require tighter integration with the user’s value chain

Balance the power of buyers:

— Increase switching cost by demanding exclusive supplier relationship in VMI

—Gain customers information to understand sales pattern at the store level

Increase bargaining power of buyers

—IT increases the power of buyers in industries assembling purchased components

—Automated bills for materials and vendor quotation files make it easier for buyers to evaluate sources of materials and make-or-buy decision Movex ERP system

Erode power of suppliers

— Erode supplier power y controlling major recourses in the value system

—manufacturing technologies and customer relationship

2) Creating product and service differentiation

Create highly differentiated services offerings

—Provide full-package supply solutions to transform the traditional commodity-like generic products

—Bundle information with physical product package, creating barriers to imitation.

—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

—demand forecast and material sourcing

— Venture into design and marketing activities in the apparel industry

The way that these initiatives have contributed to the strategic repositioning of the company in the apparel value chain:

Competitive advantage:

threat:

1.Threat of substitution

— Flexible computer-aided design and manufacturing systems

—have influenced the threat of substitution in many industries by making it quicker, easier and cheaper to incorporate enhanced features in to products

2.Rivalry

—The automation of order processing and customer billing

—has increased rivalry in many distribution industries

—The new technology raises fixed costs at the same time as it displace people

—VMI system

—Distributors must often fight harder for incremental volume

The Company’s latest development on new technologies and business innovation

Innovative Supply

•       Replenishment Model 

–       Ensuring the the shelves are always stocked with the garments that cusomters desire is essential to our coustmer.With TAL's cumtinous relenishment model, fabrics and accessories are procured based on demand forcasts 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 

–       X-Docking system eliminates costly warehousing of inventory and further shortens lead-times from order to store. All products are packed to store and bar-coded at TAL factories. When the stocks reach the customer’s distribution centers, they can simply be scanned

Collaborative Planning, Forecasting and Replenishment (CPFR)

•       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.

Vendor-managed inventory (VMI)

•       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.

Made to Measure 

The consumer simply chooses the fitting, fabric and style of garment they require, either at the store or over the Internet. Their order is sent to one of our factories in Asia, where the garment is made to exact specifications and delivered directly to the customer in the US within three weeks.

Speed to Market 

Using advanced POS data mining expertise, customers can reduce the cost and risks of new product launches.

Technologies

•       Wrinkle free SofTAL technology\

–      Machine washable and dryable and no need to iron thanks to TAL exceptional wrinkle free technolog

•       WOR – nano technology 

–      WOR-nano technology resin system plus nano-scale chemical treatments to produce exceptional stain resistant perform-ance. Furthermore, because the treat-ment is applied to finished garments even the sewing thread, pocketing and trims offer WOR performance.

•       TAL Pucker Free ® Seam Technology 

–      An innovative sewing technology utilizes adhesives along the seams to prevent pockets, cuffs, arm-holes and plackets from puckering.

•       EZCOOL 

–       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.

•       Expandable Waistband 

–       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.

•       Dot. TAL

–      De-odorant Technology of TAL. An anti-microbial finish acts as a shield against bacteria and mold growth on thus preventing unpleasant odors.

•       DriXpert 

–      TAL’s cutting-edge DriXpert treatment provides excellent moisture manage-ment 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.

•       Emboss 

–      A proprietary process that raises a permanent pattern or logo on 100% cotton garments. The treatment offers a softer and subtler alternative to embro-idery or printing.

Reflection on Case Study

            Since the course is about logistics and supply chain management, what we acquired in the case study is actually related to it. For instance, we learnt what replenishment models TAL using (QR,CR, store and warehouse VMI), what supply chain services TAL providing (Cross Docking, Pick-to-light) and how they review their performance by scorecard. All these content provided us more understandings about how a business runs their logistics and supply chain management, especially by such a successful and company. 

              The case study helps us realize all factors affecting company, and thus what company does in supply chain to maintain its competitive edges. It would be valuable experience for us to visit TAL in the following weeks.