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.