Case 1: TAL


Q1, Dynamics of the apparel value chain and how the global apparel industry is classified as a buyer-driven industry.
The company was mainly changing their manufacturing strategy from push to pull.

Manufacturer-driven industry (Push-strategy):

The production sector of the apparel industry is shift from North America and Western Europe to Japan then to Hong Kong, Taiwan and South Korea before. It can save the labour and have a preferential tariff by passing through North American Free Trade Agreement (NAFTA). The industry was to be a manufacturer-driven industry and used a mass production for the whole market. Also, Hong Kong was enjoying a prestigious role as the gateway to China on textile and clothing production.

Buyer-driven industry (Pull-strategy):

Once the WTO had established, the elimination of all textile quotas arise the competition from countries around China and Mexico. Hong Kong manufacture therefore needs to shift its expertise to higher value-added activities, which leads to a migrate to the branding and marketing side of the business, shifting from OEMs (Original Equipment Manufacturers) to OBMs (Original Brand Manufacturers). Others counter-strategy were capitalizing on their current full-package supply model, providing and coordinating all activities in the production, trade and financial networks to their foreign buyers. By using these methods, suppliers were able to gain valuable market knowledge about their foreign buyers’ purchase preferences; moreover, they can generate backward linkages with their raw material suppliers for a reliable sourcing network.



2. Based upon the Porter’s value chain model, describe how the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network with its major customer such as JC Penny.

In the past:
Value chian
Retailer customer placed their orders based on their sales forecast and gave manufacturer (TAL) the back-order and manufacturer fulfilled the order by the agreed contract date.
Inbound Logistics Operations Outbound Logistics Marketing & Sales Services
TAL Purchase & receive raw materials Manufacture according to customer orders Package & Ship to retailer’s warehouse 　 　
J.C. Penney Purchase & receive garment from manufacturer at central warehouse Perform inventory control, sales monitoring &forecast; place replenishmentorders Re-pack &distribute to retail outlets Marketing,merchandizing, and selling toend consumers Receive consumer feedback for product enhancement/new product
New:


Nowadays, manufacturer like TAL can ask retailers such as JC Penny to provide VMI from the point of sale and they both signed an agreement. Using the VMI system, retailers (JC Penny) will give manufacturer (TAL) the point of sales and in this way, TAL have the access to the sales patterns and could plan for the production without informing JC Penny. Lawyers, accountants and IT people can also help to ensure the legitimacy of the process. Supplier( TAL) can download sales record and start production to replenish the order. Distributor can look a the latest sales and ordering record start shipping the required amount of prodcuts to replenish the shortage. Retailers (JC Penney)can access the system and receive the order automatically.

As shown below, because now the supplier connect directly with the retailer, so the wholesalers is skipped.


　 Inbound Logistics Operations Outbound Logistics Marketing & Sales Services
TAL Back- order receive from J.C Penny Ask J.C Penney to give the POS to know about the sale pattern for sales forecast  and plan for production Receive orders based on J.C. Penney request Perform test marketing of new products at retail stores Monitor retail sales, replenish inventory, and design new products
J.C. Penney Place orders based on their sales forecast Perform inventory control, sales monitoring &forecast; place replenishment orders Back- order to TAL Marketing, merchandizing, and selling to end consumers Receive consumer feedback for product enhancement/ new product






3. How did Porter and Millar (1985) classify the impacts of IT on competition? Discuss the benefits and impacts of the use of IT initiatives to TAL, and how these initiatives have contributed to the strategic repositioning of the company in the apparel value chain.



1) Driving change in industrial structure:


     Minimize threat of new entrant:
  • Large investment in IT (VMI, MTM, ERP, etc.) creating entry barrier
  • Erect entry barriers by tying up distribution channels in the integrated value system.e.g. Able to gain the exclusive supply contracts --> block out the potential competitors.
  • Increase entry barriers by using MTM, as it require tighter integration with the user’s value chain( change from lower end tech to the high-end tech.
  • Manufacturing complexity were the unique requirements of the retailer customers. TAL had three retailer customers with mede-to-measure offerings: Lands’ End, Brooks Brothers, and J.C. Penney. Each retailer customers had its own unique requiremet in terms of design details, order processing technologies, and shipment requirements.



    Balance the power of buyers
  • Gain customers information to understand sales pattern at the store level --> engaged other customer in the retail business
  • Increase switching cost by demanding exclusive supplier relationship in VMI--> block out the potential competitors.


    Erode power of suppliers


  • Erode supplier power by controlling major recourses in the value-added system (manufacturing technologies and customer relationship)
2) Creating product and service differentiation


  • Provide full-package supply solutions to transform the traditional commodity-like generic products
  • Bundle information with physical product package, creating barriers to imitation.
  • Providing individually unique products by using MTM system- provides additional source of differentiation

      3) Creating new business opportunities
      • Providing logistics and supply chain management as stand-alone service offerings e.g. demand forecast and material sourcing etc
      • Venture into design and marketing activities in the apparel industry e.g. real time customer sales information and other values-adding services etc.


      4. Go to www.talgroup.com , find out more about the Company’s latest development on new technologies and business innovation. Report your findings.


      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 and routed straight to the appropriate dispatch truck for immediate shipment to store.
      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.

      • 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.
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