Post Visit Review of TAL

Brief background information of TAL

TAL Apparel Limited is a garment manufacturer headquartered in Hong Kong. It was founded nearly seventy years ago, since 1947, and has grown to become one of the world's largest apparel manufacturers in the production of clothing. The strength of TAL's product is its innovative designs that combine style, comfort and functionality at the same time. Nowadays, TAL produces over 55 million pieces of apparel annually and its target markets include America, Europe and Asia. It has become so popular that 1 out of 6 dress shirts sold in the US is made by TAL.

Video Showing

A video was shown to us with a very detailed introduction of the company's background and history, vision, customer profile and the way it fulfils its social responsibility. Although it is not a lengthy video, it succeed in telling the story of TAL in a clear and simple way, and enriching our understanding of this famous firm.

Presentation and sharing

After the appreciation of the video, we were glad to listen to the presentation given by the staff of TAL who talked more about their company, which gave us further information about the practical daily operation. The presentation certainly increased our cognition of the supply chain, and also the true meaning of a "value-added service".

(Some important slides from the presentation)

(Some important slides from the presentation)

There was a remarkable part which impressed us very much - the demonstration of their product's functions. Different clothes with their unique functions were passed around the class, and three techniques that were used to produce these clothes were introduced.

1. SofTAL Process

• It is a wrinkle free technology, which means people don't need to iron it
• Colour will not be affected even after numerous washes.

2. DriXpert 

• A moisture wicking system
• Keeps user cool and dry regardless of day's activities
• Moisture on skin is wicked through garment onto outer surface of fabric with quick evaporation

3. WOR

• A nano technology for exceptional stain resistant performance
• Sewing thread, pocketing and trims offer this performance

Q&A Section

After listening to the presentation, it was our turn to ask the related problems, and our questions were answered by their professional staff in a detailed manner.

Q.1 How does TAL get involved in corporate social responsibility?

TAL put forward two concepts of environment friendliness, Greenhouses (GHG) and Water Intensity. The core of Greenhouses is saving electric energy in the production and operation processes. And as for Water Intensity, it pays attention on reduce the use of water and recycles water. Besides, TAL built the two systems actively, to show its concern about nature. When we mentioned the increased costs accumulated by corresponding facilities, the staff told us that via the two systems, TAL could cut the non-value added steps and it prompted reasonable profits as well.

Q.2 Why doesn't TAL set up their own brand of apparel as a retailer?

The business of suppliers is quite different with the marketing of retailers. TAL is a giant in garment production and fosters many stable long-term corporations with many top retailers; however, the company does not practice marketing and does not plan to be a retailer.

Q.3 Does TAL prioritize corporate social responsibility?

TAL places a high priority on corporate social responsibility. For example, it is trying to use environmentally friendly solutions to deal with production issues in South East Asian factories, such as the waste water treatment and recycling for flushing and landscaping irrigation, water scrubbers for exhaust emission management, and heat exchangers that recover energy from steam to heat domestic water. The treatment of water is actually saving a huge amount of water, which helps the company to save the money in the long run and to bear the social responsibility for saving water at the same time.

Q.4 While the cost of manufacturing is increasing in mainland China which in turn affects the profits of TAL, will the company consider moving away from China?

As it is not an easy task for the company to shift the factories from one place to another due to the capital and equipment invested. It may be even costlier for it to move away from China to another place when taking into account the cost of previous investments. Thus, it is not really a feasible suggestion for TAL to move the factories to other places.

In fact, TAL is trying to deal with the increase in manufacturing costs (such as labour cost, material cost etc.) by recycling the left cloth/ material to produce new clothes. It is an environmentally friendly action which helps to reduce the pollution on environment and also the wastage and costs incurred as well. The reduction in this production cost can help TAL to balance the increase in manufacturing cost in mainland China.

Q.5 As online shopping is growing to become main stream, existence of many small shops is certainly affecting the business of branded companies. What will you do to cope with this situation?

According to the staff of TAL, TAL focuses on the high-end brands. And the consumers of TAL targets the top end market while online shops focuses more on the general market. Thus the target market of TAL’s consumers is not same as the online shopping market. Therefore they do not think the online shop will attract more consumers. What’s more, the employees said that they have confidence on their company and customers.

Q.6 Will you expand your business and apply your innovative techniques to other areas such as shoes or bags?

While TALs main products revolve around outerwear, shirts, polo shirts, blouses, pants (wool/ regular) they do also specialize in shoes, one of the specific brands they cooperate with happens to be Hush Puppies. An international brand selling casual footwear for men, women and children was founded in 1958. TAL’s association with Hush Puppies is prominent in some of their “technologies” as they like to call it, such as there ‘worry free suede’, ‘zero g’, ‘bounce’, ‘wave reflex’, ‘the body shoe’ ‘HPO2 flex’, and last but not least ‘waterproof’, which was one of the properties of their garments the TAL staff so generously demonstrated to us during the visit. 

However, they have not yet expanded to bags as per the knowledge imparted at the visit.

Q.7 TAL's business is all over the world and in order to manage its supply chain efficiently and effectively, it uses several method like VMI, Point of Sale System, Cross docking etc.

Vendor-managed inventory (VMI) is a system to maximize the supply chain efficiency. The manufacturer will be in charge of supervising the inventory levels for their customers, and also help them to replenish when the customers are nearly out of stock. The vendor will make use of the past demand data at the store or warehouse level of their customers for predicting the purchase order, and with the help of VMI, the replenishment cycle can be shortened and also the capacity of warehouse can be increased.

The cross docking system for TAL largely shortens the lead-times from order to store by packing all the goods inside the factories before shipping. All products which are packed in the factories can be directly sent to customers' distribution centers and increase the capacity of the warehouses.

Besides, Point of Sale (POS) system can record the change in stock and store in no time, which facilitate the vendor to supervise the change for their customers and make good use of the information inside VMI. With the help of these three technologies, the lead-times and replenishment time can be largely shortened and hence the manufacturer can earn the customers' loyalty.

Also, in order to keep the quality for the supply chain globally acceptable, TAL has used the scorecard system to check the daily performance in different areas. Performance reports will be carried out occasionally in order to facilitate the continuous improvement of the vendors, and when they realize there is problem, recommendations will be given and also conference calls maybe made to achieve better communication. 

Q.8 How can your company strike a balance between time spent on customers and costs acquired inn the supply chain?

In terms of working in close partnership with TAL’s customers, TAL applies collaborative planning, forecasting and replenishment system in the supply chain, in order to produce a comprehensive replenishment model using sales data, market trends and seasonal variations, TAL collaborates with their customers to reach a consensus of the actual quantity needed. TAL’s continuous replenishment model enables itself to streamline the production process.

As for saving supply chain cost, TAL’s X-Docking system allows their customers to simply scan and route straight to sales point in their distribution center, so as to eliminate costly warehousing of inventory. TAL also applies vendor managed inventory setting to save costs by using direct POS links with their customers, to achieve high service level and also inventory turnover.

With these value-added services, TAL succeeds in shortening lead-time, achieves quick response time, and reduces costs at the same time.

Q.9 Facing the shrinkage of the garment industry in HK, i.e. there are numerous foreign fashion retailers competing in HK (e.g. Uniqlo, H&M) and some of manufacturers introduce many new technologies into HK (e.g. heat-tech for Uniqlo, flyknit for Nike), how can TAL remain competitive in HK?

The TAL Research and Development Department invents different garment materials for their clients. The TAL produces non-ironing and easy-care garment material. They adopted the technique on shirts and pants. The cloth appearance is remarkably smooth an uncreased without any ironing after washing. This technique can attract outstanding brands to procure from TAL.

TAL produces garment material which would not change in size or color easily. Some shirts may become deformed and change shape or fade after a several washes. The garment material produced by TAL would not run into this problem. This technique is adopted to shirts mainly. The deformation and fading problems are sharply reduced. This is one of the main attractions to men’s fashion firms. TAL can hence remain competitive in this area.

Summary

Being such a large company that manages multi-stages of the supply chain, it is not easy for TAL to coordinate different parts in order to achieve efficiency. This visit doubtlessly widened our view of the sophisticated supply chain operation and informed us that anything is possible with determination and resilience, two qualities TAL doesn't seem to lack. This is a remarkable opportunity for us to acquire this information and see how the technology have affected the merchandise, and it will forever be in our memory.

Reflection

After this visit, I get to know more about the supply chain in a company, and the importance of it to the success for a business. TAL is such a well known company which provide garments for many world brands like Burberry and Brook Brothers, except the high quality for their products, the extra value-added customer services also contribute a lot to its success. A good and all-rounded supply chain is a fundamental element to run a success business, and TAL is a real life example to show that. It supply chain make it stands out in the market and become the unique one. Besides, TAL also told us innovative ideas are so important in nowadays society. To run a business, you cannot only rely on the existing techniques and materials that you have, for TAL, they always apply new technology on the garments they produce, which make their products to be a special and the only one in the industry.

References

TAL Group (2006)

http://www.talgroup.com/en/index.html

http://www.talgroup.com/en/popups/more_csr.html

http://www.talgroup.com/en/popups/tal_technology_popup_blue.html

Career Planning and Development Centre (2010) 'TAL APPAREL LIMITED - The Seamless Global Innofacturer' The Chinese University of Hong Kong

https://cpdc.osa.cuhk.edu.hk/file/event/824/profile.pdf 

Gabriel Hahn (2003) 'Made to Measure: Invisible Supplier Has Penney's Shirts All Buttoned Up' The Wall Street Journal

http://www.wsj.com/articles/SB106323446110491600

Peter Koudal, Victor Wei-teh Long (2005) 'Power of Synchronization - The Case of TAL Apparel Group' Deloitte Research

http://wpc.32bf.edgecastcdn.net/0032BF/tc/docs/TALnewsPDF1.pdf

Denise Tsang (2007) 'TAL Apparel adds value to supply chain management' South China Morning Post

http://www.scmp.com/article/617153/tal-apparel-adds-value-supply-chain-management

Dr. Jean-Paul Rodrigue 'Characteristics of Producer-Driven and Buyer-Driven Global Commodity Chains' The Geography of Transportation System

http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/table_commoditychains.html

Abhilash C., T Vamshi K., Gaurav G., Amar K., Paresh P. 'TAL Apparel Limited: Stepping up the value chain'
http://www.slideshare.net/amarkeshri/tal-apparel 

Case 1 - TAL Apparel Ltd.

1. Background of TAL

TAL is the world leader in the production of innovative clothes which combine style, comfort and functionality. It was founded in 1947 by Mr. CC Lee and headquartered in Hong Kong. TAL outputs dramatic annual production including 30 million pieces of shirts, 10 million pieces of polo shirts and 10 million pieces of pants. It continuous investing in technological research and development so as to enhance their performance and efficiency. TAL is the first one to apply I.T. in low-cost garment market. From wrinkle free and stain resistant treatments, to every aspect of garment manufacturing technology TAL leads the way and sets the industry standards.

Main customers:

Walmart, Sears, Kmart, Dayton Hudson, JC Penny, Ashworth, Brooks Brothers, Giordano, Burberry, Sanyo, etc.

Main products:

Shirts, Polo Shirts, Pants, Blouses, Outwear, Suit

Selling point of the company:

- Unique operation system

- Close relationship with customers (Using VMI) 

- Shorten the lead time and enhance the efficiency

2. The dynamics of the apparel value chain

Background of apparel industry: Apparel out sourcing in Asia

The global apparel industry was known to be a buyer-driven industry, led by the retailers, marketers and branded manufactures. In the USA, and Europe the industry was mostly dominated by a handful of giant retailers. While in East and South East Asia, the supply of low-cost and abundant labour had historically provided significant competitive advantage for the region's export growth. However , in light of the persistent over-capacity in the industry and cost pressure, the production sector of the apparel industry had undergone several migrations in the past few decades: from North America and Western Europe to Japan in the 1950s, from Japan to Hong Kong, Taiwan, and the South Korea (collectively known as the Asian Big three) in the 1970s. This dramatic production shift was alarming to the Asian countries which had dominated the global apparel production in the past few decades.

Stages of value chain in the apparel industry

- Raw material supply 

- Provision of components 

- Production networks 

- Export channels 

- Marketing networks at retail level

Dynamics : reasons of affecting the bargaining power of suppliers (Push strategy)

- China Joined the WTO

After China has joined WTO, the barrier of import and export has been lowered. Therefore, the competition of global apparel industry has become more keen than before

- Empowered consumers

Since many options for customers, the customers can easily to shift to the other companies, therefore they have a larger bargaining power. And the Internet provides the a larger amount of information for customers, then customers can have full information of all products and they can make comparison. among their options.

- Globalisation

Globalisation is a large trend that the companies outsourced some production processes to developing countries for lower labor and other costs.

- Technology

Since the technologies became more advanced, manufacturers can also get the sales data from the stores through some systems e.g. Point-Of-Sales. Also, they can use ERP to control the production process, and others technologies to provide more value-added services to enhance the efficiency.

- Government policy and regulation

For most of the developing countries, they are less regulated then the manufacturers can easily establish the plants there and hire more labor with lower costs and rent or buy more lands for the plants. It is an attractive point for companies to set up production plants in developing countries. China is an good example in 1990s, and now, some are moving to western part of China for the same reasons because the cost increased in Shanghai and other countries had become more developed.

- Entry of third-world countries into garment market

As more third-world countries like Africa devote themselves into the garment market, because of lower-cost and rent, they greatly affect the market share of existing garment suppliers which led to a more competitive market.

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

Reasons for Buyer-driven industry:

In the apparel market, it is easy to set up the clothing company and the entry barrier is low, thus a competitive market is created. 

As the garment market is a Buyer-driven industry (Pull strategy), information can be gathered by buyers easily and conveniently.The taste of consumers changed frequently. The change is from the designers to design the style and push to customers to designers to guess the taste of customers to match the favor of buyers in order to pull the customers to them. 

The global buyers determine what, where, how, when to produce and price.Retailers are the closest to customer to obtain accurate market information.

Lack of channel to contact customers: manufacturers lack of first hand information.
To avoid Bull-Whip Effect which is an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sales to the end customer. These irregular orders in the lower part of the supply chain develop to be more distinct higher up in the supply chain. This variance can interrupt the smoothness of the supply chain process as each link in the supply chain will over or underestimate the product demand resulting in exaggerated fluctuations. Once Bull-Whip Effect occurred, it may create a huge loss to manufacturer, thus they can only coordinate with retailers

Thus, retailers obtain dominate bargaining power Buyer-driven industry formed.

4. 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 Penney.

Vendor-managed inventory (VMI) is a supply-chain initiative where the supplier is authorized to manage inventories of agreed-upon stock-keeping units at retail locations.

Comparison of traditional and new Supply Chain (TAL and J.C. Penney)

1a. Traditional Operations

TAL: Production (planning is based on the information provided by Penney)

J.C. Penney: Control inventory level, sales forecasting, and place replenishment orders (Traditional cycle)

1b. New Operations

TAL: Provide assistance to Penney’s inventory control, plan for production (VMI)

J.C. Penney: Sales monitoring and sharp adjustment 

2a.Traditional Marketing and Sales

TAL: Sell directly to Penney(only on retailer level), no contact at customer’s level

J.C. Penney: Marketing, merchandising, selling to end customers, marketing test 

2b.New Marketing and Sales

TAL: Marketing testing of new products, sell to Penney (Who has First-hand information, and hence larger bargaining power)

J.C. Penney: Marketing and selling to end customers

3a.Traditional Service

TAL: Does Evaluation on sales, replenishes inventory, receives back order from Penney

J.C. Penney: Receives feedback from consumers and tries to improve/innovate new products

3b.New Service

TAL: Evaluates sales, replenishes inventory, receives back orders, designs new products and does sales forecasting

J.C. Penney: Receives consumers feedback 

Result of change in supply chain role

- Reduces burden of retailers in different stages 

- Enhancement of their role (making them more important) 

- Achievement: Taking care of the customers’ customers 

Basically, takes care of the customer’s customer, taking away their customer’s burden, and making them somewhat irreplaceable, or strategic.

5. 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 re-positioning of the company in the apparel value chain.

IT can affect competition in three way:

- Change of industry structure 

- Create comparative advantage by product and service differentiation 

- Spawning new business opportunities

1. Change of industry structure

Deal with bargaining power of buyers:

Increase switching cost e.g. customization and building unique relationship with suppliers by VMI 

Gain customer’s information at store level

Deal with bargaining power of suppliers:

To reduce suppliers’ power by controlling valuable resources among value chain. E.g. manufacturing technology, customers’ relationship

Deal with threat of new entrants:

Increase entry barriers by using I.T (to require a tighter integration with users’ value chain) , e.g. MTM

Deal with threat of rivalry:

IT technology became more common in the industry and thus, balanced the competitive advantages and make the competition in the market more vigorous.

Deal with threat of substitution:

By using the IT technology, the relationship between suppliers and customers can be enhanced.

2. Create comparative advantage by product/service differentiation

- To create highly differentiated services offer (first-hand information from customers to discover their favor, and differentiate) 

- To provide full-package supply solutions to transform the traditional commodity-like generic products

- Create comparative advantage by product/service differentiation

- Bundle information with physical product as a package, which helps to create barriers to imitation 

MTM system product provides additional source of differentiation

3. Create new business opportunities

- Involve in marketing and design activities, have a brand-new vision for improvement 

- Providing logistics and supply chain management as stand-alone service offerings

Benefits and impacts of the use of IT contributed to the strategic re-positioning of the company in the apparel value chain.

- Capital-intensive (cost efficiency by mass production, such as EOS) 

- Huge cost of investment involved for development in IT (e.g. labour cost, capital investment cost) 

- Higher training cost 

- Better coordination by the rapid exchange in information from different department