Company Background
TAL, as named in the case study, or TAL Group, which is its actual brand name, describes itself as “the world leader in the production of innovative clothes that combine style, comfort and functionality”. Indeed, an extensive in class performed case study analysis has introduced the innovative approach TAL has as a garment manufacturer. From the vendor managed inventory system to the made-to-measure system, TAL has definitely a pioneering approach that adds value to their core services and provides them first-hand industry information from their customers. These innovations provide them the ultimate advantage in an otherwise competitive, buyer-driven industry.
Visit Outline
We had a detail presentation provided by TAL. In the presentation, we acknowledged what business that TAL is running and what services that TAL provides for their customers, and what technologies they have. In the other part of visit, TAL showed us some innovative products, including winkle free shirt, water pool shirt, pucker free shirt. In the last part of visit, their CEO responded to our questions and provided detail answers for us. All of parts were well organized and intended to deepen our impression and knowledge from TAL.
Focus of TAL
An interesting insight during the company visit was the fact that TAL doesn’t really put a focus on its made-to-measure system. Although it is a noteworthy concept, other supply management practices make a more important part of TAL’s revenues.
Additionally, it was interesting to see how dependent the supply chain systems are of the market structure. Indeed, TAL mainly operates in North America with a plan to expand into South East Asia, but the company is almost non-existent in European countries. The company representative explained that few big companies as for instance JC Penney own North America’s retail industry. Europe, on the other side is much more divided into smaller retail businesses each of them with a unique supply management model (see Zara, H&M).
Subsequently, it was extremely interesting to see that TAL plans to be the “Mega Supplier”, by diminishing its customer number from 121 to 60. That way, they want to serve the most important actors in the retail industry and keep them by providing excellent customer service as well as superior custom-made supply systems, and so, obtaining lasting customer loyalty.
In addition, while TAL always seemed to avoid answering the question whether they would step into the retail business themselves, it was curious to finally know that TAL actually has its own brands – some sold at their customer’s stores.
Finally, it was rarely clear, what kind of customer segment TAL targets. Thus, it was very insightful learning that TAL actually focuses on middle to high-range retailers and doesn’t do fast-fashion. That might not have been consistent with them putting a focus on vendor managed inventory systems that ensure the shortest lead times possible as well as a direct response to the consumer’s changing needs.
Learnings from the Visit
As the focus was mainly on the supply chain approach during class, it was interesting to get to know other innovations and patents that TAL developed bringing them one step ahead in the industry. Several technologies have been introduced; some ensuring wrinkle and pucker free garments thanks to the SofTAL Process®, EZCOOL® and the TAL Pucker Free® Seam Technology, while others guarantee an optimal comfort with the DriXpert® process and TAL’s patented expandable waistband technology. It was impressive to see that, while we were testing the sample clothing provided by trying to wrinkle it, nothing happened and the garment stayed wrinkle-free. One might have to add, that the garments didn’t feel optimal in terms of quality.
Subsequently, TAL’s innovative supply processes were introduced, as for instance the continuous replenishment that ensures constantly stocked shelves without having to incur high inventory costs. This process bases itself on demand forecasts provided by the customer and on just-in-time shipments by TAL. Furthermore, the company introduced the X-Docking system, that provides already packed and barcoded products further shortening lead times and reducing warehousing costs. As a more integrative system, the VMI (vendor managed inventory) setting adapts to the customers’ business nature by monitoring directly the inventory on the customer’s side. The stock is then replenished to achieve the optimal inventory turnover as well as the ideal service level. Adding to that, TAL also developed an advanced version of the VMI service, providing direct Point-of-Sale links with the customer’s stores as well as pack and ship-to-store systems. These systems provide real-time information on the consumer’s preferences and even before its customers realize, the ready-packed items are shipped straight to the stores, cutting inventory costs by 15%. Stepping up a level, TAL also provides the CPFR system, which stands for collaborative planning, forecasting & replenishment. This system is unique in its core. CPFR involves a very close partnership between TAL and their customers. Indeed, the replenishment model is based on sales data, market trends and seasonal variations, automatically sent to TAL and the customer warning them when these vary. Then, TAL and its’ customers work together to select the optimal replenishment quantity. This is definitely a system that differentiates TAL from other garment manufacturers. By stepping up the value chain, TAL effectively acquires valuable information but also has an important competitive advantage.
Q&A during the Visit
1. Besides of IT system like ERP, are there any new IT system TAL are using to create competitive advantages to differentiate your services to others?
Of course there are some IT system else in TAL, including VMI, CPFR, Pick to light system. VMI is the important practices for TAL, it help TAL to monitor the inventory for their customers by some sophisticated technologies and replenish the inventory for the customers automatically, it could reduce the bullwhip effect in the supply chain system and maintain a strong relationship with their customers in order to keep a long term cooperation with them.
CPFR inherent an automated system which sends alerts to TAL and customers when there occur deviations from the replenishment model, it lead to a more effectively managed supply chain for TAL and the partner of her value chain.
Pick to light system is a system that improving the efficiency of warehouse management and pick up process. TAL can have a more accurate order quantity and can provide a prompt service for their customer to replenish the inventory.
2. We all know that TAL has been using IT to gain a big success. However, most companies are likely to follow the strategy to succeed by using the similar IT systems. How could you continuously keep the company in business in terms of market share?
Keeping innovative is the key success factor for TAL. They will keep investing more in R&D to develop more innovative product. Moreover, although there many similar IT systems in other company, TAL still have competitive advantage to outperform their competitors. It is because TAL has many experience IT and management colleagues that helping it better control and design their system. Although their competitors can imitate their IT system, without these specialize work with the system, it still useless. Moreover, TAL keeps investing more in improving their IT system. it could help TAL retain the competitive advantage.
3. Due to the low profit margin of MTM, why do you still offer this service? Will MTM have any further development to become the main elements of the business?
Although MTM is not the key business of TAL, it is one of competitive advantage for TAL. It is because they can diversify their business and provide more service for their customers to meet their needs. Imaging that, if you are the customer, you will keep cooperation with a company which could provide more services for you.
As it is a minor business for TAL, TAL won’t make it as it’s major business now, but will keep improving the services to add value to their customer. However, there still many uncertainties in the future, it is hard to say that they won’t make it as it’s keep business in the future.
4. How does TAL show their Corporate Social Responsibility in the sense of being environmentally friendly?
TAL always follows closely to the world’s environmental friendly standard. TAL has scorecard tool to evaluate the performance of their production. They weight the importance of production cost and responsibility factors in order to find a balance in their production. After the evaluation, they can determine how much proportion of environmental material they need to use in the production. Moreover, in the production process, they have some environmental process like 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. Although it will increase the production cost, they always want to keep an image of environmental friendly.
5. Why has TAL not gone into retailing its own products under its own brand?
TAL has some small brands to sell their own product in small boutiques, but the brand name is not “TAL”. It is because the name of TAL is a manufacturer and don’t want to be the competitor with their customer. They have many experts in garment industry and well understand the business of manufacturer. However, it is a different business for TAL to become a retailer. It’s operation flow and marketing is totally different compare with Manufacturer. It needs specialize in retailing whereas TAL is specializing in manufacturing. They don’t have such power to compete with their customers. Moreover, TAL has strong customer relationship with their customer. The company has many businesses with high-end garment retailers and now they have achieved great success in garment industry. Thus, there are no reasons for TAL to become a retailer.
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