TAL

Company Visit 1 

Date: 6-2-2015

Company: TAL

Location: T.a.l. Bldg, 45-53 Austin Rd, Tsim Sha Tsui.

Schedule

1. Arrive to TAL

2. Watch a video - About the history of TAL 

3. Listen a talk - Introduction of TAL (Eg, Products, technology & Supply Chain)

4. Q&A Section

Background of TAL

Original equipment manufacturer (OEM) is a company makes a part or subsystem that is used in another company’s end product or it may say it produces parts that marked by another company or second company’s owned product.

For TAL, since it is mainly focus on the innovation on the technique which be used in producing the component of shirt or pants. For example, SofTal technology makes the garments to be wrinkle free. The products it produced, is marked under other brand name companies (their customers) such as Burberry, Jones etc. End users/customers cannot be known the product is made by TAL by looking the product itself.

Although TAL has a lot of innovative techniques, it would not develop its own brand at this moment. It think it is not a suitable time for it to expand the business to become a retailer as more things need to be manage and to be promoted. They will keep on to be a manufacturer and develop more innovative techniques.

The Supply Chain Model of TAL

TAL uses 4-level model in supply chain. They are Quick Response (QR), Continuous Replenishment (CR), Warehouse VMI and Store VMI. The services, which is provided by TAL, cover from warehouse replenishment to store allocation. It plans on purchase forecast to sales forecast. 

QR is about the material safety stock ad material order management. It can shorter the lead-time.QR is about the supply forecast, intake planning and order decision. Warehouse VMI is about the demand forecast. By using it, the warehouse inventory turn of TAL is increased by 62%. Moreover, the warehouse in stock rate is increased by 5%. The store can drive more sales by tore in-stock rate increment. At last, Store VMI is about the demand foremast. TAL helps their customer to forecast the warehouse demand. 

The 4-level model speeds up the response time in supply chain. It can maximize the sales potential. 

Q & A Section

1. How do TAL get involved in corporate social responsibility?

TAL get involved in CSR (Corporate Social Responsibility) by improving sustainability, doing charity and taking care the employees.

TAL concerns the pollution problem. Therefore, it makes some effort on protecting the environment. First of all, TAL tries its best to reduce the Greenhouse Gas emission. The Greenhouse Gas intensity (Kg CO2e per garment) is reduced by 21% by the end of 2014 compared to 2009 baseline.

Moreover, garment industry always requires a lot of water to the manufacturing process, such as, overdye and washing. The used water have many chemicals which will cause water pollution problem. Therefore, TAL reduces the water used in manufacturing. The water intensity (m3 per garment) is reduced by 15% by the end of 2014 compared to 2009 baseline.

Besides improving sustainability, TAL has also done some charity works to give back to the community. For example, contributing to natural disaster relief efforts in Asia and elsewhere and donating to educational institutions in Hong Kong and China.

Furthermore, TAL provides a safe and secure place for their employees. It also gives opportunity to their employees to upgrade their skills and knowledge.

2. Why do TAL not set up their own brand of apparel as a retailer?

There are few reasons that TAL do not set up their own brand as a retailer.

First, managing to end customers is always different from managing a brand to retailer. It is not easy to manage end customers. Being a retailer, TAL need to understand more customers’ needs and wants. They have to do more research such customers’ preference and the fashion trend. It is not easy to set up their own brand.

Also, TAL positioning itself as a manufacturer in the supply chain. They have experience in acting as a manufacturer but do not have any experience as a retailer. Since it is a good opportunity to go one stair down the supply chain to manage their own brand. They are still learning how to be a retailer. For example, they are understanding more customer preference, knowing how to do forecasting, how to do promotion to consume the goods. Those are useful to help TAL to become a retailer.

In order to set up their own brand, it must have a right timing to do this. For example, it has to know whether the needs of consumer, the capital is enough to expand or not and the economics in that countries. Besides having the right timing, it is important to wait the decision of management team too.

3. What do the priority TAL place on the corporate social responsibility?

TAL has done a lot of things to fulfill CSR (Corporate Social Responsibility). The first priority is protecting the environment. They have reduced the pollutants emission and the water usage. The details have been mentioned in Q.1.

The remainings are doing charity and taking care the employees. Both of them have the same priority.

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

TAL have different factories in many different countries. There are two factories in mainland China. Each factory in different countries has its manufacturing cost. Although the cost of manufacturing is increasing in mainland China, TAL will not consider to move away from mainland China in a meanwhile. Because it is not easy to move out a factories from a country, because they need to consider the capacity that a factory can offer.

If TAL are looking to set a new factories, TAL have to consider the total cost to set up a new factories. There are many different kinds of cost. It might include set up cost and land cost. TAL will not consider mainland China as the first choice because the labor cost in mainland China is increasing. Now TAL is actually target looking for a factories in different countries. They are looking to see whether Africa can have a new factories or not.

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

TAL chooses to keep their image to attract target customers. Actually, the partners of TAL are mainly from the worlds’ leading apparel brands and retailers such as JCPenney, Burberry, Giordano and Jones, etc. The target customers of those retailers are having middle to high income level, their expectation of the product quality is high as they are willing to pay more to get a better quality product.

While those online shops are mainly focus on selling products with cheaper price to attract more customers. The target customers of those shops are having low income level, who are having much more concern on the price of product.

Since TAL focuses on premium brand while online shops focus on popularized brand, they are focusing on different market segment. TAL believes customers will not switch their style easily, so it chooses to keep selling their products with a steady price level as of now to maintain customers’ confidence on their products.   

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

First, TAL will continue to invent innovative technology in apparel in order to deliver to enhanced quality of garment to customer. TAL differentiates the innovation but not the product.

Second, TAL specialize in garment manufacture and is the world leader in production of innovative clothes. Their products include shirts, blouses, knitwear, polo shirts and pants. However, they think they may not apply their innovative techniques to the accessory such as shoes and bags. Although the company provides a wide range of technologies, most of them are focus on creating a new process, treatment or quality on clothing. For example, the unsurpassed wrinkle free processes, it commonly applies on shirt. Thus, most innovative technologies are hard to apply on shoes or bags. Besides, the techniques to produce bags or shoes are not fit with the apparel. Therefore, TAL would not create a new business on accessory in the short run.

7. How do you ensure the quality of your supply chain globally?

To ensure the quality of the global supply chain, TAL has used Warehouse VMI and Store VMI to have better manage the flow of stock in their global supply chain.

VMI is a business models in which the buyer of a product provides information of that product to vendor supplier and the suppliers takes responsibility for maintaining an agreed inventory or even help doing the demand forecast of that product as to better predict the replenishment of the product.

TAL receives the information from the point of sales (POS) and inventory data of each customers (brand companies) to do the demand forecast and base on the forecast to plan the level and the frequency of inventory replenishment to each distribution center (DC) which is the Warehouse VMI.

To do one step further, TAL also do the Store VMI, which base on reviewing the store POS and inventory data to forecast and calculate which type and its corresponding amount of product is required by each store. Then, auto replenish product to DC and stores by clustering the information and model for floor set of the store.

This can increase the the fill rate, turns rate and reduce the in-stock rate in both DC and stores.

Besides, in order to improve the quality of the whole supply chain, TAL uses a lot of computerized process to fasten up and reduce the artificial errors such as pack-to-light, using RF scanning, tilt tray sortation etc. On the other hand, TAL uses shipping direct-to-DC, direct-to-store, direct-to-customer can reduce the process.

8. How can your company strike for the balance between time spending on customers and cost in the supply chain?

TAL has implied a unique supply chain model in their own operation, which include Quick Response (QR), Continuous Replenishment (CR), Warehouse VMI and Store VMI. By applying this model, TAL can save more than 50% order lead time as well as the cost, which compared with normal order. While TAL wants to strike for the balance between time spending on customers and cost in the supply chain, it has focus on elaborating QR and CR.

With the application of QR, TAL can use shorter lead-time to manage the material order, as well as the material of safety stock. This can help maintain high in-stock rate and turn keeps improving. With the application of CR, TAL can make supply forecasting more accurately, stock intake planning and order decision can be chosen in the most effective way to perform most efficiently. With the help of CR, TAL can save more than 4 millions per year, drive more than 600,000 piece of stock per year and also can reduce more than 57% lead time.

Besides applying the supply chain model, TAL also use cross docking to has fasten the supply chain process with saving some steps of supply chain. By using this, TAL can reduce the storage times and eliminate the need to retain safety stock in order to reduce inventory costs.

9. Facing the shrinking of the garment industry in HK, i.e. there are numerous foreign fashion retailers compete in HK (e.g. Uniqlo, H&M) and some of manufacturers invent many new technologies into HK (e.g. heattech for Uniqlo, flyknit for Nike), how can TAL remain competitive in HK?

First, the target market is different. TAL is different from some fashion retailers like Uniqlo, H&M. TAL’s target customer is the branded company which is not end customer. The branded company will buy TAL’s innovative products (such as shirt with Softal). TAL is a manufacturer to produce high quality apparel to branded company. Therefore, TAL may not have direct competition with fashion retailer.

Second, TAL has a diversified client base. For example, Ashworth, Banana Republic, Brooks Brothers, Burberry, Chico's, Dillard's, Givenchy, L.L.Bean, Serfontaine, Tommy Hilfiger, Talbots etc. the company has the world’s leading apparel brands and retailers as its partner. Each of partners has various feature and requirement. TAL can anticipate their needs and deliver the best products and services. The partners have confident that to make business with TAL and create a strong business relationship between them. It can bring a strong loyalty with clients. Therefore, TAL has a competitive advantages that other companies are hard to replace TAL and keep making business with TAL.

Third, with VMI and other supply chain capabilities, TAL creates many achievements:

- increased warehouse inventory turns by 62%.

- increased warehouse in stock rate by 5%

- support store to drive more sales by store in stock rate increment

- warehouse fill rate improved from 70% to 99.8%

- Store turns improved by 14%

-Store in stock rate increased by 17%

- Potential sales are maximized

The improved supply chain can speed up response time, sell more with less stock out and increase revenue. The advance supply chain capabilities can increase their competitive advantages in the industry since the supply chain practices are different from other companies.

Forth,  TAL has over 30 innovative garment technologies. For example, SofTAL Process ®, TAL Pucker Free ® Seam Technology, Dot.TAL ®, WOR - nano technology, DriXpert ®, EZCOOL ™, Emboss, SofTAL ® Wool. Expandable Waistband etc. Some of the technologies make the clothing more unusual. The technologies can directly improve the quality and performance of the garment. TAL differentiate their innovation but not the product. Now, TAL keep invest in R&D to create more innovative process in order to offer the enhanced products to clients. The technologies help TAL to be more competitive and success.

Reflection

In the visit of TAL, we know  more about the technology and supply chain of TAL. We are surprised about its technology. When we viewed and touched the products which are displayed during the visit, we though the quality of the garments is nice. The SofTal technology make the garments to be wrinkle free. Moreover, The garments are smooth because of Pucker Free. The most interesting technology is Inno Smart. When the inside of the garments is wet, there would not have mark to be showed outside.

Besides the innovative technology, we think the supply chain model is the important factor for TAL to be success. However, we are disappointed about TAL would not develop its own brand to be a retailer now. 

References: 

TAL PDF

PowerPoint which is prepared by TAL 
http://www.talgroup.com/en/popups/more_csr.html