This week there are two questions about the TAL case study. Please answer one of the questions. Aim to bring in angles/points/evidence that others haven't yet considered.
1. In your opinion, what is TAL's most strategically important innovation with respect to the value chain? (why?)
Question 1 - Aiden McGillicuddy - 300188493
ReplyDeleteIn my opinion the most strategically important innovation by TAL was their implementation of made-to-measure. Made to measure gives a customization option to a retailers high-end customer willing to pay more for tailored clothing. Made-to-measure (MTM) uses “the same production resources to manufacture a variety of similar, yet individually unique products”. In Porter’s value chain MTM affects operations in the value chain’s primary activities.
The introduction of MTM allowed TAL to capture the high-end apparel market and in turn open up more contracts to high-end apparel retailers. TAL increases value to a retailer’s customer from the ability to offer tailored clothing now at a lower cost. The lower cost can be attributed from TAL’s investment in support activity infrastructure.
TAL also added the ability for its retailers (such as Brooks Brothers and J.C Penny) to offer its existing customers more options and customization when purchasing clothes. This new offering increased the value the customer received from their clothing and also gave TAL’s retailers a competitive advantage over its competitors who did not have MTM. Although their competitive advantage cannot be sustainable, innovations such as clothing delivery to the customer helps maintain the advantage by giving more value to the customer.
I think TAL's most strategically important innovation with respect to the value chain was the Vendor-managed inventory (VMI) as this improved TAL's inbound logistics, operations and outbound logistics by having products ordered and produced when required by the retailer. By doing so, TAL learnt valuable information about different sales patterns from each retailer and was able to plan for production. TAL could produce varying quantities of each product to match sale patterns from different retailers in order to minimise production costs and reduce product wastage. Stock was ordered automatically, and monitored by TAL, so this meant that the retailers could benefit from higher inventory turnover. VMI also gave TAL access to customer sales information which allowed them to provide demand forecasting, product design, material sourcing and test marketing. By using VMI, TAL had created exclusive supply contracts with retailers which gave them a competitive advantage over its rivals.
ReplyDeleteIn my opinion TAL's most strategically important innovation with respect to the value chain was the VMI (Vendor-managed inventory) as TAL recognized the significance of inventory management in the apparel industry with it purchased US wholesaler, Damon Holdings Inc. Damon Holdings Inc. made a loss of US$150 million in 3 years largely due to poor inventory control. Using VMI from point of sale would allow TAL to receive orders directly from each store and met the orders with ongoing production with a view of minimizing stock on-hand.
ReplyDeleteIn my opinion I believe that Tal’s most strategically important innovation with respect to the value chain would have to be the Vendor-managed Inventory (VMI).
ReplyDeleteVMI is a program; it works around the vendor creating purchase orders based on the demand at the store or warehouse level.
In respect to the value chain, it affects the primary activities including inbound logistics, operations and outbound logistics.
The benefits of the VMI program included reduced inventory and short replenishment cycles for retailers.
VMI is important as TAL had poor inventory management in the apparel industry when they purchased a US wholesaler, Damon Holdings Inc in 1988, and resulted in a loss of $50 million in 3 years, because of poor inventory control. With VMI implemented this kind of incident would not occur again, as there would be supply chain control and management.
With VMI, TAL received orders directly from individual retail customer stores, and met the orders with ongoing productions with a view of minimizing stock on hand. Production orders were generated automatically and would be processed with priority, so when a customer purchased an item from a store, that information would be tracked with TAL’s computers and that item would automatically be shipped back to the store in a few days. So this was a benefit as TAL learnt about the sales pattern and could plan for production.
In your opinion, what is TAL’s most strategically important innovation with respect to the value chain? (why?)
ReplyDelete• In my own opinion, TAL’s most strategically important innovation was its new supply chain management system and vendor-managed inventory (VMI) in order to strengthen its position as a dominant apparel supplier in the industry. TAL recognised the need to adopt this innovation early on because of rising threats to their competitive position. Some of the threats were China entering the WTO and the elimination of textile quotas which meant other competitors would be able to use China as a sourcing hub. There were also large price falls and persistent over-capacity in the apprel industry. This created a lot of pressure for TAL because of the inevitible increased competition.
• TAL decided to shift their expertise to higher value-added activities, using the branding and marketing side of the business. This included demand forecasting, product design, material sourcing and test marketing. This is particularly important because apparel demand is seasonal, it has longer product cycles and does not change much, or as fast as electronic products. Using the value-added activities would help TAL combat the issue.
• Through the use of their innovative supply chain management system, TAL was providing and coordinating all activities in the production, trade and financial networks to their foreign buyers. Suppliers are able to gain valueable market knowledge about their foreign buyers’ purchase preferences and create a reliable sourcing network for raw materials. This allowed TAL to create a closer relationship with its retailer customers. A closer relationship meant better collaboration and communication.
• The supply chain management system optimised TAL’s business processes with its suppliers. The system had incorporated the use of IT infrastructure to support its supply operations. It allowed the supply chain to be more efficient because suppliers were linked through a single network that optimised costs and opportunities.
• The vendor-managed inventory (VMI) program allowed vendors to create the purchase orders based on the demand at the store or warehouse. This meant reduced inventory levels and shorter inventory cycles. This allowed TAL to learn about the sales pattern and could plan for the production using common performance measures. This was beneficial for suppliers because each supplier had different unique requirements (design details, shipment reqreuiements, and so on).
TAL was able to gain exclusive supply contracts from its retailer customers in product lines that they provided VMI for. This allowed the company to avoid any price competition from its competitors.
1. In your opinion, what is TAL's most strategically important innovation with respect to the value chain? (why?)
ReplyDeleteTAL's most strategic innovation in respect to the value chain was the concept of made to measure. This was seen as a new market niche in the apparel industry, with mass customisation using advanced technologies and was seen to grow the apparel industry within the next 5 years. The customisation included shifting its post productions to create collaborative operations with retailers, manufacturers and IT specialists to fulfil the order process.
In making collaborative links TAL made its first step by connecting with Lands End a made to measure company who operated mass scale operations. This allowed TAL to open up is supplier base to other contractors. This proved successful with 40 percent sales in all categories. Having 3 factories meant that once each order was made, the pattern files would be sent to TAL’s system electronically. Then the machines will cut to scale according to the file sent to their system. This allowed TAL too produces far cheaper apparel for customers.
In terms of the value chain TAL tries to shrink down the process of the value chain by creating a faster and simple way of operations by a mass scale production. Inbound Logistics meant that data was being sent straight to the factories electronically, once orders were made.
In your opinion, what is TAL's most strategically important innovation with respect to the value chain? (why?)
ReplyDeleteIn my opinion TAL's most strategically important innovation in respect to the value chain management was the introduction of VMI (Vendor-managed inventory). TAL realised that there was a huge reliance on inventory management in the apparel industry when they purchased Damon Holdings Inc, a US based wholesaler. Their recognition towards inventory management came from the fact that their new acquisition made a huge loss of fifty million dollars in 3 years, and to blame for the loss was “poor inventory control”.
Using VMI, TAL got the orders straight from each retail store by having access to the inventory and near real time information of sales figures. This meant that production orders were made automatically when a customer bought any piece of apparel. When purchased the information was seen by TAL and an identical product is shipped to the in matter of just a few days.
This was beneficial to both parties as it reduced inventory and shortened the “replenishment cycle”. It also help TAL, as they could use the information to track sale patterns and plan for future production. For example, TAL could use the sale patterns from throughout the year to plan for the next year and plan what apparel sold more and for which time period, for instance, summer apparel against winter apparel.
TAL's most strategically significant innovation is the VMI (Vendor-managed inventory). TAL soon realized that this system would allow for added value to the business services they provided in the inbound, outbound logistics and operations.
ReplyDeleteThe TAL system added value by allowing real time sales figures determine the stock levels of a stores apparel they were selling.
This reduces the amount of stock on hold in a warehouse or out the back of the store and would allow the business to only stock the items they were selling, the more the retailer sold the more TAL would manufacture and provide to the customer this would increase TAL’s inbound logistics, operations and outbound logistics in the value chain.
The VMI system also helps develop shopping patterns which can predict how much of an item would be needed and when they need to up production in certain times of the year – all this information can help the buyers (retailers) better manage their own stock inventory and determine how much stock of an item they want in hand of each item.
1. In your opinion, what is TAL's most strategically important innovation with respect to the value chain? (why?)
ReplyDeleteTAL's VMI (Vendor Management Inventory) is the key factor in their success. It allows for the most efficient use of stock management as TAL would receive automated orders from the individual retailers when their stock depleted. This cut down the time it would usually take for TAL to receive an order for more stock. Dispatch times are also reduced as the new stock is on its way to the retailer before they have even run out.
Automating and digitising this system allowed TAL to track the trends of the orders, which is very valuable in the this industry. If TAL can predict downturns in customer sales before they happen based on previous years data then this is both beneficial to TAL and the retailer.