TAL Visit

Q1. Because of the economic downturn, the purchasing power of European countries is sharply decreasing. People in those countries may not afford the high cost apparel. TAL has added numerous technological values on their products and led to higher cost comparing with other manufacturers in China. How does TAL overcome this problem?

TAL currently produced over 50 million garments a year, including tops, pants, outerwear and tailored suits, supplying to markets in North America, Europe and Asia. Economies of scale are the cost advantages that TAL obtains due to size of output, with cost per unit of output decreasing with increasing scale as fixed costs as the cost is spread out over more units of output. Operational efficiency is also greater with increasing scale of output, leading to lower variable cost as well. This kind of cost advantage can overcome the added numerous technological values on their products and led to reduced cost comparing with other manufacturers in China.

Q2. Computer systems (such as, VMI, FRM etc.) are easily imitated by other competitors, how TAL sustain competitive advantages in the long run?

There are many factors lead to the success of TAL in the industry and well-developed computer systems are one of the successful factors of TAL. Although others competitors can imitate the computer system, TAL still have other factors that cannot imitated by their competitors such as the infrastructure, talent people and partnership to sustain the competitive advantage. With the well-developed infrastructure like data center, innovative product created by talent people, long-term partnership with their customers and the computer system, TAL is able to maintain less holding cost which can help improving their supply chain so TAL can improve their service level by providing supply chain services to their customers without additional cost.

Different computer systems have different degrees of complexity. The complexity of the system is a function of the bundle of skill and knowledge necessary to effectively design, develop, implement, and use the IT in question. While the same technology may present different challenges to different organizations, because of their varying degrees of knowledge with any given technologies have inherently different levels of complexity. Therefore, even though the others can imitate computer system and services, it is hard for them to imitate such a great and complicated system of TAL.

IT resources are technology assets available to the organization, including hardware components and platforms, software applications and environments, and data repositories. These resources contribute to building response lag directly, by simplifying and speeding up the development and introduction of the initiative’s IT core, or indirectly, by making it difficult for competitors who have no ready access to the needed IT resources to replicate leader’s initiative.

Managerial IT skills can contribute to creating substantial response lag when techniques and routines developed over time can significantly reduce development costs and development lead times. These skills are likely to be generally applicable across a number of projects and technologies. Thus, when a new IT-dependent strategic initiative is introduced, managerial IT skills can be leveraged to deliver the necessary IT core in a timely and effective manner. Competitors, who attempt to replicate the initiative but lack the same high level of managerial IT skills as the innovator, face substantial obstacles to imitation. Also, TAL continuously improves their service and their computer system, so it is difficult for their competitors to imitate and can sustain their competitive advantages.

Last, the design of the TAL system aims at improving the whole supply chain of the apparel and there are many supporting facilities and policies like storing 3 months fabrics inventory in their warehouse. These facilities and policies are not easy to imitate so that TAL can sustain their competitive advantages.

Q3. Are there any foreseeable changes in market segments that may come to the apparel industry?

Cost would be the main concern of apparel industry. In most manufacturing countries, costs continue to rise faster than the efficiency gains due to several reasons like minimum wage, inflation. Also, there is more manufacturing supply than demand, which increases competition. Furthermore, TAL targets on high-end market, which offer garment products in high quality but high price. Most of their customers are luxury brands and their main concern is not the price but the quality of garments. The change is that what new value can be added to new garment products to better fulfill needs and wants of customers. TAL would keep track on analyzing the needs of customers and raise the quality of garment. They have really good R&D department, which could help them invent some new garment technology for the value adding.

Q4. How do TAL strike for a balance between corporate / social responsibilities and production costs, in the domains of inventing energy-saving facilities or environmentally friendly practices?

As TAL is one of the largest garment manufacturers in the world, it follows closely to the world environmentally friendly standard. TAL sets targets on reaching their goals. In order to strike a balance between the corporate responsibility and the company’s interest, TAL has implemented the scorecard tool to evaluate the performance of the measures which are related to the production cost and the corporate responsibility. By weighting the importance and impact of the measures, it can determine how to allocate the resource appropriately to different aspects. Importantly, it can find out the best way to achieve the best performance on the whole. TAL has implemented environmentally friendly solution that basically increases production cost but saves more than the cost in the long run. These include 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. Moreover, some measures do not increase the cost but do benefit the environment, for example, the control of kitchen exhaust emissions from workers’ canteens and recycling waste such as paper, textile cones and used chemical drums.

Q5. Have TAL thought of expanding the business by establishing your own brand in the apparel retailing industry instead of only being a manufacturer? Why?

Under TAL group, there are some small brands to sell their products in small boutiques but not in form of “TAL” brand. TAL will not take the role of retailer as they are more specialized in research and development, as well supply chain planning. Their facilities and resources are mainly allocated to these two areas. They have already achieved large proportion of high-end garment manufacturing market and have built up closed relationship with many retailer brands. Also, they consider that retailing is another specialized area, which is totally different from manufacturing.