Tal - Jcpenny Case

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Case Name: TAL – J.C. Penney Case
Problem Statement
Hong Kong based apparel manufacture, TAL, faced many strategic challenges and wanted to learn how leverage the Company’s information management system to strategically reposition the company with a view to creating sustainable competitive advantage in the long run. Background

TAL Group
History
* Started 1947, by Lee family – first spinning mill in Hong Kong for producing yarn * 1962: mills banded together to form Textile Alliance Limited (TAL) * 1983: subsidiary Textile Apparel Limited - garment division * 2001: TAL Global Alliance Limited (TAG) – (global sales and marketing business) to adjust to the increasing scale of international business * One of the Largest Garment Manufactures in the world

* Headquarters in Hong Kong
Conditions
* 2004 china’s accession into the WTO meant regulatory changes * No textile quotas
* Pressures to manufacturers and suppliers on a global basis Culture
* TAL facing external changes has looked inward for improvement and expansion of the Company’s Information Technology System * The company is focused on building retailer partnerships * Wants to strengthen its position as a dominant apparel supplier Strengths

0 Has been around for over years and still is a strong company 1 Head quarters in Hong-Kong
2 Close relationship with US retailers
3 R & D department
4 VMI and MTM
Weaknesses
5 Over capacity – Cut costs
6 Far away from the US (shipping costs could be high)
Global Apparel Industry
Customers
* Department stores = JC Penney
* Specialty clothing stores = Brooks Brothers, Liz Claiborne, Polo Ralph Lauren and Banana Republic * Catalogue retailers = Lands’ End and L.L. Bean
* Major Retailers that are looking for cheaper labor and low cost manufacturing while still maintaining quality Traditional Competitors
* With the globalization of apparel production, competition between the leading firms in the industry has intensified as each type of lead firm has developed extensive global sourcing capabilities * Based on price, quality, and delivery

New market entrants
* North American Free Trade Agreement (NAFTA) brought other low cost labor countries into competition. * New entrants were benefiting predominantly from new countries in the industry low labor wage and preferential tariffs in their regional trade networks. Opportunities

* New Technology
* Value added services
* Their own apparel lines
Threats
* Textile quotas eliminated
* Low cost in other Asian, Central American, Caribbean countries * Replication of their information management system from competitors Key Issues
Issue #1: IT initiatives that strategically repositioned the company Sub-Issue #1: Vendor Managed Inventory (VMI)
Sub-Issue #2: Made to Measure
Issue #2: Benefits for both retailer and manufacturer
Issue #3: Design and marketing
Relevant Areas, Facts, Conclusions
Initiatives that strategically repositioned the company
Vendor Managed Inventory
Continuous replenishment program that the supplier creates the purchase orders based on the demand at the store or warehouse levels Backward replenishment tool: Supplier does the demand creation and fulfillment based on real time front line sales information TAL spent 3 years to convince JC Penny to provide VMI from point of sale TAL promised cost savings and efficiency gains

Could reduce inventory level but had to be the sole supplier for a certain garment Sold them on having multiple factories so they could handle the inventory load Since JCPenny no longer would have control on their ordering TAL would have to hard code sales information, inform J.C.Penney on inventory shipment quantity, and had to increase employment positions of lawyers, accountants, and IT. Production orders were generated automatically as well as stock replenishments VMI gave TAL point of sale information which...
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