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Session 8 Competitive nature of apparel industry in Hong Kong 1

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Page 1: Session 8 Competitive nature of apparel industry in Hong …edblog.hkedcity.net/te_tl_e/wp-content/blogs/1685/uploads/S8 Dr... · 7. Service‐centric, globalizing sourcing and manufacturing

Session 8

Competitive nature of apparel industryin Hong Kong

1

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Competitive Nature of Apparel Industry in Hong Kong

Service‐centric, globalizing sourcing and  manufacturing operation

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungL&F has changed dramatically in scale, but its fundamental philosophy 

has not changed. They just apply it with more sophistication and

more  depth

Growth over the past decade were due to fundamental strategies + three‐ year planning process Victor (non‐executive Chairman) and William Fung 

(Group Managing Director) instituted in 1989.Today, L&F is yet to broaden its wings as a truly full‐service global 

business in sourcing, retail, and distribution

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungL&F growth through its intense planning and scrutiny of its core

sourcing 

businessFirst: Not owning supply chain to focused on optimising

the pricing 

structure of each segment of the global supply chain, i.e., squeeze more  efficiency (in logistics, shipping, and customs) in the supply chain 

between the factory and the consumerCost savings from these efficiencies + profit maximising

and creating by 

creating more sophisticated value‐added services for its customers

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungL&F launched onshore partnership with its key customers to create 

customized strategies and servicesUS onshore strategy allows L&F to become more versatile in its offerings 

to customers through the development of proprietary/private‐label  brands

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungSecond: Continued acquisition of competitors – 22 acq. Since 1999. The 

acq. of two export trading “Swire & Maclaine”

and “Camberley”

+ Colby  Group Holdings in late 2000 = 21% in revenue in 2000 year‐end result –

L&F as leading in sourcing and export trading

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungFrom mainland China to Hong Kong

1906: Founded in Guangzhou by Fung Pak‐liu

and Li To‐mingPorcelain and silk – bamboo and rattan ware, jade, ivory, handicrafts, and 

fireworks (with fireworks still offering today)28 Dec., 1937: established in HK as ltd.1943: Fung Hon‐chu

took over the 

late Fung Pak‐liu

+ retirement of LiLi = ‘profit’

+ Fung = ‘abundance’

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungExpansion beyond Hong Kong

1949: rise of the Communist Party in mainland China –

influx of  refugees –

turned HK economy into an important manufacturing center 

for labor‐intensive consumer productsL&F expanded to garments, toys, electronics, and plastic flowers

become one of HK’s largest exporters

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungExpansion beyond Hong Kong

Early 1970s: Victor and William Fung studied in the USVictor completing PhD at business economics Harvard U + William 

getting MBA at Harvard Business School when they observed changes in  the sourcing industry –

redefine the way L&F conducted its business

1972: William returned to HK to work in L&F + Victor remained as professor at Harvard Business School

1974: Victor returned to HK, together they modernised

and rebuilt L&F  into a structured business run by professional management at all

levels

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungExpansion beyond Hong Kong

1978: China opened up – rapid industrialisation

of less developed Asian  countries – L&F investing in and sourcing supplies from relocated 

factories in southern China and Asia – L&F established as regional  network of offices beyond HK focusing on various customers

1985: L&F expanded to include retailing (Li & Fung (Retailing) Limited) =  Circle K + Toys “R”

Us, etc. – right to establish stores to Taiwan, 

Singapore, Malaysia, the Chinese mainland and other Asia countries

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungExpansion beyond Hong Kong

1989:  Victor and William Fung owned the whole of L&F and was taken  private for restructuring into two core areas: export trading + retail

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungMergers and acquisitions spur growth

1995: Acquired Inchcape Buying Services (also Dodwell), a HK‐based  export‐trading company –

established a strong European customer base to 

complement the US strength + expanded sourcing network to include  south Asia, Mediterranean, and the Caribbean

End of 1999: Acquired two Swire subsidiaries, i.e., Swire & Maclaine

Ltd.  + Camberley

Enterprises Ltd. and gained expertise in the design process

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungMergers and acquisitions spur growth

Early 2000: Bought Colby Group Holdings Ltd.2002: Took over Janco

Overseas Limited

Customer base broadened + management team strengthened + product offerings enhanced + geographic reach expanded

Today, L&F is a truly multinational company

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungBroadening the business model

L&F expanding on the sourcing side in the Indian subcontinent and the  Caribbean and Mediterranean basins that were important given their 

geographic closeness to the key North American and European markets1999: L&F diversified into distribution business through Li & Fung 

(Distribution) Ltd. which acquired the marketing services businesses of  Inchcape in the Asia‐Pacific region –

continue core business in 

manufacturing + logistics + marketingL&F (Distribution) Ltd. listed as Integrated Distribution Services Group

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

The ultimate middlemanBusiness strategy – disciplined entrepreneurship

Transforming the customer experienceInformation technology as a core strength

Moving up the value chain

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

The ultimate middlemanIntroduction of a seller to a buyer ‐

maximise

its potential through 

sophisticated technologies + networks + knowledge + staff + informationSoft goods (garments, apparel) + hard goods (fashion accessories, toys, 

travel goods, gift items, fireworks, stationery, furniture, shoes, etc.)SG = 2/3 total trading business, US = 69% of SG businessBig‐box/superstore retailers – specialty stores ‐

brands

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

Business strategy – disciplined entrepreneurship170 entrepreneurial profit centers to maintain a customer‐centric focus

Competitive compensation + incentive bonus plans + stock‐option grantsA culture of 3‐year business planning ‐

process institutionalisation

(failure 

analysed) ‐

managers accountable for goals (management/business  theories tested)

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

Transforming the customer experienceTradition = shipped goods 4 times for 4 seasons; now more and fasterCompress between planning, designing, sourcing, and manufacturing

Expertise: an ability to collect the most up‐to‐date information on how to  best manufacture a product for a customer

Manager intranet for info on best supplier and factory = top‐notch quality  at the best price in the timeliest manner

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

Transforming the customer experienceWoven in China, fastened in Korea, sewn in Guatemala“Just‐in‐time”

coordination –

flexibility for changes

L&F philosophy was to organise

around the customer in a ‘flat world’

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

Information technology as a core strengthTo manage logistics of the supply chain process

L&F focused on sharing/connecting information across headquarters,  customers, sourcing offices, and factories (including adopting customer’s 

in‐house system software systems, if required) = real customer‐centric“The Wired 40”

in 2005 along Apple, Google, Samsung, Yahoo…

“Plug and play”

model for back‐end operations: admin, finance, HR, IT…

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Export‐Trading Business –

Traditional Supply Chain Services

Moving up the value chain by doing moreWilliam Fung: “Nobody is going to pay you more unless you do more”SG customers: besides traditional raw material and factory sourcing ‐

product planning, design services, and developmentL&F customer‐facing teams provides creative suggestions on colors and 

fabrics against season + QC, testing, export documentation, logistics  services

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungEating into the Soft $3

US onshore strategy to gain more margin by providing more values through new services between factory and selling floor, e.g., orders  analysis to reduce markdowns + decrease the inefficiencies of the reorder 

cycle + minimise

risk of inventory to logistics

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungEating into the Soft $3 –

70% customers are based in the US

4 benefits of the onshore strategy: closer relationship for improved  margins with more services within the value chain + create more 

stickiness between L&F and their best customers + closer to information  and responds faster to changes and announcements + penetrate the

import market for middlemen sourcing products through L&F on behalf  of their US customers

L&F onshore business now grows from nothing to US$1b

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungEating into the Soft $3 ‐

Licensing recognised

brand

By controlling product design, branding, sourcing, product delivery,  quality control, pricing, warehousing of licensed brands like Cannon,  Royal Velvet, Disney and Levi’s for twice the project over mere sourcing

2005: acquired Briefly Stated with 60 brands focusing on loungewear and  undergarments for children and adults

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungEating into the Soft $3 ‐

Private label

Strategy to acquire companies that specialised

in producing finished  products with a specialty in design for retailers that would give the 

product a private label/in‐house brand to differentiate its offerings from  those of its competitors

Private‐label had proliferated/transformed retail industry over the years

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & Fung ‐

Proprietary brandsCombination of the previous two

Strategy focused on making an already recognised

brand exclusive to a  retailer. Examples include housewares

by Michael Grave for Target, 

Martha Stewart for Kmart, Karl Lagerfeld, Stella McCartney, and Viktor &  Rolf at H&M, Nicole Miller at J.C. Penney, etc.

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Major sourcing acquisitions2006: Acquired KarstadtQuelle’s

sourcing arm

KarstadtQuelle

is a major German catalog and retail business and  Europe’s largest department store operator –

brought L&F over US$1b 

additional revenues and a stronger base in Europe

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The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Steady drumbeat to fill in the hard‐goods mosaicSought acquisitions in products and regions in which it was weak

Eyed small and medium‐sized sourcing offices with specific specialties in  areas such as furniture, home textiles

HG are less profitable, longer lead times to production setup, more labor  intensive, less customer prices than those for soft goods. Yet, huge growth  potential.

Competitive Nature of Apparel Industry in Hong Kong

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The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Steady drumbeat to fill in the hard‐goods mosaicLess than 10% of trade business in 1992; over 30% in 2006 (US$3b)

China remains the key HG supplier: Southern China (primarily HK and  Guangdong Province); Central China (Shanghai); Northern China 

(Qingdao and neighboring areas of Beijing); Western China (Chengdu)

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The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Steady drumbeat to fill in the hard‐goods mosaicSouthern China (primarily HK and Guangdong Province) for 

sophisticated design yet highest labor cost; Central China (Shanghai) for  its strength in cheaper labor, smaller quantity production on home textiles, 

glass, ceramics, home decoratives, and plush toys; Northern China  (Qingdao and neighboring areas of Beijing) for its strong expertise in  metal, home textiles, ceramics, and glasses; Western China (Chengdu) is 

viewed to be Shanghai region of 20 to 25 years ago

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The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Steady drumbeat to fill in the hard‐goods mosaicVietnam for wood, sea glass, shoes, and gardening items; Southeast Asia 

(Indonesia) for wood and furniture products; India and Pakistan for home  textiles and handicraft items in metal; Turkey, Eruope, and Mexico for 

hard‐goods business

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Growing Europe from 20% to 33% of the trading businessFour concerns: 

1. Geographically fragmented and more work to penetrate2. The buying, sourcing, and logistics business was sophisticated

3. Multiple agents and supply chains used in Europe – smaller business4. Buyers opted for diversified vendors for creative services for a variety 

of ideas to make up for the lack of scale and design in‐house

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungThe Next Wave of Acquisition –

Rebalancing the Portfolio

Growing Europe from 20% to 33% of the trading businessThe four concerns + specific European tastes present a challengeLearn from the US onshore experience for the Europe market

Competitive Nature of Apparel Industry in Hong Kong

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Service‐centric, globalizing sourcing and  manufacturing operations

The Story of Li & FungThe Second Hundred Years

Problems facing:An unbalanced portfolio

An over‐reliance on the US marketA rather diversified European market

A global saturation of demand for soft goodsNew business?

Other supply chain efficiencies unanalysed

yet? 

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Single textile mill in Hong Kong ‐

global powerhouse in apparel design, manufacturing, and logistics

= synchronisation

the simultaneous and highly efficient coordination of far‐ flung supply chain, product development, and marketing and sales

activities 

with customers and suppliers

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Hong Kong baseOne of the largest apparel manufacturers in the world

Double set of cost pressures:Retail customers

International multitude of competitors, e.g., mainland ChinaDifferentiators: cost, quality and delivery

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Competitive situation –

distinct advantage beyond cost, quality, and deliverysynchronisation

of supply and demand to a new level of performance

by linking activities on the factory floor ‐

its various Asian factories ‐

points of  sale at retailers in the US

Established closer ties with retail customerscommodity manufacturer – full‐fledged, synchronisation

services provider

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Close and stable customer relationshipsCapability to create new materials, products, manufacturing, and

logistics 

processes to help ensure continued improvement of its business model

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

1947 – South ChinaAlliance w/ Jardine

Matheson Group ‐

Textile Alliance Limited (TAL)

Met various challenges over time: Reduce cost and cycle time –

increase quality,  on‐time delivery, collaboration and differentiation

Acquire new skills, develop new resources

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Meet demands of cost efficiencies by economies of scaleSingle textile spinning mill in HK –

production facilities in Thailand, Malaysia, 

Taiwan, China, US, Indonesia, Vietnam,  Mexico – 3.5m ft2

factory floor41m tops, 8m pants, 1.5m outerwear, 0.13m tailored suits

23000 workforce –

US$600m annual turnoverMajor customers: Brooks Brothers, L.L. Bean, J.C. Penny, Giordano, Land’s End, 

Liz Claiborne, Nautica, Tommy Hilfigar…

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

TAL’s

sales –

retailers, i.e., high profit w/ less middlemen80% US market, i.e., 1 out of 8 dress shirts sold in the USExport countries: South Korea, Japan, China, Europe…

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Cost pressures in the US market since 1960sFirst wave to outsource to Asia –

cheaper labor, lower cost, same quality

TAL benefited with cost containment + qualityMeanwhile, retailers looked for designers for heighten product demand and 

margins by changing the product look more frequently –

fashion in apparelCost containment + quality are not enough

Reduced cycle time for product development and launch areYarn dyed fabric – shipment, 5 months – 60 days

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Cost containment + quality control skills + improved communications with  global customers – provision of flexible and responsive manufacturing and  design systems

Early 1970s ‐

electronic data interchange systems (EDI)TAL exchanged documents with customers electronically = IT

Today, EDI for purchase order (PO), advance ship notice (ASN), invoice,point‐of‐sales (POS) data, order status, etc.

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Late 1980s to 1990s – rise in supply chain management software, i.e., i2  Technologies, Manugistics

in consumer goods and retail industries

TAL provided rapid replenishment for J.C. Penney, etc. = much faster shipment  + heavily reduced cycle time + more efficient inventory operations

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Late 1990s to date – hurdle raised again = synchronize supply and demand  activities more effectively –

ensuring close coordination among far‐flung 

product development, marketing/sales and supply chainsTAL enabled vendor managed inventory with customers such as J.C.

Penny

Link designers with factory globally to points of sale in the US

= greater  efficiencies for its customers and expanded business opportunities

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

TAL model –

traditional manufacturer –

flexible manufacturer – integrated  synchronisation

services provider with capabilities for rapid design, flexible 

manufacturing, and collaborative planning, forecasting, and replenishment,  including vendor managed inventory (VMI)

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Traditional manufacturing –

command demand = no visibility into customers’ demand requirements and simply responded to orders + competition

based on 

price, quality = strict manufacturer + supplierGreater cost + delivery pressure –

retail customers forced TAL to be a flexible 

manufacturer that responded to their demand on the warehouse or store levelTAL  started to synchronize to such demand by offering logistical services on 

top of manufacturingToday, TAL has visibility into demand at point of sale + link info back to 

production operations, R&D, etc.

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Since 1995 –

TAL’s

synchronisation

of supply + demand = rapid replenishment  to J.C. Penney’s warehouses

TAL ‐

Penney’s demand – TAL warehouse levelWeekly orders communicated by EDI – shipped within a week

Cycle times reduced from 4‐6 months to 30 daysInventory reduced from 6 months to 7 weeks

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

TAL factories shipped directly to Penney storesSee shop floor demand – pack, bar code, consolidate shipping orders to storesCustomized heat shrink packing to meet individual stores’

packaging needs

minimised

factory inventory + higher order fill ratesNo warehouse inventory and handling for Penney = improved fill rates + 

increased customer satisfactionDirect shipment to shores – less 15% of cost free on board (FOB)

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Tight collaboration yields synchronisationTAL ‐

suppliers – customers = respond holistically to demand

Tight collaboration = efficient, quick, accurate, and extensive syncCustomer’s customer demand = data not from Penney but data from POS store

level – TAL demand forecasting model yielding dynamic model stock of stock  keeping units (SKUs) for each store

“Fire truck”

cycle – shipment within 4 hours

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Sharing point‐of‐sale (POS) data with customer, i.e., PenneyFaster +  more flexible + more accurate response to consumer market –

greater 

sales + fewer closeouts + reduced inventorySupply = demand driven = more pull than push process

Close collaboration with customers – design products for them = Penney’s shirt  + Dillard’s private label shirts

Also with supplier = wrinkle‐free, 100% cotton shirts + patented, pucker‐free  seams + pinpoint oxford shirts that can withstand machine washing up to 50  times or more

Competitive Nature of Apparel Industry in Hong Kong

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Design and coordination services in sustaining  supply function efficiency and effectiveness

The Case of TAL Apparel Group

Yarn‐dye‐fabric – idea and design to delivery ‐

180 days to 90 days nowWeave‐dye‐item – less than 60 days shipment inclusive

Competitive Nature of Apparel Industry in Hong Kong

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Referenceshttp://www.51hotnet.com/archiver/showtopic‐43581.aspx http://www.nanfangdaily.com.cn/jj/20050630/zlygl/200506290088.asp http://deloitte.com/dtt/cda/doc/content/arg_tall_06‐2005.pdf http://www.lawson.com/www/resource.nsf/pub/Fashion_News_04_03_en.pdf/$FILE/Fashion_News_04_03_en.pdf http://blogs.sun.com/MortazaviBlog/resource/ATransactionCostEconomicsViewofUncertaintyAmplificationInSupplyChains.dochttp://en.ec.com.cn/topic/apecgslmfirsten/ppt/KurtCavano.ppthttp://books.google.com/books?id=XsdDf4a1e98C&pg=PA86&lpg=PA86&dq=TAL+VMI+Penney&source=web&ots=TctDd3OiNK&sig=POda‐FG___tbqURxVZu3kT9hRmA http://news.ctei.gov.cn/zhuanti/fenghui/CITALES_2005_2.htm http://www.leaonline.com/doi/abs/10.1207/S15324796ABM2603_03 http://www.efu.com.cn/data/2005/2005‐10‐31/125182.shtml http://www.cz.capgemini.com/m/cz/tl/Consumer‐Driven_Replenishment_‐_A_Collaborative_Approach.pdf

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References

http://www.intracen.org/textilesandclothing/get‐connected_study.pdfhttp://www.ism.co.at/analyses/Fashion/Intentia_Movex/Intentia_Movex.htmlhttp://www.nanfangdaily.com.cn/jj/20050630/zlygl/200506290088.asp http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6W45‐4K23YF9‐4&_user=107833&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000008378&_version=1&_urlVersion=0&_userid=107833&md5=c8bd41bf3240af90402ddd8778fb24c2 http://www.all56.com/list0.php?docid=30596 http://www.curtn.com/news/window_detail.php?hid=488&querys=%C3%87%C3%AB%C3%8A%C3%A4%C3%88%C3%AB%C2%B9%C3%98%C2%BC%C3%BC%C3%97%C3%96 http://www.consumergoods.com/Media/PublicationsArticle/10_CG_0507.pdf http://www.supermarketalert.com/pdf%20docs/04specrptsfr03/4altchannels‐web.pdf

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Market driven apparel design managementand product categorization

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of Zara

March 29, 2006 – Spanish retail group Inditex

best known for its ZARA stores  in Europe reported 21% sales growth in 2005, to $8.15 billion, putting the group  ahead of H&M.

ZARA’s

Secret?

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of Zara

It moves fast!In‐house design team based in La Coruna, Spain + tightly controlled

factory 

and distribution network = design on drawing board to store shelf in 2 weeks ‐allows ZARA to introduce  new items every week –

customers come back again 

and again to check latest styles out

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of Zara

Surprise!At least half of its factories are in Europe where wages are much higher than in 

Asia and AfricaTo maintain quick inventory turnover by reducing shipping time

Fast moving fashion reduce its exposure to fashion faux pasCut losses quickly for unsold item of small quantity – move on to other styles

12 collections a year

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of Zara

Popular items appear and disappear within a week – an image of scarcity that  shoppers find irresistible –

“an excitement around snapping up new clothes 

before they go…keeping sales high throughout the year…margin‐stripping  markdowns to a minimum”

Designers in daily contact with store managers, discussing which

items are  most in demand and which are not

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of H&M

Around one quarter of its stock is made up of fast fashion items

that are  designed in‐house and farmed out to independent factories

H&M keeps a large inventory of basic, everyday items sourced from cheap  Asian factories

H&M also struck deals with Stella McCartney and Karl Lagerfeld to create  limited, one‐time collections which generally sell out within days

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

Rapid Expansion of Fast Fashion Stores

H&M (Swedish), Zara (Spanish), Mango (Spanish), Top Shop (Britain), etc.  expanded fast, e.g., Inditex

opened 448 new stores in 2005, H&M 145; Inditex

opened another 490 stores in 2006 which include first Chinese outlet in  Shanghai. By 2010, global total from 2700 to 5000.

Yet, cautiously in the US, only 19 in the States; H&M 91 (1200 globally)

Competitive Nature of Apparel Industry in Hong Kong

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Market driven apparel design management and  product categorization

The Story of NIKE iD

With an extra $10, allow customers to personalize shoes by picking colors,  putting own name or team name on

Visit NIKEiD.STUDIO

Competitive Nature of Apparel Industry in Hong Kong

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References•

https://www.just‐style.com/article.aspx?ID=93565&lk=ht •

http://www.businessweek.com/globalbiz/content/apr2006/gb20060 404_167078.htm 

http://www.yeald.com/Yeald/a/8824/h_m__inditex_and_gap_sales _increases_are_only_a_fashion_fad.html 

http://money.cnn.com/2005/08/23/news/international/international _retailers/ 

http://bmelie.wordpress.com/ •

http://www.fashionmission.nl/nieuws/news‐ details.id.1220.titel.Zara‐beats‐HM‐to‐take‐over‐

Europe.aspxhttp://www.nikebiz.com/media/#&view=pressreleases •

http://www.aflcio.org/aboutus/globalunions/ns03062001.cfm  http://nikeid.nike.com/nikeid/index.jhtml;nisessionid=0YAF54R22E

WLMCQFTBECF3Y?_requestid=1165628#home •

http://www.idsa.org/idea/idea2005/s26.htm