1. What are the main advantages of letting a company like TAL manage your inventory and reorder systems? What are the major disadvantages?

2. How does TAL achieve integration in its supply chain? What are the critical success factors that make the supply chain work?

3. How does the partnership with TAL help JCPenney achieve a lean service philosophy?

TAL Apparel Limited, a shirt maker in Hong Kong (P.R. China), brings a unique perspective to its approach to solving operations and supply chain problems. In 1947, the company’s owner, C.C. Lee, started his first spinning mill in Hong Kong. Over the years, he set up several textile mills, including fabric finishing mills, and by the early 1960s had extended his operations into garment making and founded Textile Alliance Limited (TAL). Since the 1980s, when TAL Apparel Limited was formed, it has been among the foremost innovators in the manufacturing and supply of apparel for some of the best-known companies in North America and Europe.

How big is the company? TAL has established relationships with Banana Republic (division of Gap Inc., San Francisco, CA), Brooks Brothers (New York, NY), L.L. Bean (Freeport, ME), Lands’ End (Dodgeville, WI), and Calvin Klein (subsidiary of PVH Corp., New York, NY). TAL’s relationship with the retail giant JCPenney (J. C. Penney Company, Plano, TX) is a particularly interesting partnership. Like all major retailers, JCPenney has been under huge pressure to carry lower quantities of goods in stock. It has done this by outsourcing its warehousing and tock replenishment. TAL offered to work with JCPenney to streamline the retailer’s operations and take pressure off the firm by handling its reorder operations, forecasting, and inventory management. JCPenney agreed to the arrangement. As a result, JCPenney stores carry almost no extra stock of house-brand dress shirts because TAL collects all point-of-sale data directly from the stores, determines how many replacement shirts to make, and in what styles, colors, and sizes. TAL then sends these quantities directly to the individual stores, bypassing the need for JCPenney to operate large central warehouses.

Suppose, for example, that a JCPenney store in Paramus, New Jersey, sells two white shirts and three blue shirts of a different style on a Saturday, leaving no more blue shirts in stock at the store. TAL’s computer system in Hong Kong receives this information instantly and, based on past sales information, calculates the ideal mixture of shirt styles, colors, and sizes for that brand at the Paramus store. Within two days, a factory in Taiwan has received the order to produce and ship the replacement shirts directly to the store.

JCPenney has been willing to maintain this partnership because TAL can instantly do what used to take JCPenney long lead times and extensive warehousing operations to accomplish. Furthermore, because they are linked in real time, any changes in sales generate instant responses. TAL ensures that JCPenney is never without replacement stock. TAL also removes the guesswork when it comes to forecasting fashion changes and adjusts JCPenney’s stock to meet them. TAL’s design teams in Dallas and New York can design a new style, give their orders directly to the company’s factories in China, and produce 100,000 shirts for a test run in less than four weeks. After analyzing the sales data, it is TAL, not JCPenney, that adjusts the retailer’s orders and decides how many of the new shirts to make and ship. With TAL managing the entire process, from design to ordering yarn to manufacturing, the firm can roll out new brands in four months, something that would take JCPenney much longer to accomplish. The TAL/JCPenney relationship is one that illustrates the positive attributes of lean global supply chains: mutual trust, a commitment to innovative practices, instant information processing, and a philosophy of continuous improvement to streamline the resupply cycle.