TAL: Question 3

Q3. Based upon the Porter’s value chain model, describe how the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network with its major customer such as JC Penny.

Traditional sequential value chain



Traditionally, value chain is the linear and sequential set of primary and support activities that an enterprise performs to turn inputs into value-added outputs for its external customers. The product development and procurement processes are managed in a set of discrete
stages, with each upstream stage providing a set of outputs for the next downstream stage. Also, the information flows are from one stage to another, sequentially and in one direction.

However, there are some shortcomings with the sequential value chain. First, the rigid and inconsistent information flows cause the inventory problems and the coordination problems between the activities in the various stages in the value chain. Second, linear and sequential information flows cause delays of information sharing within the value chain.


Synchronous value chain



Today, TAL’s VMI has enabled it to turn the sequential value chain to an integrated and synchronous value network with its major customer like J.C. Penny. As with IT, the information of all partners is to be exchanged in a central hub, it creates multiple touch points for collaboration and information exchange. Both retailers’ and the suppliers’ warehouse information like current stock levels are shared within the value chain in real time.

Also, VMI changes the Customer-initiated order process to Vendor-initiated order process that TAL takes the initiative in the strategic alignment of data, structures, and processes. By making this exchange on a daily basis the system makes it possible to better monitor the warehouse and the expected demand. This leads to more effective planning in regards to production of TAL and the management of warehouse levels and ultimate just in time supply to J.C Penny. Moreover, VMI reduced inventory in warehouse, reduced out of stocks at the warehouse level, improved store service levels, and improved warehouse efficiency.

 

Reference:

Safeway, n.d., Continuous Replenishment Process (CRP), retrieved 14 March 2014 from: < http://suppliers.safeway.com/usa/edi_us/edi_crp.asp> 

Ventureline, n.d., VALUE CHAIN Definition, retrieved 14 March 2014 from: <https://www.ventureline.com/accounting-glossary/V/value-chain-definition>

Phoebe Ho (2005), TAL APPAREL LIMITED: STEPPING UP THE VALUE CHAIN, retrieved from: The Asia Case Research Centre, The University of Hong Kong