Dr Harry Lee, CEO of TAL Apparel

Dr Harry Lee, CEO of TAL Apparel

TAL Apparel, one of the world's leading garment suppliers, has turned the threat of inflation across the supply chain into an opportunity to do things differently. Here CEO Dr Harry Lee tells just-style how the Hong Kong based firm's long-time focus on efficiency, sustainable development, and added value is helping to combat rising costs and set it apart from the competition.

“Ten years ago, if you asked me the best place to invest in a production facility my first choice would have been China, my second choice China, and my third choice China. Now it’s very difficult,” explains Dr Harry Lee, the chief executive officer of TAL Apparel Ltd.

While “China will continue to be key to production,” Dr Lee also believes the practice of relentlessly shifting from one country to another in search of cheaper sources is no longer the winning formula.

Instead, he points out: “What we are trying to drive right now is looking at the whole supply chain to see what we can do to improve efficiency.

“The only way to combat rising costs is to be more efficient from the start to the end, not just in our world, but working with fabric mills, working with our customers in the US, the whole process needs to be a lot more efficient.”

It’s an interesting point from the boss of a company that has new facilities coming on stream in China and Vietnam to add to a network of ten factories in Hong Kong, Thailand, Malaysia, China, Indonesia and Vietnam.

Privately-owned TAL Apparel employs over 20,000 workers, has an annual production of 55m pieces of apparel a year – and makes one out of every six dress shirts sold in the US. It also supplies blouses, trousers, knits and tailored suits for US customers such as Banana Republic, Brooks Brothers, Burberry, Dockers, Eddie Bauer, Givenchy, Giordano, Hugo Boss, JCrew, JCPenney, Nordstrom, Talbots and Tommy Hilfiger.

The firm’s diversified production base was initially set up to help navigate historical restrictions on garment imports ranging from quota limits to anti-dumping duties. But it also means the company is now well-positioned to take advantage of category strengths and price competitiveness throughout the region.

Dr Lee points out that the deflation-busting combination of rising wages, worker shortages, higher freight rates, currency hikes and surging cotton and synthetic fibre prices leaves firms with little choice but to start addressing inefficiencies in design, product development and merchandising if they want to remain competitive.

“Most of our customers understand quality, and our philosophy is to partner with them and work with them on a long-term basis. We try to understand their business better than they understand their own business,” he says.

Indeed, TAL Apparel has even coined the phrase ‘innofacturer’ to describe its ability to come up with products for its customers “before they even know they want them.”

Supply chain strength
While some TAL customers have been experimenting with higher prices, so far with little loss of business, Dr Lee feels this is not sustainable. “I don't think it will last; in the long run I think there will be a volume loss.”

An important lesson learnt the hard way back in the 1980s has left a legacy at TAL Apparel that continues to shape the business today. The firm lost $50m when it bought a wholesale order of white shirts for a customer that didn’t materialise – and then had to offload $10 shirts at just $3 a piece.

“We realised [then] that inventory control, and having the right inventory, is so important. We learned a lot about the wholesale business – and a lot more about the retail business. And that very expensive lesson was a chance for us to really get into the supply chain knowing all sides: manufacturing, wholesaling, retail.”

“That's really the starting point of our building up our strength in the supply chain.”

On this front, the supplier has developed vendor managed inventory systems that allow it to add value – and cut costs – for its retail customers by managing their supply chains, including ordering, inventory management, and shipping direct to store. At JCPenney for example, which operates more than 1,100 department stores across the US, TAL automatically replenishes stock directly onto the retail shelves.

Adding value
Innovation on the product side has also honed its reputation for added value. From the 100% cotton wrinkle-free dress shirts that helped TAL make its mark ten years ago, the company has been constantly refining applications for its SofTAL wrinkle-free process

This can now be applied to ever more lightweight fabrics (which are susceptible to weakening by over-processing); cotton/silk blends, cotton/cashmere blends(normally silk and cashmere need to be dry-cleaned); and on flannel shirts (where it also helps reduce shrinkage, retain colour, and improve fabric handle).

Also included among the company’s 15 different patents are 100% wool machine washable trousers, pucker free seaming technology, a water and oil repellent finish, and an anti-microbial deodorising process.

Sustainability goals
TAL’s work on the wrinkle-free front also fits neatly into wider concerns about how firms can reduce their carbon footprint, with studies showing that consumer usage (washing and ironing) contributes most to the carbon footprint in a garment’s entire lifecycle.

This is where an easy-care wrinkle-free shirt comes into its own, TAL believes, although it admits that while research into its garments’ environmental impact has proved so far inconclusive it is helping to provide a longer term focus for its design efforts.

It’s the same on the sustainability front where TAL has set itself a three-year target to reduce the carbon footprint per garment produced by 15%. In the first year alone it managed to achieve savings of 7.9%

Because of the company’s size, huge savings can be achieved when even small changes are rolled out across all its factories. Its track record so far includes recycling and re-using waste-water at each factory, reducing exhaust emissions, and more than halving electricity consumption by switching to LED lights.

The second-phase of its plant in Vietnam will also be the first in the country to receive the Gold rating under the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the US Green Building Council (USGBC).

The company has also teamed with a group of other Hong Kong based textile and apparel firms to set up the 'Sustainable Fashion Business Consortium' (SFBC) aimed at helping the industry minimise its impact on the environment.

And it is part of the broader US-based Sustainable Apparel Coalition which includes retailers and brands such as Adidas, Gap, H&M, M&S and Walmart and is working to set common goals to reduce the environmental and social impact of clothing products sold around the world.

“We’re not doing it not because we're going to get more business, but because we want to do it and we feel it is our duty to do it,” Dr Lee says, although he concedes “being green can also help us to save money.”