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TAL Apparel

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TAL Apparel Limited may not be a household name, but the companies it supplies are: Marks & Spencer, Goldlion, Giordano a€| Not bad for a company that set up shop by accident.

In 1947 TAL Apparel's founder, Shanghai native C C Lee, bought a spinning machine from the U.S. with the plan of shipping it to Shanghai to set up business there. But just after the war the government had banned all imports to revive and protect the old industries.

"The machinery came but the import license didna€?t get issued so he was stuck in Hong Kong," said TAL Apparel Limited Managing Director Dr Harry Lee (above).

Faced with no other option, Dr Lee's uncle set up shop in Hong Kong and began producing yarn, and in doing so started the very first textile factory in Hong Kong. As his mill hummed constantly to meet demand, he moved into the weaving and finishing industry. Then, in 1962 Jardines, had a finishing plant in Sha Tin, so all the textile mills banded together to form the Textile Alliance Limited, which went public in the same year.

A decade later, the oil crisis of 1972 struck and plunged the world into turmoil.

"For some reason the market really went haywire before the crash in '74," recollected Dr Lee. The price of yarn rocketed from just over US$1 per pound to US$2.25 per pound, and created a significant shortage of yarn and fabric.

Feeling there was a killing to be made, one of TAL's directors decided to expand the business.

"It was more like an explosion than expansion really. We invested heavily in Malaysia, Thailand, Taiwan and South America," he said.

The company ordered 7,000 looms -- which ranks as one of the biggest orders for looms ever -- and if its timing was correct and everything went on-stream as planned, the company would recoup its investment within six months.

"At that time things were so crazy. We flew in the spinning machines by air because we wanted to start operations as soon as possible. The minute they started up it was like printing money," Dr Lee said.

But the bubble burst in mid-1974 and the price of polyester fibre and yarn plunged below cost. The old mills were able to stand the crash, but because of the huge investment made in creating its overseas spinning network practically overnight, TAL ran into serious financial difficulties, Dr Lee said.

Japanese fibre maker Toray Industries stepped in to rescue TAL by buying out two-thirds of the company.

"It took us a few years to stabilise and towards the end of the '70s we became profitable again," he said.

In 1983, the company underwent a major reorganisation. The TAL Apparel of today took up the garment division of Textile Alliance Limited, and Toray took over all the textile operations of spinning dying, and weaving. Toray today still holds a 20 per cent stake in the company, though Dr Lee said the company is basically a silent partner.

It was also around this time that TAL began investing in automation its operations, by installing management and control systems.

Dr Lee said the company hired U.S. consultants KSA see how it could manage its factories more professionally and efficiently, and to produce programmes to train its operators.

But the actual sewing operation of most of its garments is still done by machinists, he stressed.

"If you get into the automatic machines for sewing you limit yourself on the style changes," he explained. "Every time you change a style you need to change the template and it's costly and time consuming."

Instead, Dr Lee said he has been investing in computerised cutting machines to speed up production, and to reduce waste.

Diversifying markets
The USA has traditionally been TAL's main market, taking 80 per cent of its production. About 12 percent goes to Asia, including Japan, while the remaining 8 per cent clothes the European market.

Dr Lee said given the complexities of the European market and vastly different tastes, it made more sense to focus on the homogeneous market of the United States.

However, his marketing team has been putting more effort into capturing a larger piece of the European market.

This is not because he feels the European market has more potential, rather he thinks as U.S. firms increasingly look closer to home to source goods, TAL's share of the U.S. market will shrink.

"So eventually, what we see for the U.S. market is that Central and Southern America will increasingly supply Northern America," he said.

Already, due to the exodus of businesses to south of the U.S. border, Mexico has surpassed China as the major exporter to the USA, Dr Lee said.

He expects a similar integration will happen in Europe, with possibly East Europe, Russia and North Africa becoming the manufacturing hub feeding Central and Northern Europe, but at a later date than the U.S.

But Mr Lee isna€?t losing any sleep over the changing business climate. He's too busy focusing on expanding TAL's Asian market.

"We feel the Asian market is our target. As the 1.2 billion people here become more affluent, if everyone buys just one more garment a year, the figures would be huge," he said.

In 1996, TAL set itself a goal of increasing its sales in the Asian market by 30 per cent -- which would be worth about US$100 million -- over a five-year period. Dr Lee said the company was well on the way to achieving that target until the economic downturn.

Even so, today TAL is 12 per cent of the way there and Dr Lee said he is confident that figure will grow considerably this year as the Asian economies regain steam.

The Asian market, like the European market, presents TAL with some new challenges. While there are no quotas to worry about, the costs and level of customer service is completely different from that of the U.S., he said.

In the U.S., many people buying a new shirt or pair of pants consider the cost small change. But for people buying a shirt in China, it is a major decision as it accounts for a large chunk of their salary, and so they scrupulously examine the shirt to make sure they are getting quality for their money, he said.

"The quality of the garments in China have to he higher than in the USA because they really do inspect things with a magnifying glass," he joked.

TAL looses its pants a€| and underwear
TAL has no plans to move into wholesale or retailing, Dr Lee said, having learnt its lesson after buying a retail business in the U.S about 12 years ago.

"For a few years we tried to promote our own brand in the U.S. We bought a company that had its own brands, but we lost our pants and lost our underwear," he said.

"Before we bought the company we really thought we knew the business, but we found out that we didn't," he said.

However, through marketing its own brand, finding out customer requirements, distribution, inventory control and so on, although the exercise cost millions, Dr Lee said it was a very valuable lesson to learn.

"We made a very conscious decision not to do wholesale or any distribution here; those are very specialised areas," he said.

"Being a manufacturer we count pennies -- how to save a penny here and there. But for marketing you need a flair; it's completely different. Using our manufacturing mentality to market brands doesn't work. I think today you really need a very concentrated effort on what you are doing."

Keeping its edge
To remain competitive, Dr Lee said TAL is focusing on providing more value-added services to customers, and developing new products.

One of the achievements he is particularly proud of is the non-iron 100 per cent cotton shirts sold in Marks and Spencer department stores around the world.

"No one else in the world can produce a shirt like this," he said. It owes its non-iron properties to a very complex, high-tech manufacturing process.

"There are other non-iron shirts, but no one can produce a shirt that can perform as well as ours," he said.

Another development TAL's R&D team have come up with is non-puckering stitching on seams and pockets, the technique for which has been patented by TAL.

It has also developed new services. Presently, its customers in the U.S. tell TAL's sales team what has been sold on a daily basis. Then at the end of the week, garments are delivered directly to stores to replenish their stocks.

"The new programme that we are doing for them will be able to tell them what they have sold," Dr Lee said. The quick replenishment service which was launched about five years ago has now eliminated its customer's inventory completely and TAL now supplies directly to each store.

"This is the kind of thing we have learned by having our own wholesale operation in the U.S. We understand that that is how they can save money."
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