Design to Store - Luen Thai

1. Case Summary

Beginning as an apparel manufacturer company in 1983, Luen Thai now is a world's leading apparel supply chain services providers. The company operates sales and design offices, manufacturing facilities and logistics stations in Asia, America and Europe. It provides end-to-end apparel services that support customers' speed-to-market goals.

In apparel industry, products have short life cycles and tremendous variety, customer demands are volatile and unpredictable, supply processes are long and inflexible. The largest apparel manufacturers are mainly in Asia-Pacific region. After textile quotas were lifted in 2005, the whole industry faces further pressure on prices, more competitive market, and more power of customers. As Luen Thai's major customer, Polo Ralph Lauren requires Luen Thai to provide better service through collaboration. Ruentex, Luen Thai's important supplier, also plays a significant role in this supply chain integration process.

Luen Thai's vision is to be recognized by customers as the best apparel supply chain services partner in the world. To support that vision and develop in the severe industry, Luen Thai executes design to store (D2S) business model. This strategy enables Luen Thain to become a one-stop shop apparel services provider for customers. The services include design and development, material management, manufacturing and logistics, which help customers to bring their products to market faster at a lower total cost. The Supply Chain City, located in Dongguan, China, is the realization of the D2S. The idea behind SCC is that Luen Thai invites upstream and downstream partners to open offices in SCC to support Luen Thai with materials and design capabilities.

As Luen Thai's CEO, Henry Tan is responsible for making this decision whether his company will use D2S supply chain strategy to retain their leadership in the apparel market. On the one hand, he is evaluating the benefits of D2S, and on the other hand he is considering the financial and resource investment commitment for D2S.

2. Analysis Of Design-to-Store Strategy

Using D2S Polo would outsource the key areas design and logistics processes to Luen Thai and would involve horizontal integration among the three partners, the advantages of D2S are as followings:

The three partners will get a tighter collaboration to improve efficiency of gathering and updating information. Instead of using the limited and fragmented technology, the partners use integrated information technology system extensively. Real time information exchange would avoid the Bullwhip effect to reduce total cost.

D2S suppliers can provide more products and service. Because this model will provide customers with the services from the very beginning of the product life cycle, spanning the entire supply chain from design and product development,