Abstract
In recent years, supply chain management (SCM) has been developed as essential management philosophy and practice for all business operations. As with other business management principles, SCM also applies to the textile and apparel industries. Supply chain members should cooperate with its downstream customers and upstream suppliers to achieve supply chain goal. The activities such as Quick Response (QR) to improve supply chain competitive advantage have been implemented in textile and apparel industries for years. This paper was designed as an exploratory study to investigate SCM practice and supply chain competitive advantages in textile and apparel industries, from the perspective of business processes. The sample companies are from mainland China and Hong Kong. Current conditions of SCM practice in textile and apparel industries were revealed after questionnaire survey, and the relationship between SCM practice and the competitive advantages of the supply chain was also investigated.

Key Words: SCM practice, competitive advantage, business operation


1. Introduction

Entering the new millennium, organizations must consider the issues of increased competition, rising customer expectations and the demand for increased product variety. Organizations will simultaneously be forced to decrease profit margins and cope with changing governmental regulations, such as taxes and tariffs to remain competitive (Rockhold et al., 1998). To handle these pressures, organizations are forced to consider the impact of operational decisions on not only their own company but also all members of their supply chain. No longer will firms compete against each other individually but rather they will compete with their respective supply chains (Schorr, 1998). Thus, developing close, long-term relationships with both customers and suppliers can take significant wastes out of the supply chain, and is a potentially valuable way of securing competitive advantage (Porter, 1985; Spekman et al., 1998). Understanding and practicing supply chain management (SCM) have become an essential prerequisite to staying in the competitive global race and to growing profitably (Garwood, 1999).

As with other business management principles, SCM also applies to textile and apparel industries. Stone (1994) pointed out, "The same general principles that apply to all businesses apply to the textile and apparel industries, but they are magnified when the product is fashion" (p.35) because of the nature of fashion product. Fashion products are unique, dynamic, emotional and cyclical, which makes the rate of change in the apparel industry much faster than in other businesses (Stone, 1994). Because of the synergy SCM can generate, it has been given much attention by both scholars and practitioners in textile and apparel industries.

Theoretically, the goal of SCM is to coordinate the activities of each tier, as well as the transition between tiers, to facilitate the smooth and efficient flow of products down the value-added chain at the lowest cost, and at the same time, to match the supply with market demand (Tan et al., 2000). Supply chain members should cooperate with its downstream customers and upstream suppliers to achieve supply chain goal. The activities such as Quick Response (QR) to improve supply chain competitive advantage have been implemented in textile and apparel industries for years.

This paper was designed as an exploratory study to investigate SCM practice and supply chain competitive advantages in textile and apparel industries, from the perspective of business processes. The sample companies are from mainland China and Hong Kong. The purpose of this study is to reveal the current conditions of SCM practice in textile and apparel industries, and to explore the relationship between SCM practice and the competitive advantages of the supply chain.

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2. Literature Review
2.1 Supply chain business processes in textile and apparel industries

A process is a structured and measured set of activities designed to produce a specific output for a particular customer or market (Davenport, 1993). It is a group of activities within sequential or parallel relationships that span over a period of time. integrating nature of these processes across functional and organizational barriers that suits the need of supply chain design and improvement so well that from the very beginning, supply chain study are generally believed to be process-based (Yang, 2000, p.456).

Lamber and Cooper (2000) propose a SCM framework that consists of three closely interrelated elements: the supply chain network structure, the supply chain business processes and supply chain management. The supply chain structure element tells who the members of a particular supply chain are, how many tiers are involved in the chain and how many members are in each tier. A supply chain looks rather more like an uprooted tree than a pipeline, which suggests that supply chains are very complicated to manage. Within such complex network structure, the key to successful SCM is to identify the key processes, which need the coordination of all the tiers in one supply chain, and mange these processes in an integrated fashion.

Even though different researchers give different categories of the processes involved in a supply chain, these processes are somewhat functionally independent and quite similar in that sense. Strader et al. (1999) referred to the underlying business processes as mechanisms and included these processes in a complete supply chain: (1) forecasting demand based on information such as market research, (2) placing and receiving customer orders, (3) purchasing between supply chain partners, (4) processing orders internally, (5) identifying new sources for capacity and/or inventory when needed, (6) managing inventory, (7) planning production, (8) managing distribution (shipping), (9) communicating between supply chain partners and (10) supporting customer service.
The supply chain processes identified by members of the Global Supply Chain Forum (GSCF) are: (1) Customer relationship management; (2) Customer service management; (3) Demand management; (4) Order fulfillment; (5) Manufacturing flow management; (6) Procurement; (7) Product development and commercialization; (8) Returns. These processes strengthen the customer side, but do not put enough emphasis on managing the supplier side; therefore, weakening the spirit of integrated SCM.

Lancioni et al. (2000) defined seven substantive supply chain decision areas, which include purchasing/procurement, inventory management, transportation, order processing, customer service, production scheduling and relations with vendors. These seven areas do not include any process that relates to demand forecasting while joint forecasting or demand management is one of the processes that are critical for a successful supply chain to be able to compete in the market.

Singh (1996) listed supply chain activities for the direct sales channel within the telecommunication industry, which included forecasting, processing customer orders, placing purchase orders, manufacturing/procuring goods, storing goods, shipping goods, monitoring goods movement, invoicing customers, collecting cash and operational and financial reporting. This list, for a very specific industry, not only illustrated the kind of activities that are involved in the supply chain and showed the relationship between goods movement and the exchange of information between relevant parties, but also included financial issues involved in SCM.

Apparel wear are the final products of the textile-apparel supply chain. The creation and development of apparel items into a matching collection or a product line involves a series of steps. Each step is closely related to and influenced by all the other steps in the process. Burns and Bryant (2002) presented an eight-step workflow model of creating and marketing an apparel line, which is shown in Figure 1.


The objective of textile-apparel supply chain is to provide the right fashion products to market, with the lowest cost and in the fastest speed, and to achieve the maximum profit simultaneously. Based on the above literature, and considering the convenience of data collecting, the main business processes in textile and apparel industries explored in this study are: (1) product design and development. It determines whether the supply chain can provide right product to market; (2) forecasting. Without accurate forecasting, the supply chain can not be efficient enough. The markdown or stock-out cost will be increased; (3) order placing. It concerns with the speed of the supply chain; (4) replenishment. It concerns with the inventory cost and the flexibility of the supply chain; (5) price negotiation. With ideal price negotiation pattern, transaction cost between supply chain partners will be low and the lead time will be decreased; (6) quality control; and (8) information sharing. Information sharing is without question quite important, because all the decisions in the supply chain should be made according to the information shared. Production process is neglected in this study because it mainly relies on the capacity and capability of the organization itself, and is determined by the other processes such as replenishment.


2.2 Information sharing in supply chain

It is recognized that a basic enabler for SCM is information sharing. Many researchers have emphasized the importance of information sharing in SCM practice. Lalonde (1998) considers sharing of information as one of five building blocks that characterize solid supply chain relationship. According to Stein and Sweat (1998), supply chain partners that exchange the information on a regular basis are able to work as a single entity. Together, they have a greater understanding of the end consumers and are better able to respond to change in the marketplace. Moreover, Yu et al. (2001) point out that the negative impact of the bullwhip effect on a supply chain can be reduced or eliminated by sharing information with trading partners. Tompkins and Ang (1999) suggest that the key competitive and distinguishing factor for the 20th century is the proficient use of relevant and timely information by all functional elements within the supply chain to meet organizational objectives. For example, sharing information with suppliers gives Dell Company the benefits of faster cycle times, reduced inventory, and improved forecasts. At the same time, the customers get a higher-quality product at a lower price (Stein and Sweat, 1998).

However, there is the reluctance on part of organizations in the supply chain to share information with each other. Information is generally viewed as providing an advantage over competitors, and organizations resist sharing with their partners (Vokurka and Lummus, 2000). This hesitancy was due to a variety of factors, including the perceived threat of giving away competitive advantage to other organizations, the sharing of sensitive information such as inventory levels and production schedules with other channel members, and the potential of losing customers to other competitors (Lancioni et al., 2000; Ballou et al., 2000; Croom et al., 2000).

According to Lee and Whang (2000), the types of information that need to be shared among supply chain partners are: (1) Inventory level. Access to supply chain inventory status can contribute to lowering the total inventory in the supply chain. In practice, sharing of inventory information is implemented in different forms. Continuous replenishment program (CRP) and vendor managed inventory (VMI) are two of them. (2) Sales data. Depending solely on orders from downstream will lead to the distortion of true market dynamics. Using sell-through and/or POS data, manufacturers can better forecast the demand and develop a better production plan that is closer to the volatile reality; (3) Order status for tracking/tracing. Customers can get information about order status by one stop because all the players in the supply chain have access to each other's order databases; (4) Sales forecast. Suppliers can share the forecast developed by the downstream player who is closer to the end consumer to develop their production plans; (5) Production/delivery schedule. Manufacturers can use their suppliers' production or delivery schedule to improve their own production schedule. Additionally, suppliers can use manufacturers' production schedule to ensure reliable re-supply; (6) Other information sharing, including performance metrics and capacity.

In this study, except for the above types of information, the information of new product design and development and product specification are added to be examined.


2.3 Competitive advantage in supply chain

Competitive advantage is the extent to which an organization is able to create a defensible position over its competitors (Porter, 1985; McGinnis and Vallopra, 1999). They are potential points of differentiation between an organization and its competitors and are not directly controlled by management, but are outcomes of critical management decisions (Tracey et al., 1999).

Consensus on the identification of the following important competitive advantages exists within the empirical literature (White, 1996; Roth and Miller, 1990; Tracey et al., 1999): price/cost, quality, delivery, and flexibility.

Expanding the above list, Koufteros (1995) describe a research framework for competitive advantages and define the following five dimensions: competitive pricing, premium pricing, value-to-customer quality, dependable delivery, and product innovation. Moreover, recent conceptual work suggests that time-based competition will emerge as an important competitive priority.

The above aspects of competitive advantages are mainly from the perspective of outcome, not process-based. In this study, supply chain practice is explored in their business operations. Relatively, the competitive advantages are also examined from the perspective of business processes. The perceived competitive construct is made up of product design and development, planning and forecasting, sourcing, production, transportation/distribution, warehousing and information capacity.


3. Methodology

3.1 Questionnaire development

This study adopts a survey approach to data collection. Part one of the methodology entails construction of a questionnaire. This process includes reviewing current literature, analyzing previous studies, and conducting interviews with supply chain practitioners in textile and apparel industries. Based on the information gathered, a series of questions addressing the key issues will be developed.

The questionnaire is composed of three parts. Section A contains the measure of demographic variables such as business type, employees and turnover. Section B concerns supply chain management practice from the perspective of business processes. Section C is about competitive advantage of the surveyed supply chain.

In Section B, the above mentioned seven types of supply chain business practice both with their customers and with their suppliers are investigated. The investigated styles of each process are thought to be frequently used methods in industries after being discussed with industry practitioners.

(1) Product design and development: Respondents are required to indicate their way of product design and development. The alternatives are independently, cooperate with customers, cooperate with suppliers, cooperate with both customers and suppliers, and no product design and development.

(2) Forecasting: Five types of forecasting styles and their accuracy are examined. They are independently, combine information from customers, combined information from suppliers, combine information from both customers and suppliers, and no forecasting. Four types of forecasting methods are also examined. They are simple forecasting model manually or using Excel, special software or system such as ERP, experiment such as test order, and qualitatively.

(3) Order placing: Both traditional order placing methods and electronic methods are explored. They are orally, by fax, by post, by email, EDI, system based on Web, special software or system such as ERP. Respondents are requested to rank three most frequently used methods of order placing.

(4) Replenishment: The replenishment styles with customers and suppliers are: one order placing one delivery, one order delivery multiple deliveries, multiple order placing multiple deliveries, multiple order placing one delivery, multiple order placing multiple deliveries, and special project such as vendor managed inventory (VMI). Respondents are requested to rank three most frequently used methods of replenishment. Minimum order limitation to customers and from suppliers is also investigated.

(5) Price negotiation: Four frequently used price negotiation methods are examined. They are: by orders with many rounds, by orders with few rounds, by time (per month/season/year), and by project. Respondents are requested to rank two most frequently used methods of price negotiation.

(6) Quality control: The methods of quality control are: no quality control, only final inspection, in-line and final inspection, quality control staff resident in your company, and third party. Respondents are requested to rank three most frequently used methods of quality control.

(7) Information sharing: The seven types of information to be shared are new product design and development, product specifications, inventory level, sales data, order status for tracking/tracing, sales forecast, production schedule, and delivery schedule. Subjects were asked to rate the degree of information sharing between the company and its suppliers and the company and its customers separately. For each type of information, a five-point bi-polar scale was used to get the degree of information sharing for this specific type.

In Section C, the competitive advantages are described by the respondents' self-evaluation of their supply chain's advantage or disadvantage in performance among these key supply chain processes compared to their primary competitor.


3.2 Sampling processes and data collection
This study investigated the SCM practice and supply chain competitive advantages in textile and apparel industries, from the perspective of business processes. Because top management is assumed to have more knowledge about the company's various strategies and operations, the company's top executives, such as CEO or COO, or director of manufacturing, were targeted as research subjects. The survey was conducted in Hong Kong and some provinces in mainland China. The selected provinces of mainland China are typical places for industry clustering of textile and apparel industries, and are dispersed located. They are Guangdong in the south, Zhejiang in the east, Beijing and Tianjin in the north, and Shanxi in the northwest. The survey was sponsored by local associations of textile and apparel. After discussing with the sponsors, they provided the member lists that were suitable for this study.

About twenty typical companies were selected for interview as pilot test to verify the understanding of the questionnaire. The survey was conducted mainly by mail with self-addressed envelop. The mailing was followed two weeks later by a telephone reminder. The survey lasted two months, from October, 2004 to December, 2004. The sampling procedure produced 400 companies as potential respondents. A total of 77 questionnaires were completed and returned to the researcher, resulting in a total response rate of 19.3 percent.


4. Results

4.1 Sample Characteristics

Location: The headquarters of 30 (38.9%) companies are located in Hong Kong, while the left 47 (61.1%) companies are from mainland China.

Number of Employee: Over half of the organizations (51.9%) have between 1000 and 5000 employees, and another 9.0% of the organizations have over 5000 employees. Organizations with between 500-1000 employees account for 13.0% of the sample and the rest (26.1%) have less than 500 employees.

Annual Sales: Almost half of the organizations (49.4%) have sales volumes exceeding 50 million (RMB or HK$) and 9.1% of the organizations have the sales volume below 10 million. 11.7% and 18.2% of the respondents have sales volumes between 10-20 million and between 20-50 million, respectively. Another 11.7% of the respondents did not make the choice.
Business types: An independent organization may take part in several different business processes in the operation of textile and apparel supply chain. In this survey, 55.8% of the respondents engage in garment manufacturing, which occupies the largest portion of the respondents. Following is the fashion distribution and retailing, which is 32.5%. 24.7% of the respondents engage in fabric manufacturing, and 11.7% of the organizations have the business of yarn manufacturing. 16.9% of the respondents major in garment trading. 6.5% of the organizations take part in the auxiliary processes such as finishing, printing or dying, and 2.5% of the respondents are manufacturing auxiliary materials such as zipper and clasp. Nearly all kinds of members of textile and apparel supply chain are involved in this survey.


4.2 SCM practice

Only 19.5% of the respondents surveyed have embarked upon a program aimed specially at implementing SCM, another 32.5% of the organizations will have SCM program. About 27.3% of the respondents will not have SCM program, or even have not considered it. The left 20.8% of the organizations are assessing SCM program to determine whether they will implement it. Apparently, the implementation rate of SCM project in textile and apparel industries is relatively low. The detailed business processes of supply chain practice and competitive advantage will be discussed in the following parts.


4.2.1 Product design and development

28.6% of the respondents implement the process of product design and development independently. 32.5% of the organizations do the process with their customers, while only 2.6% of the respondents with their suppliers. 24.7% of the respondents cooperate with both customers and suppliers for product design and development. 10.4% of the respondents do not have designs because the design was provided by their customers.

To further investigate the business type and product design and development, some interesting findings are revealed. For downstream side of the supply chain who takes part in apparel retailing and distribution, more than half of them conduct the process of product design and development independently. While for upstream sides of the supply chain such as garment manufacturers and fabric manufacturers, more than 60% of the organizations conduct the process of product design and development with their customers, or do not have designs. The results shows that in textile and apparel supply chain, apparel retailers, or brand owners, are triggers of the whole chain. They design proper products according to the final consumers' needs. Upstream members of the supply chain are trying to follow their downstream customers' pace for product design and development.


4.2.2 Forecasting
The most often used forecasting style is combining information from customers. 35.1% of the respondents implemented their forecasting by this way. Nearly no respondents conducted their forecasting combining information only from their suppliers, while 15.6% of the organizations used information both from customers and suppliers to forecast. 26.0% of the organizations forecast independently, and 18.2% of the organizations need not forecast because the style of their production is make-to-order. One way ANOVA was employed to examine the accuracy of the different forecasting styles. The result showed that the accuracy is significant different between different forecasting styles (Significant at 0.05 level). The accuracy of forecasting combining information with both customers and suppliers is significantly higher than the others. It shows that information sharing with supply chain partners is very important to forecasting. Even forecasting combining information with customers and suppliers, the accuracy is just over middle score.

As to forecasting methods, nearly 60% of the respondents use simple forecasting model manually or using software such as Excel, or just qualitatively. Fewer organizations have special software or system such as ERP to do the forecasting. About 20% of the respondents do some experiment program to test the market to collect the information for forecasting. Forecasting is a very difficult task for apparel. As the final product of the textile and apparel supply chain, fashion is characterized by a number of factors, such as short lifecycle, high volatility of market demand, low predictability, and high impulse purchase, which make the final consumers' needs quite uncertain. The result reveals that the advanced forecasting model for apparel is deserved to be developed.


4.2.3 Order placing
It is not surprise that the most often used methods for order placing are still traditional ones, including orally, fax and post. Table 1 shows the details of the proportions of order placing methods, both from customers and to suppliers.



As shown in Table I, fax is still the dominant method for order placing, both from customers and to suppliers. Except for email, the other electronic methods are seldom used. Downstream customers would more like to accept electronic methods for order placing than upstream suppliers.


4.2.4 Replenishment

For the same product in the same season, the proportions of replenishment styles to customers and from suppliers are shown in Table 2.


It is surprising to find that continuous replenishment (multiple order placing, multiple deliveries) is the most widely used in textile and apparel supply chain, while formal special project such as VMI is seldom used. About half of the respondents (51.9% to customers and 46.8% from suppliers) rank the simplest method (one order placing, one delivery) as the second frequently used method.

The minimum order limitation to customers and from suppliers is shown in Table 3.



The result reveals that there always exists the minimum order limitation in supply chain partners, which may constrain the flexibility of the operations of supply chain.

4.2.5 Price negotiation

The price negotiation methods with customers and suppliers are summarized in Table 4



Most of the organizations negotiate the price with their partners are based on orders, and can achieve the agreement with few rounds. The second large choice for price negotiation is by time zone, which may be based on enough trust between supply chain partners.

4.2.6 Quality control

It is no doubt that quality is vital for any product at any time. The proportions of quality control methods by customers and to suppliers are shown in Table 5.


Nearly all the respondents need to control the quality in different ways. The result reveals that the closer the supply chain members are to the final consumers, the stricter quality control they will require. To different supply chain partners, their request is different. For trusted supply chain partners, perhaps only final inspection is enough. But for general partners, in-line and final inspection are needed, even quality control staff resident in the partner' company. Third party quality inspection organizations are relatively welcome, mostly to the big company.


4.2.7 Information sharing

The degree of information sharing between the respondents and their customers and the respondents with their suppliers are shown in Table 7.



*Significant at 0.01 level.

Generally speaking, the degree of information sharing between the respondents and their downstream customers are more substantially than that between the respondents and their upstream supplier. For information sharing between the respondents and their customers, delivery schedule, product specification, new product design and development, production schedule and order status for tracking/tracing are relatively substantial, while sale forecast, inventory level and sales data are not substantial. For information sharing between the respondents and their suppliers, only delivery schedule, product specification, and production schedule are relatively substantial, while the others are not substantial. Two of the eight types of information sharing between these two groups are significantly different. One is new product design and development, the other is sales forecast. The results also validate the former mentioned SCM practice in product design and development, and forecasting.


4.3 Competitive advantage

Respondents indicated their perception of their supply chain's level of performance compared to its primary competitor in seven capabilities. Five selection choices were available, from "major advantage" to "major disadvantage". The percentage of respondents claiming either "major advantage" or "advantage" were compared to the percentage claiming "disadvantage" or "major disadvantage". The result is shown in Table8.


Respondents most often claimed an advantage in production and sourcing. The reason is that the respondents are companies in mainland China and Hong Kong. Mainland Chain occupies a dominant position in the production of textile and apparel product in the world. Information capacity and planning and forecasting were least often claimed as competitive advantage and most often claimed as competitive disadvantage.

Relationship between product design and development styles and competitive advantage in product design and development, and relationship between forecasting styles and competitive advantage in planning and forecasting, are further explored by one way ANOVA.

Different product design and development styles lead to significantly different competitive advantage (p=0.021) in product design and development of the supply chain. Post hoc test shows that respondents who cooperate with both customers and suppliers in the process of product design and development have significantly higher competitive advantage than the others. Different forecasting styles also lead to significantly different competitive advantage (p=0.048) in planning and forecasting of the supply chain. Post hoc test shows that respondents who combine information form both customers and suppliers have significantly higher competitive advantage than the others.


5. Conclusions
This paper was designed as an exploratory study to investigate SCM practice and supply chain competitive advantages in textile and apparel industries, from the perspective of business processes. Questionnaire survey was employed to get the information. 77 out of 400 questionnaires from mainland China and Hong Kong are completed and collected.

Based on the literature review and discussing with industry practitioners, seven business processes in textile and apparel industries are explored. They are: (1) product design and development; (2) forecasting; (3) order placing; (4) replenishment; (5) price negotiation; (6) quality control; and (7) information sharing.

The competitive advantage is also explored. Production and sourcing are the most often claimed advantage, while information capacity and planning and forecasting were least often claimed as competitive advantage and most often claimed as competitive disadvantage. Different product design and development styles lead to significantly different competitive advantage in product design and development of the supply chain. Different forecasting styles also lead to significantly different competitive advantage in planning and forecasting of the supply chain.