Original link: https://www.latepost.com/news/dj_detail?id=1418
39-year-old Liu Weizong is one of thousands of factory owners in Humen Town, Dongguan. This Hakka man has dark skin, bright eyebrows, and a strong body. He came to Humen from his hometown of Meizhou after graduating from junior high school. Relying on diligence, the belief of “living a good life” and the 7,000 yuan raised by relatives and friends, Liu Weizong’s identity has changed from an ordinary workshop worker to a factory owner in the past ten years, from sporadic foreign trade exports to OEM for domestic brands.
At the end of this summer, Liu Weizong’s new clothing factory was completed and started. As a result, Liu Weizong’s living and working radius in Humen Town has been extended by one kilometer.
The new factory is a three-story building, with an open space of more than 1,000 square meters on each floor, which is bright and airy. The ground is covered with white and yellow lines, and every operating table and fabric that can be pushed are placed along the line, which is neat and tidy that most garment factories do not have. At its busiest, 300 people were busy inside.
Every morning, bundles of fabric are sent to the first floor, where they are artificially soaked in water and laid flat, layer by layer to a thickness of more than 10 centimeters. Two computer-controlled machines automatically cut the fabric into the shape needed for the garment.
The cut fabrics are sent to the third floor, put into a hanging basket similar to the top of the Hema store, and flow to the workbench. Each workstation only does one process, such as knitting the neckline of a T-shirt. Different styles of clothes require different processes, and the hanging basket only stops where it needs to stop. Workers don’t have to think too much, the sewing machine in front of them has a memory function, and the machine will remember how to weave the same style once done. In this way, the hanging basket turns around and passes through more than a dozen workbenches, and a batch of clothes of four or five styles is finished.
The hanging basket assembly line in the garment factory. Workers handle fabric, waiting to be cut.
The finished clothes go down from the third floor to the second floor. Workers dust off the thread ends, put them in a transparent plastic bag with the SHEIN logo printed on them, and then load them into the truck. Generally, after one or two weeks, the clothes will reach consumers, which may be in the United States, Brazil, or Europe, the Middle East, or Southeast Asia.
The design drawing of the new factory also comes from the fashion brand SHEIN, which represents the experience it has accumulated in the past 8 years of cooperation with the factory. The paint of the floor takes into account the wear and tear caused by the carts in the workshop. The hanging basket equipment allows small batch orders of dozens or 100 pieces to be used in the assembly line production that was suitable for large orders in the past.
This experimental base for digital production is expensive, and the most complex equipment is hundreds of thousands of yuan per unit. The decoration of the new factory will receive subsidies ranging from hundreds of thousands of yuan according to the decoration area. It is understood that the first batch of factories participating in the expansion and transformation received a total of 6 million yuan of support from SHEIN, and the amount of investment planned by SHEIN in the future will reach 100 million yuan.
The cooperation between Liu Weizong and SHEIN began in 2018. In 2021, his factory will produce 20 million pieces of clothing for SHEIN consumers. Hundreds of such clothing manufacturers, together with a total of thousands of cooperative suppliers, support SHEIN’s seemingly light website and mobile application. Clothes worth more than 100 billion yuan a year are transported from Liu Weizong’s factory to the Foshan warehouse, and then travel across the ocean to all parts of the world.
In 2014, SHEIN tried to sign a contract with a factory for the first time, accessing the most prosperous clothing production base in the world.
In the past eight years, SHEIN’s sales have increased hundreds of times, and its relationship with the garment processing industry in South China is no longer that of customers placing orders with factories. SHEIN has built a supply chain system that goes deep into various processes such as clothing design, fabric procurement, and processing, so that the needs of factories and market-side consumers are closer, the efficiency of factories is higher, and the waste of inventory is less. Digitization and Production Efficiency in South China Apparel Supply Chain. SHEIN has transformed itself, and also transformed the supplier factories it cooperates with.
At the moment when the garment industry chain is shifting to Southeast Asian countries, exports are subject to trade barriers, and local labor costs are rising, the entire garment industry needs higher efficiency to meet new competition.
The Mystery of “Small Order Quick Reverse”
In 2012, SHEIN, which made full efforts to transform into cross-border fashion women’s clothing, took the lead in entering the US market, focusing on cost-effective and fast-selling women’s clothing. Its clothing sales scale is now second only to ZARA, and its sales in 2021 will exceed 15 billion US dollars. In terms of style, compared with ZARA, which is chasing fashion sense, SHEIN’s model image is closer to Instragram net red – dressed young and colorful.
Since the second quarter of this year, European and American inflation and consumption decline have caused many Chinese foreign trade factories to drop orders and slow down payment. SHEIN still maintains growth and can bring stable orders to garment manufacturers in Guangdong Province every day.
SHEIN’s growth in such an environment relies on the same ability as its initial success: to plan production as efficiently as possible, reduce waste caused by inventory backlog, and provide consumers with cheap and good-looking products. Inflation has impacted middle-class brands in Europe and the United States, but people are still willing to spend ten or twenty dollars to buy a good-looking dress to improve their mood.
Efficiency depends on SHEIN’s system. The system connects two ends, one end is the consumer and the other end is the factory.
The first step to reducing waste is to spot trends early. Behind the colorful website for the consumer is a tracking system. SHEIN summarizes the current popular colors, prices, and patterns from the front-line trends, and designers and buyers design new clothes based on them.
Discovering trends is only the first step, and production must also be matched in time. Traditional clothing orders may take several months to a year from pattern making to production delivery. Unless you sell basic styles like Uniqlo, if you miss the trend, you can only suppress the warehouse, and the price of clothes cannot be suppressed-so consumers will be less willing to buy, a vicious circle.
The solution is to produce on demand, reducing wasted inventory and thus lowering prices.
An industry person close to SHEIN told “LatePost” that when SHEIN started 10 years ago, the “small order and quick response” model was already a relatively mature clothing supply model in South China. From spot procurement to a large number of independent designs and stocking, what SHEIN has done is to apply the information system to large-scale clothing supply management. “Online management allows large-scale small order quick-return production to be completed within one organization.”
After completing the design and taking pictures of the models, SHEIN will place orders with each factory through the system between 4 and 6 pm every day. The factory business department immediately calculates the fabric cost and places an order with a specialized fabric supplier through SHEIN’s system. The next morning, the fabric has arrived at the factory, and the workers process the fabric, make a sample, and send it to SHEIN for confirmation. The entire proofing process was completed within two days, and then production started, and the whole process took only 7 days.
Before it goes on the shelves, no one dares to say whether a style will sell well, so the first batch of a style generally does not exceed 100 pieces. The accuracy of the system’s judgment has been improved in repeated tests. It is understood that more than 80% of the styles will now receive additional orders.
In traditional industries, after the goods are delivered, the only relationship between the factory and the brand is the checkout. But delivery is the beginning of a new cycle in SHEIN’s “small order quick return” mode.
After the delivery quality inspection is completed, the styles on the SHEIN website will be put on the shelves immediately. From the next day, Liu Weizong could see the sales of each style of clothing from the management system provided by SHEIN. When a style sells well and is about to run out, he knows that a new order is coming, and he can prepare to purchase fabrics in advance.
“If it sells very well on the first day of the store, we will return the order to us immediately. We will purchase the fabric in time and drive out the size or color first. The original seven-day delivery period, we will make up for it in three days,” Liu Weizong said. The more timely the factory’s response, the shorter the code interruption time, and the less wasted traffic on the Internet.
Most of Chinese clothing is sold overseas, and traders take orders and find factories. The whole process is not digitized. Few overseas traditional brands have a digital system to manage production, but they do not give any information to suppliers. A few European companies that are good at small orders and quick responses mainly produce small batches of orders in their local factories. A senior clothing trade practitioner told LatePost, “The factory itself does not have a system, nor can it obtain the order data of the brand management system.”
The ordering process faced by Liu Weizong is basically completed automatically. According to the sales situation, SHEIN’s system automatically grades each product and places a new order. For a piece of clothing that sells well, the system places orders to the factory every day. For example, a style we saw in the background sold more than 20,000 pieces in two months. During this period, additional orders were added almost every day, but the average order was only a few hundred pieces.
This rhythm greatly reduces waste. When the enthusiasm of consumers passes, SHEIN’s orders will also be stopped to reduce unsalable clothes as much as possible.
In the past, the loss of unsalable clothes in traditional clothing manufacturing was also apportioned to each piece of clothing in advance, raising commodity prices. “Small order quick return” reduces the loss of slow sales, which is why SHEIN can set the price of goods lower than other fashion brands. More consumers can afford the happiness of fashion, and then sell more, forming a virtuous circle. Therefore, SHEIN can lower the price of products than other fashion brands.
The return order rate of Liu Weizong’s factory is stable at 80%. If a model can continue to sell well, SHEIN’s system will send out orders one after another. The model that can receive return orders for 2-3 months is considered to have a long sales cycle. Add up to sell less than tens of thousands of pieces. The factory does not need to prepare clothes in advance. The data dashboard in the background allows the factory to place orders and purchase fabrics in advance by seeing the sales and outages. This is beyond the scope of the traditional clothing factory’s responsibility. Amount and then return the order.
Now Liu Weizong’s factory can receive about 70,000 to 80,000 orders a day. After four years of cooperation, all the data that workers used to record on paper have been collected on the online platform.
The cooperation between the brand and the factory: Embedding, Yuyu
Compared with the traditional clothing business, the relationship between SHEIN and factories is more closely linked. It is understood that with the vigorous expansion of categories, the number of Chinese suppliers who have cooperated with SHEIN has reached thousands.
The systems connecting these factories have been upgraded over the years, and since 2020, they have penetrated into the production links of the factories. The factory owner can now see which models are being made every day, which process each model is doing, whether there is any deviation in this process, and which production links have losses, etc.
With more data, SHEIN began to investigate the comprehensive operation of the factory, and found the deficiencies of the factory through the data. For a while, there were spots on the clothes delivered by Liu Weizong’s factory. SHEIN set up a project team to find problems in the factory and improve the process.
Relying on system tracking and project team improvements, the quality control and efficiency of these garment processing factories have gradually improved. Less waste in factories can also help brands set more attractive prices.
In addition to inspection, there is also an independent project team. For example, if a factory has spots on clothes for a while, SHEIN will set up a project team and send people to the factory to solve the link that caused the spots. Project teams have also been set up for threads, patterns, etc.
During these 8 years, SHEIN and its cooperative factories have grown from a small company to a large company. The two parties are also exploring more ways to improve factory operations, such as allowing factories to “bind” single products. A style, if the sales volume reaches a certain amount in a day, it will be bound to the factory. Factories that originally made small orders will continue to make follow-up large orders, and will not transfer them to companies with greater production capacity.
Small orders are just preparations, and big orders make money. A cooperating factory owner believes that this is more benign and allows small factories to have opportunities to grow.
After the binding, SHEIN factory owners are more motivated to prepare materials in advance and speed up production, so that the styles on sale are as few as possible out of stock, can sell more and longer, and bring more orders to themselves.
Therefore, there is a balance between SHEIN and the factory. This balance allows SHEIN to be deeply involved in the operation of the factory and also allows the factory to maintain its autonomy. Traditional clothing processing does not have such autonomy: the factory inspects the goods and pays the bill when the delivery is due. They can neither see the sales figures nor feel that it has anything to do with them.
Although Liu Weizong is already a strategic supplier, 30% of his factory’s production capacity is still delivered to customers other than SHEIN. SHEIN is trying a new digital assembly line, but it does not stipulate what equipment the factory purchases and how to coordinate production, but allows the factory owner to explore the most suitable production mode by himself.
The production of both small and large orders requires different capabilities. A SHEIN supplier split the production into two parts. One is the flexible quick-response team, which consists of skilled workers who are familiar with various crafts and forms small units, specializing in small orders. When a small order becomes a hot item, it will be transferred to the assembly line-specialized people do special processes, which is more efficient.
The construction of warehousing and logistics also requires close cooperation while leaving space. Since 2021, SHEIN has started to set up a front warehouse. After a batch of clothes are produced, the factory will first send them to the front warehouse in the city where they are located. After a customer places an order, it will be transferred to the SHEIN warehouse in Foshan and shipped to the world. At present, more than 20 strategic suppliers of SHEIN have established their own front warehouses, the site selection is completed by the manufacturers, and the rent is provided by SHEIN.
Every month and every quarter, SHEIN’s service department will award gold, silver and bronze suppliers based on their performance. These days, Liu Weizong couldn’t help but ask SHEIN employees who came to the factory: “Did we get the gold medal at the end of the year?”
A huge system developed in 8 years
At the beginning of its establishment, SHEIN, like other independent stations, successfully stepped on the traffic depressions, and Facebook, Instagram, Pinterest, TikTok, etc. all caught up. In 2011, SHEIN was one of the first wave of companies to use social network KOLs. Many people who later received an advertisement asking for thousands of dollars were willing to share the brand’s outfits for free. Now, the brand has been formed, and 70% of consumers spontaneously search for SHEIN and enter the website.
The traffic bonus will always come to an end. In 2014, SHEIN, which originally mainly relied on getting goods from Guangzhou Shisanhang, decided to try to contact some suppliers and explore a new cooperative relationship with them.
Initially, the cooperative relationship between SHEIN and suppliers was relatively loose, and the whole process was not digitized. The most digitized one might be that the employees of SHEIN supply chain center used QQ to contact the stall owner to place an order. At that time, SHEIN was also small, and suppliers would take samples to the SHEIN office building in Baiyun District, Guangzhou to confirm directly.
In 2014, a new model was born. SHEIN chooses to design and pattern by itself, complete the entire design process, and deliver the finished pattern to suppliers for garment production.
At that time, the clothing industry in Guangdong Province did not do much business with small orders of one or two hundred pieces, except for urgent orders at stalls. Factory owners may not understand “quick return of small orders”, but they all understand the need to reduce inventory. The main concern was that SHEIN was a small company at the time, and the factory didn’t know whether there would be a big order after making a small order.
In order to persuade the factory to accept, SHEIN hired professionals such as reviewers to help the production in small-scale factories. The pricing is more relaxed, and the supply price will be repeatedly calculated with the factory to ensure that the factory can make money from the first batch of small orders. The billing period is also more friendly. When there are the most orders, some factories will get paid for the first delivery of the order-the industry standard is within three months after delivery.
At that time, SHEIN’s rigid requirement when looking for a factory was that the factory owner had to manage the factory himself, instead of investing in a factory and handing it over to the manager. “Human will” is more important.
In this year, SHEIN brought the production process follow-up system into the factories. At first, it was purchased from outside, and it was simpler, and then it was built by itself. This is the iterative story that Internet companies are familiar with: continuous improvement, system improvement and efficiency improvement based on feedback from SHEIN supply chain employees and factories. Behind the efficiency improvement, there will naturally be fewer unsalable clothes. According to a SHEIN executive’s introduction at this year’s Web Summit, the industry’s unsold inventory is generally 25%-40%, while SHEIN has dropped to a low single-digit percentage.
“I feel like it’s taking off every year,” said an employee of the supply chain center who joined SHEIN in 2013. From its establishment to the present, “SHEIN’s annual growth has been particularly strong.”
With the scale, SHEIN further transformed the supply chain and began to integrate fabric resources in 2015. Previously, the factory decided where to purchase fabrics by itself. Due to the small order quantity, it was often impossible to negotiate a good price. Now factories place orders from SHEIN’s fabric supplier library. The price of the fabric is negotiated by SHEIN, and there is no need to bargain with the factory. If the required fabric is not available in the warehouse, the factory will feed back to SHEIN through the system, and SHEIN’s supply chain staff will find suitable fabrics and add them to the warehouse.
Starting from the fabric is because the fabric is the least standardized, which affects the quality of the product. The employee at the supply chain center who joined SHEIN in 2013 said, “More than 95% of the whole garment is made of fabric, which is the core. Accessories (such as buttons) are standard products, and the quality is relatively controllable.”
In 2017, SHEIN began to integrate “secondary process” suppliers such as printing and dyeing, and then also had an “accessory material library”. All of these can be found on SHEIN’s Taoliao website.
All companies are willing to say that they go deep into the supply chain, but the above-mentioned senior foreign trade practitioners said that even among the most well-known overseas brands, only a few are willing to integrate resources from raw materials in China.
Similar to the “small order quick return” of garment factories, factories have become more flexible in placing orders with fabric manufacturers. An order can only cut 30 meters of cloth, reducing waste of raw materials.
Also more flexible is the billing period. The cooperative relationship between traditional offline brands and factories is generally a “futures model”. A 20-year clothing industry practitioner described the past situation in this way. It may take one year from pattern making to production completion, and the most conservative is 9-10 months; The billing period is basically 60 days as a base, sometimes even if you can’t give cash, you will be given an acceptance bill. As a result, factories are often under pressure on capital turnover. However, since SHEIN started to cooperate with the factory, the longest billing period set up is 30 days after delivery. If it catches up with big promotions and big orders, it will be shortened to one week or two weeks, reducing the capital turnover cost of the factory.
A SHEIN employee half-jokingly said that every aspect of this company is inseparable from “small orders and quick feedback”.
From a company to an entire industry – new production methods, new challenges
When the business is pouring down from the sky, the cost of making a piece of clothing is higher or lower, which does not constitute a fatal impact. Things have changed now.
“Ten years ago in Guangzhou Shisanhang, one stall could earn 40 to 50 million yuan a year. The boss made a prediction with his head, and he would make more money and lose more money.” A Humen factory owner said. He came to Guangdong from Sichuan in the late 1990s to work as a garment maker, and now he owns a garment processing factory with an annual order value of hundreds of millions of yuan. The rent of the Thirteenth Street stall has surpassed that of the most expensive office building in New York many years ago in terms of square meters. Selling clothes at Shisanhang “Main profit is at least 35%, Taobao was 25% in the early days, and then it will not work.”
When he first came, the monthly salary of garment workers was more than 300 yuan. Even so, you have to go through layers of assessments to get a job. At that time, there were many job seekers and few jobs, so he didn’t even meet recruiters or workshop technicians in the first round of interviews—the factory security guards came forward to screen them.
The living environment of Chinese workers today has changed a lot. The above-mentioned SHEIN supplier boss in Humen, Guangzhou reported that a skilled garment worker generally earns more than 8,000 yuan per month. Although equipment efficiency and worker skills are improving, the average labor cost (wage price) for making a simple piece of clothing has also increased by about 30% in ten years. Excluding raw materials, logistics and transportation and other costs, worker wages may account for 30%-60% of the cost of a piece of clothing. Fabric and fuel costs in the Pearl River Delta rose even more. Coupled with the reduction of the clothing tax rate in Southeast Asia by the European Union and others, foreign trade orders that Guangdong could not handle have gradually shifted to Vietnam, Myanmar, Bangladesh and other countries.
According to China’s published export data for August, the growth rate of textile and apparel exports has slowed down significantly, with a month-on-month decline of 6.8% and a year-on-year growth rate of 2.9%. This is just the beginning. Large foreign trade orders are placed half a year or even a year in advance, and the consumption recession brought about by the inflation crisis in Europe and the United States in the second quarter of this year has not yet been fully reflected in the export output value.
It is understood that in the first half of this year, SHEIN was one of the few brands that still brought larger orders to domestic garment factories. A research report of CICC in July this year stated: “SHEIN now undertakes part of the function of exporting the production capacity of small and medium-sized factories in China to overseas markets. This is a big window.” Small and medium-sized enterprises are also the main body of China’s textile manufacturing industry. The number of small, medium and micro enterprises accounted for 99% of the country as a whole, and the number of employees accounted for 87%. They were unable to build digital systems by themselves.
At the same time, larger factories began to join SHEIN’s “Small Order Quick Response” system. Over the past year, many “super factories” have become suppliers of SHEIN, and there are many large suppliers who have cooperated with well-known domestic and foreign shoe and clothing brands. Among them, the factories responsible for pure processing have an annual output value of over 100 million, such as a clothing company in Zhongshan City. The company, its 2 square kilometers factory area used to serve international orders from spinning, weaving, printing and dyeing to production. In the past, these factories were more accustomed to only making large orders.
Investments in the supply chain continue. According to previous information from the relevant government in Guangzhou, SHEIN’s Bay Area Supply Chain Headquarters project in Zengcheng, Guangzhou has started preliminary work. The project covers an area of about 3,000 mu, with a total construction area of about 3.3 million square meters and a total investment of 15 billion yuan. The project has been included in Guangzhou’s 2022 key construction preparatory project plan.
This system can also be extended inland. Originally, SHEIN’s suppliers were concentrated in areas less than 200 kilometers away from Guangdong. In the past two years, some cooperative factories of SHEIN have started to set up branch factories in Jiangxi, Hubei, Guangxi and other places to send the fabrics cut in Guangdong to production. The ready-made production tracking system reduces the running-in cost of opening a branch factory. The factory owner can directly see the progress of each link through the data panel and manage production in different places. Working in Guangdong for many years, a generation of workers who need to go home to take care of the elderly take this opportunity to return to their hometowns and continue to do their familiar jobs.
An industry person close to SHEIN told “LatePost” that whether it is the environment or technological progress, the direct-to-overseas consumer model explored by SHEIN is a start, enabling the South China clothing supply chain to communicate with the international market. SHEIN also Small-scale production with less waste will gradually be explored in other parts of the world, thereby changing the development and production relations of the textile industry.
Over the years, the Pearl River Delta has accumulated the most abundant fabrics, accessories and factory resources in the world. The production mode of “small order and quick return” has been fully utilized here, so that the brand can provide customers with more colorful choices. Eight years ago, this was the basis for the rise of SHEIN. Eight years later, the orders that SHEIN has won, and the perfect digital system over the years have enabled the local clothing industry to face today’s more difficult market environment more calmly.
“Liu Weizong” in the article is a pseudonym
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