The 39-year-old Liu Weizong is one of the thousands of factory owners in Humen Town, Dongguan, a Hakka with dark skin, gleaming eyebrows, and a strong body who came to Humen from his hometown of Meizhou after graduating from junior high school. Relying on diligence, the belief in "living a good life," and the 7000 yuan raised by friends and relatives, Liu Weizong's identity has changed from an ordinary workshop worker to a factory owner over the past ten years, from doing foreign trade exports sporadically to labeling for domestic brands.
At the end of this summer, Liu Weizong's new garment factory was completed and opened. Liu Weizong's living and working radius in Humen Town is thus one kilometer wider.
The new factory is a three-story building with more than 1,000 square meters of open space on each floor, bright and airy. The base is plastered with white and yellow lines, and every operating table and blue fabric that can be pushed is organized along the lines with a neatness that most garment factories do not have. At the busiest time, 300 people are busy inside.
Every morning, bundles of fabric are sent to the first floor, manually soaked, flattened, and stacked layer by layer to a thickness of more than 10 cm. Two computer-controlled machines automatically cut the fabric into the shapes needed to make clothes.
The cut fabric is sent to the third floor, loaded into hanging baskets similar to the ones on top of the box store, and flows to the workstations. Each workstation does only one process, such as knitting the collar of a T-shirt. Different styles of clothes require other processes, and the baskets only stop where they need to. The workers don't have to think much, the sewing machine in front of them has its memory function, so the machine will remember how to weave the same style once. This way, the basket turns around, and after a dozen workstations, a batch of four or five types of clothes is finished.
The hanging basket assembly line in the garment factory. Workers handle fabric and wait for cutting. Swipe left and right to see
The finished clothes are brought down from the third floor to the second floor, where workers dust off the threads, fold them into clear plastic bags with the SHEIN logo, and load them onto trucks. Usually, in a week or two, the clothes will be on the consumer's body, which may be in the United States, Brazil, Europe, the Middle East, or Southeast Asia.
The design drawings for the new factory also come from the fashion brand SHEIN, representing the experience it has gained from working with factories over the past eight years. The floor coating considers the wear and tear caused by the shop trolleys. The gondola equipment is designed to allow small orders of a few dozen or 100 pieces to be produced in an assembly line that was previously only suitable for large orders.
This experimental base for digital production is expensive, with the most complex equipment costing hundreds of thousands of dollars per unit. According to the renovation area, the new factory renovation will receive subsidies ranging from hundreds of thousands of yuan. It is understood that the first batch of factories involved in the expansion and renovation received a total of 6 million RMB from SHEIN, and the amount SHEIN plans to invest in the future will reach 100 million RMB.
Liu Weizong's partnership with SHEIN began in 2018. in 2021, his factories produced 20 million clothing for SHEIN consumers. Hundreds of these clothing manufacturers, totaling thousands of collaborating suppliers of all kinds, come together to support SHEIN's seemingly lightweight website and mobile app. More than 100 billion yuan of clothes a year are shipped from Liu Weizong's factories to Foshan warehouses and across the ocean to all parts of the globe.
In 2014, SHEIN tried contracting with factories for the first time, accessing the world's most prosperous clothing production base.
In eight years, SHEIN's sales have increased hundreds of times, and its relationship with the garment processing industry in South China is no longer about customers placing orders with factories. SHEIN has transformed itself as well as the factories it works with.
When the apparel industry chain is shifting to Southeast Asian countries, exports are constrained by trade barriers, and local labor costs are rising, the entire apparel industry needs to be more efficient to meet the new competition.
The mystery of "small single fast counter."
SHEIN, which fully transformed into cross-border fashionable women's apparel in 2012, took the lead in entering the U.S. market, focusing on cost-effective, fast-release women's clothing, and its apparel sales scale is now second only to ZARA, with sales of more than $15 billion in 2021. The style and chase fashion sense of ZARA compared to SHEIN model image is more similar to Instagram netizens - dressed young and colorful.
Since the second quarter of this year, the inflation and consumption downturn in Europe and the United States have caused orders from many Chinese foreign trade factories to plummet and payback to slow. Still, SHEIN has maintained growth, bringing in a steady stream of daily orders for garment manufacturers in Guangdong province.
SHEIN's ability to maintain growth in such an environment and its initial success relies on the same capacity:
- Planning production as efficiently as possible
- Reducing waste due to inventory backlogs
- Providing consumers with cheap, good-looking goods
Inflation has hit middle-class brands in Europe and the US, but people are still willing to spend a dollar or two on a nice piece of clothing to improve their mood.
Efficient relies on SHEIN's system. The system connects two ends, the consumer at one end and the factory at the other.
The first step in reducing waste is to identify trends early. Behind the colorful consumer-facing website is a tracking system that allows SHEIN to summarize current colors, prices, and patterns from frontline trends and designers and buyers to design new clothes accordingly.
Identifying trends is only the first step; production must match them in time. Traditional clothing orders can take months to a year, from pattern making to production delivery. It would help if you sold the basics like Uniqlo to avoid the trend. You have to press the warehouse, and the price of clothes can not be pushed down - so consumers are even less willing to buy a vicious circle.
The solution is to produce on demand, reduce inventory waste, and thus lower prices.
An industry source close to SHEIN told "LatePost" that when SHEIN started ten years ago, the "small single fast-reverse" model was already a relatively mature mode of clothing supply in South China, which was not new. The information system is applied to managing large-scale garment supply, "the online management makes the scale of small-order quick-reverse production within one organization."
After completing the design and taking the model pictures, SHEIN places orders to the factories through the system daily between 4-6 pm. The factory business department immediately calculates the cost of the fabric and places the order with a specialized fabric supplier through SHEIN's system. The following day, the material arrived at the factory. The workers process the fabric, make samples and send them to SHEIN for confirmation. The sampling process was completed in two days, and production began in seven days.
No one dares to say whether a model will sell before it hits the shelves, so the first shipment of a model usually is at most 100 pieces. The accuracy of the system's judgment has been improved through test after test, and we know that more than 80% of the styles are now available for additional orders.
In the traditional industry, after the goods are delivered, the only relationship between the factory and the brand is to settle the bill. But delivery begins a new cycle in SHEIN's "Small Order Quick Response" model.
After the delivery quality control is completed, the styles on SHEIN's website immediately hit the shelves. Starting the next day, Liu Weizong could see each garment's sales in the management system provided by SHEIN. When a style sells well and is about to go out of size, he knows that a new order is coming soon and can prepare to purchase fabric in advance.
"If the first day on the shelf sells particularly well will be immediately returned to us, we will promptly purchase fabric, first the code or color out, originally seven days of delivery, we three days to make up," Liu Weidong said. The more timely the factory response, the shorter the time to break the code, and the less traffic waste online.
Most Chinese garments are sold overseas, with traders taking orders to find factories, and there is nothing digital about the whole process. A few traditional brands overseas have digital systems to manage production, but they must give suppliers information. A few European companies that are good at small orders and quick reactions make small orders mainly in their local factories. A senior apparel trade practitioner told LatePost, "The factories themselves don't even have a system in place, and they can't get the order data from the brand management system."
The process of placing orders that Liu Weizong faces is automatic. Based on sales, SHEIN's system automatically rates each item and places new demands. The approach to the factory gives a dress that sells well daily orders. For example, one style we saw in the back office sold more than 20,000 pieces in two months, during which additional orders were placed almost every day, but only a few hundred parts per order on average.
This rhythm dramatically reduces waste, and when consumer enthusiasm passes, SHEIN's orders stop, minimizing stalled clothing.
Losses from the traditional garment manufacturing of the past are also amortized to each garment in advance, raising the price of the item. The "small-order quick-reverse" reduces the loss of slow-moving sales, which is why SHEIN can price its items lower than other fashion brands. More consumers can afford the pleasure of fashion, which sells more, making it a virtuous cycle. This is also why SHEIN can price its products lower than other fashion brands.
If a model continues to sell well, SHEIN's system will send orders one after another, and the models that can receive 2-3 months of charges are considered to have a long sales cycle, adding up to tens of thousands of pieces. The factory also can prepare clothes in advance. The backstage data board allows the factory to see the sales and broken yardage to place orders in advance to purchase fabrics, which are outside the scope of duties of traditional garment factories. A few pure e-commerce brands will be based on sales and then return orders.Now Liu Weizong's factory can receive about 70,000 to 80,000 orders daily. After four years of cooperation, the workers' data that used to be recorded on paper are all put together in the online platform.
Brand-factory cooperation: phase nesting, surplus
Compared with the traditional clothing business, the relationship between SHEIN and the factory is more closely linked. It is understood that the number of Chinese suppliers with which SHEIN cooperates has reached thousands under the significant expansion of categories.
The system that connects to these factories has been upgraded over the years, and since 2020, it has penetrated deeper into the factories' production process. Factory owners can now see which models are being made every day, which process each model is in, whether there are deviations in the process, which production steps are losing money, etc.
With more data, SHEIN started to examine the comprehensive operation of the factory and found the factory's deficiencies through the data. There was a time when the clothes delivered by Liu Weizong's factory had spots, and SHEIN set up a project team to go to the factory to find the problems and improve the process.
Relying on system tracking and one project team improvement after another, the quality control and efficiency of these garment processing factories gradually improved. Reducing waste in the factories also helps the brand set more attractive prices.In addition to audits, there are independent project teams. For example, if a factory has had spots on its clothes for some time, SHEIN will set up a project team to send people to the factory to fix the link that caused the defects. Project teams were also set up for threads, patterns, etc.
Over the past eight years, SHEIN and its partner factories have grown from small companies to large ones. Both sides are also exploring ways to improve factory operations, such as having factories "bind" individual items. A style that sells a certain number of daily units will be tied to a factory. The factory that initially made a small order will continue to make subsequent large orders and will not be transferred to a company with greater capacity.
Small orders are just preparation. Oversized orders are the ones that make money. A cooperative factory owner believes this is more benign and gives even small factories a chance to grow.
After the tie-up, SHEIN factory owners have more incentive to prepare materials in advance and tighten production so that the models on sale are less out of stock and can sell more and more prolonged, bringing more orders to themselves.There is a balance between SHEIN and the factory. This balance allows SHEIN to be deeply involved in the factory's operations but also allows the factory to maintain its autonomy. Traditional garment processing does not have such independence: factories do the inspection, and the delivery is due and settled. They don't see the sales figures and don't feel it has anything to do with them.SHEIN is experimenting with a new digital assembly line. Still, instead of dictating what equipment factories purchase and how they coordinate production, they let factory owners explore the best production model for themselves.Production for both small and large orders requires different capabilities. One SHEIN supplier cuts production into two pieces. One piece is a flexible quick-reaction team, a small unit of skilled workers familiar with multiple processes specializing in small orders. When a small order becomes a pop-up, it is transferred to the assembly line - specialized people doing specialized processes with higher efficiency.
Warehouse logistics is also built in close cooperation while leaving space. Since 2021, SHEIN has started to establish front warehouses. After a batch of clothes is produced, the factory first sends it to the front warehouse in the city where it is located and then transfers it to the SHEIN warehouse in Foshan for global shipment when a customer places an order. At present, more than 20 strategic suppliers of SHEIN have set up their front warehouses, with the site selection done by the manufacturers and the rent provided by SHEIN.Every month and quarter, SHEIN's service department awards gold, silver, and bronze suppliers based on performance. These days, Liu Weizong can't help but ask SHEIN employees who come to the factory, "Are we going to get the gold medal at the end of the year?"A considerable system developed in 8 years.In 2011, SHEIN was one of the first companies to use social network KOLs, many of whom were willing to share their brands for free after receiving thousands of dollars for a single ad. of outfits for free. Now, the brand has taken shape, with 70% of consumers spontaneously searching for SHEIN and coming to the site.
In 2014, SHEIN, which had relied heavily on the thirteen houses in Guangzhou, tried to reach out to some of its suppliers and explore a new relationship with them.Initially, the partnership between SHEIN and its suppliers was relatively loose, and the whole process needed to be digitalized. The most digitalized was that the employees in SHEIN's supply chain center contacted the stall owners by QQ to place orders. At that time, SHEIN was also small, and suppliers would bring samples to SHEIN's office building in Baiyun District, Guangzhou, to confirm directly.In 2014, a new model was born; SHEIN chose to design and make the board, complete the design process, and deliver the finished version to suppliers for garment production.At that time, the garment industry in Guangdong Province still needed to do more business with small orders of one or two hundred pieces, except for expedited orders from stalls. Factory owners did not necessarily understand the "small order fast counter," but all understood the need to reduce inventory. The main concern was that SHEIN was also a small company then, and the factory needed to know if there were any big orders after making small orders.
To convince the factories to accept it, SHEIN hired its pattern reviewers and other professionals to help with production in smaller factories. Pricing is more lenient, and we will repeatedly check the supply price with the factory to ensure the factory can make money from the first small orders. The billing period was also friendlier. When charges were at their highest, some factories would get paid for the first order delivered - the industry standard was within three months of delivery. The mandatory requirement for SHEIN to find a factory at that time was that the factory owner had to manage the factory himself rather than invest in a factory operated by a manager. The "will of the people" was more important.
This year, the system for following up the production process was also taken over by SHEIN to the factories, initially sourced externally and more modestly, and then built in-house. This is the iterative story familiar to all Internet companies: constantly improving and refining the system based on feedback from SHEIN's supply chain employees and factories to improve efficiency. Behind the efficiency gains, there are naturally fewer stalled clothes. According to a SHEIN executive at this year's Web Summit conference, where unsold industry inventory typically ranges from 25-40 percent, SHEIN has reduced it to low-single-digit percentages."I feel like it's taking off every year," said one Supply Chain Center employee who has been with SHEIN since 2013. Since its inception until now, "SHEIN's growth has been felt particularly strongly each year."Once it had scaled, SHEIN further transformed its supply chain and began consolidating fabric resources in 2015. Previously, factories decided where to source fabrics and often needed help negotiating reasonable prices because of the small order sizes. Now, factories place orders from SHEIN's fabric supplier pool. SHEIN negotiates the cost of the fabric, so the factories don't have to bargain anymore. If the required material is unavailable in the library, the factory will feed it to SHEIN through the system, and SHEIN's supply chain staff will find a suitable fabric to add to the library.We start with fabrics because they are the least standardized and affect product quality. The supply chain center employee who joined SHEIN in 2013 said, "More than 95% of the whole garment is fabric, which is the core. Accessories (such as buttons) are standard products, and the quality is relatively controllable".
In 2017, SHEIN began integrating "secondary process" suppliers such as printing and dyeing, followed by an "accessories library." These can all be found on SHEIN's Amalgamated Materials website.
All companies are willing to say they are deep into the supply chain. Still, senior foreign trade practitioners mentioned above noted that even among the most well-known overseas brands, only a few are willing to integrate resources in China, starting from raw materials.
Similar to the "small orders and quick reactions" of garment factories, factories have become more flexible in placing orders with fabric suppliers. They can cut only 30 meters of fabric for an order, reducing raw material waste.
Also more flexible is the billing period. The traditional offline brand and factory partnership is generally a "futures model" a 20-year garment industry practitioner described the situation in the past, from pattern to production, maybe one year, the most conservative also 9-10 months; the accounting period also essential 60 days bottom, sometimes even can not give cash, will provide a promissory note. This has led to pressure on liquidity in factories. Since SHEIN started cooperating with factories, the most prolonged billing period is 30 days after delivery. In the case of big promotions and orders, it will be shortened to one week or two weeks to reduce the working capital cost of factories.A SHEIN employee half-joked that every aspect of this company is inseparable from the "small-order express."From one company to the whole industry - a new production method to meet new challenges.When business was spilling out of the sky, the higher or lower cost of making a garment did not constitute a fatal impact. Now things have changed."Ten years ago in the thirteen lines in Guangzhou, a stall could make 40 to 50 million a year. The boss patted his head to make predictions, will earn money to earn more, and lose money to lose more". A factory owner in Humen said. He came from Sichuan in the late 1990s to work in Guangdong doing garments and now has an annual order of hundreds of millions of dollars from a garment processing plant. Thirteen lines of stall rent by square meters years ago exceeded the most expensive office buildings in New York. Selling clothes in the thirteen lines "gross profit of at least 35%, Taobao 25% in the early days, and then it did not work."When he arrived, garment workers were paid more than 300 yuan a month. Even so, there were layers of tests to have a job. There were so many applicants and so few jobs that he couldn't even see a recruiter or shop technician for his first round of interviews - the factory security guard came directly to screen.
Today, the environment for Chinese workers has changed dramatically. The owner of the SHEIN mentioned above supplier in Humen, Guangzhou, reports that a skilled garment worker now typically earns more than $8,000 a month. Although equipment efficiency and worker skills are improving, the average labor cost (labor price) for a simple garment has risen by about 30 percent in a decade. After deducting other expenses such as raw materials, logistics, and transportation, the labor price may account for 30-60 percent of the cost of a garment. The cost of fabrics and fuel in the Pearl River Delta has increased. Coupled with the European Union and other places down to reduce the tax rate of clothing in Southeast Asia, Guangdong used to not over the foreign trade orders gradually to Vietnam, Myanmar, Bangladesh, and other countries.
China's published export data for August show a significant slowdown in textile and apparel exports growth, down 6.8 percent from a year earlier, with year-on-year growth slipping to 2.9 percent. This is just the beginning. Large foreign trade orders are placed six months or even a year in advance. In the second quarter of this year, the inflation crisis in Europe and the United States brought about by the recession in consumption has yet to be fully reflected in the export output.
It is understood that SHEIN is one of the few brands that still bring more oversized orders to domestic garment factories in the first half of this year. A CIMB research report from July this year said, "SHEIN now takes on the part of the function of exporting capacity from small and medium-sized Chinese factories to overseas markets, which is a big window." SMEs are also the bulk of China's textile manufacturing industry, accounting for 99% of the country's overall number of SMEs and 87% of employment in 2021. They need help to afford to build digital systems.At the same time, more giant factories are starting to join SHEIN's "Small Order Express" system. Over the past year, many "super factories" have become SHEIN's suppliers, many of them are big suppliers who have cooperated with famous footwear and apparel brands at home and abroad, and some of them are responsible for sterile processing with an annual output value of over 100 million, such as a garment company in Zhongshan City, whose 2 square kilometer factory used to serve international orders from spinning, weaving, printing and dyeing to the whole production process. In the past, these factories were accustomed to doing only large orders.The investment in the supply chain is still ongoing. According to previous information from the Guangzhou government, SHEIN's Bay Area Supply Chain Headquarters project in Zengcheng, Guangzhou, has started preliminary work. With an area of about 3000 mu, 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 essential construction preparation project plan.This system can also be extended to the inland. Initially, SHEIN's suppliers were concentrated in areas with less than a 200 km radius centered in Guangdong. In the last two years, some of SHEIN's partner factories have started to open branch factories in Jiangxi, Hubei, Guangxi, etc., and send the fabric cut to Guangdong for production. The off-the-shelf production tracking system reduces the teething costs of opening branch factories, and factory owners can directly see the progress of each step through the data panel and manage production off-site. A generation of workers who have labored in Guangdong for years and need to go home to take care of the elderly take this opportunity to return to their hometowns to continue doing the work they know.An industry source close to SHEIN told LatePost that whether it is the environment or technological advancement, this direct-to-consumer model explored by SHEIN is a start, giving communication capability between the garment supply chain in South China and the international market. SHEIN will also gradually explore smaller-scale production with less waste in other parts of the world, thus changing the development and production relationship of the textile industry.The Pearl River Delta has accumulated the world's richest resources of fabrics, accessories, and factories over the years. The "small-order, quick-reverse" production model has been more fully exploited here, allowing brands to offer more color choices to their customers. Eight years ago, this was the foundation for SHEIN's rise. Eight years later, the orders SHEIN has secured and the digital system it has perfected over the years has allowed the local garment industry to face today's stricter market conditions with greater ease.