Text | Blue Ocean Billion View Network
On February 8, the Guangzhou Municipal Development and Reform Commission issued the "Guangzhou 2020 Key Project Plan" notice, the Xiyin Bay Area Supply Chain Headquarters Project, which is prominently listed among the urban consumer industrial projects.
The project is located in Zhongxin Town, Zengcheng District, Guangzhou, covering an area of 3,000 mu per month and a total construction area of about 3.3 million square meters.
As we all know, although SHEIN mainly does overseas markets, its core supply base is in Panyu, Guangzhou. It is home to a large number of small and medium-sized garment processing plants that have made a significant contribution to the development of SHEIN.
At the same time, SHEIN's large warehouse in Sanshui, Foshan, has also played a major role in recent years.
However, Panyu is densely populated and cannot provide more than 3,000 mu of large areas of land for the construction of supply chain headquarters, while although Foshan Sanshui has a large area of land, its location advantage is not obvious.
Zengcheng District has an economic and technological development zone, and there are large areas of land available for construction development. At the same time, the southwest of Zhongxin Town is Huangpu District, from Panyu to Huangpu to Zhongxin Town, almost a line.
SHEIN placed a quick rebound order from a small and medium-sized garment processing plant in Panyu, which can be more conveniently transported to Zhongxin Town, and its geographical advantage is still relatively obvious. Just south of Zhongxin Town, it leads all the way to Dongguan City, and Dongguan also gathers a large garment processing field.
In addition, near Zhongxin Town, there are Guangdong Agricultural, Industrial and Commercial Vocational and Technical College (Zengcheng Campus), Guangzhou Business School, and a little farther away, there are Guangzhou Institute of Applied Technology and Guangzhou Huashang Vocational College, which can recruit professionals nearby.
Comprehensive consideration, Zengcheng District Zhongxin Town is indeed an ideal location.
The new supply chain headquarters will once again strengthen SHEIN's control of the supply chain, and will once again enhance SHEIN's ability to integrate small and medium-sized garment factories with a "flexible supply chain".
In this article, we will explore:
The "flexible supply chain" brought by Zara has "saved" a large number of small factories
Zara relies on "copying", SHEIN relies on "counting"? Global fashion element data is deposited in the small workshop of Panyu
● Is the flexible supply chain a "life-saving elixir" for the "river and river" clothing industry?
01 Zara's "flexible supply chain" has saved many garment processing "small workshops" in China
In Panyu, Guangzhou, a large number of small and medium-sized garment factories are gathered.
These garment processing plants have contracted a large part of the production capacity of fast fashion clothing in the country and even the world.
In the past garment industry, the status of these small and medium-sized processing plants was not high, most of them struggled on the "subsistence line", and they were not far from elimination.
In the traditional garment industry, the ability of factories to scale is the most important measure of strength. Most factories maintain a year's profit by receiving OEM orders from well-known overseas clothing brands.
This has led to the status quo of factories "relying on overseas brands to eat". The success of the year depends on whether there is a "big order".
However, overseas big brands, looking for foundries in China, generally have to find factories with a certain scale. Because in the traditional large factory, it is generally a special post, and a post worker is only responsible for one process. In this way, the division of labor is clear and the efficiency is high.
And the larger the order, the longer the production cycle, the higher the familiarity of the workers, and the higher the efficiency.
At the same time, the machines of large factories are more suitable for mass production of basic products.
Large-scale labor and large-scale production machines are not available in small and medium-sized garment processing factories such as Panyu and Dongguan. Therefore, in the competition for overseas large orders, small and medium-sized processing plants do not have much advantage, and they belong to the "vulnerable groups" in the entire industry.
In 2006, after Zara landed in China with the "small single fast return" model, this batch of small and medium-sized garment factories were "treated as treasures", and the original "weak projects" became the highlights of Zara's attention.
Originally, in the "small single fast return" mode, Zara's order volume per order will not be very large, generally dozens of hundreds of pieces, after the measurement, it will focus on the development of hot sales.
For large-scale factories, such small orders are disdainful of receiving.
Because the profits brought by the orders of hundreds of pieces are simply not enough to make up for the loss of construction, a large number of people are idle, and the machine is at a loss as soon as it is opened.
Small factories do not have this kind of trouble.
Originally there were only Bailai employees, there would be no problem of a large number of manual idleness; the machine is also for small-scale production services, there will be no large loss.
In terms of supply and demand, only small processing plants are willing to accept orders for "small orders and fast returns".
Another important point is that the "small single fast return" requires a high response speed of the factory.
The delivery speed of large-scale factories is generally based on quarterly or even semi-annual cycles. However, most of Zara's designs are popular elements that "copy" the predictions of big brands at major fashion weeks, and need to occupy a part of the market before the big brands react.
The speed of response of large-scale factories obviously cannot meet Zara's needs.
Small and medium-sized processing plants, on the other hand, can achieve this goal.
Unlike large factories, which have a clear division of labor, "each performing its own duties", and finally unified sewing, small and medium-sized garment factories have insufficient manpower, and a person is almost responsible for all the garment making process except design and plate making.
Faced with large orders, these small factories may not be able to do anything about it. But in the face of dozens or hundreds of small orders, these factories are more than enough to do, and if the workers are skilled enough, they can even take orders the day before and deliver them the next day.
Although there may be deviations in quality, the victory is fast enough, timely enough, and the response is very sensitive. Moreover, it can quickly adjust according to the current market feedback, making Zara more responsive to the market.
This is zara's first concept of "flexible supply chain". Its core is to solve the pain points of the clothing supply chain such as low prediction accuracy, many varieties and slow response through the "small single fast return" model.
Relying on the "flexible supply chain", Zara has killed a bloody road in the monopoly of the market by a number of established clothing giants.
Over the past decade, fast fashion brands led by Zara have also allowed these small and medium-sized garment factories in the Pearl River Delta to grow enough, and flexible supply chains have been paid more and more attention in the industry.
Their growth and development also provided a solid supply chain foundation for SHEIN to achieve great success in one fell swoop.
It's safe to say that SHEIN's great success began with "inheriting" the Zara's "legacy."
02 From "copying" to "counting", global fashion element data is precipitated in Panyu small workshops
With a proven "flexible supply chain", SHEIN has been able to achieve great success.
Successful SHEIN is also feeding Back China's "Flexible Supply Chain" on the other hand.
Panyu and Dongguan can become global fast fashion clothing production bases, and the "flexible supply chain" is of course indispensable. But the essence of the "flexible supply chain" is a rapid response to global fashion acumen.
To put it simply, it has always been on the trend and has never been "left behind".
The traditional fashion brand has a high right to speak in the original fashion industry and is in the position of "uncrowned king" to a certain extent. I said, "Whatever color is popular next spring, whatever color is popular."
The way these big brands "control" the right to speak is by launching Fashion Week.
Veteran fashion tycoons who have mastered the "right to speak" of popular elements can crack down on late-entrants through their control of patents and their influence on huge fans.
For example, in the second half of 2018, Pantone, a fashion authority color research institute, released a predictive study showing that 16 popular colors in the spring and summer of 2019, led by coral orange, including pepper stems (yellowish green) and ash moss (a dark green) were popular.
But the release of these 16 popular colors is not what Pantone said is popular, but a group of the world's top designers gathered to study the popular elements released at major fashion weeks in the past year.
(Pictured: 2018 Miami New Fashion Show)
Fashion week data has become a popular "code".
Zara, backed by a "flexible supply chain," can beat big brands in terms of speed.
From the release of Fashion Week to the time the product becomes popular, it takes 3 months to half a year. Then, Zara can completely "copy" these elements and quickly produce physical objects.
Many Zara designers and fashion buyers mingle in the fashion weeks of major brands, picking up the fashion elements of their launches, reorganizing them into their own designs.
Then use a faster response speed than big brands to make these elements popular first. Of course, Zara has suffered a lot of lawsuits for this, and has also become the object of criticism by the Western media.
But at the same time, the Zaras have caused headaches for established fashion tycoons. I can't get used to it, but I can't eat it.
As a supplier of Zara, the small and medium-sized garment processing factories in Panyu and Dongguan also "got a piece of the pie", and the popular elements and trends of that year were learned half a year in advance, catching up with the big brands before they reacted.
If Zara relies on "copying", then for SHEIN, "copying" can no longer meet its needs, relying on big data to "calculate", only to achieve its counterattack against big names.
Veteran fashion tycoons are not really "one-size-fits-all" in predicting fashion trends, saying whatever they want. The prediction of all popular elements still has a certain factual basis, including sales in previous years, sales after the release of new products, and so on.
Therefore, to some extent, these big brands rely on "guessing", or can have a certain probability of "betting on the treasure", but there is also a probability of "overturning".
Relying on e-commerce sales, SHEIN, which has no physical stores, is significantly higher than these fashion brands in terms of sensitivity and utilization of data, and is also higher than Zara, who is keen on "take-ism".
Pei Xuan, the former general manager of SHEIN Mobile, once demonstrated SHEIN's tracking system at an event, and summarized the most popular popular elements by capturing the data of the products on sale on various clothing retail websites, comparing colors, prices, elements, etc.
At the same time, SHEIN can also crawl the search keywords of consumers in various regions through Google Trands to determine the most popular fashion elements.
Through various data means, SHEIN successfully predicted the popular lace elements in the United States and the popular cotton material in India in 2018.
At the same time, the large amount of data precipitated by SHEIN's own independent website (App) has played a huge role in its "calculation" of quasi-fashion trends.
Of course, SHEIN is not entirely "self-calculated", after all, as a descendant of Zara, the "fine tradition" of the predecessor has not been abandoned. A SHEIN buyer once said that he often observes the current popular elements in the offline stores of major fashion brands, and he has also been "driven out" by the clerks because of taking photos.
As the rear factory of SHEIN, Panyu and even various small and medium-sized garment processing factories across the country have also been able to contact the latest popular elements in the world at the first time, faster than any fashion magazine.
"SHEIN is not afraid to hand over data to the factory. As long as the factory fulfills shein's order, it can sell the same style of clothing to other customers. ”
Tim, a former supply chain manager at SHEIN, gave feedback to the Blue Ocean Egainnews, perhaps knowing that under the concept of fast fashion, the "fashion code" is not valuable, so SHEIN never skimps on giving data to the factory.
Even some factories hang the data for sale online as soon as they get the data.
In the words of the anecdote, in a small clothing plus workshop in Panyu, Guangzhou, the aunt who is sewing clothes holds the world's top fashion code.
The New York Times made a suffocating question about the legendary fashion magazine VOGUE: What is the meaning of your existence? Do you still try to lead the global fashion trend with the "turtle speed" of "once a month" and "one half a month"?
Those small and medium-sized clothing processing factories that have been abandoned by the old fashion tycoons but favored by fast fashion brands are the gathering places for the latest fashion and popular elements in the world.
In turn, some factories are willing to share data with SHEIN, including raw material price data, order data from other customers, and so on. In this atmosphere of data sharing, SHEIN and the factory have achieved common growth and progress.
According to Tim, in such a situation, SHEIN has established a pricing system according to which a certain production cost can be rolled out and then locked in the price range of the product.
In this way, before handing over the order to the factory, SHEIN actually has a good idea of the offer for this order. The next step is to wait for the factory to quote itself. If the offer is reasonable, the order is handed over to the factory.
Zara has allowed small and medium-sized garment processing factories under China's flexible supply chain to "copy" the popular elements of top fashion brands.
SHEIN, on the other hand, allows these processing plants to precipitate fashion data, and to a certain extent even catches up with the prediction speed of fashion brands.
03 Large-scale factories have serious overcapacity, is the flexible supply chain the antidote?
Zara has been in China for more than a decade, but what has really transformed the country's garment factories and accepted the transformation of small orders is only in the past two or three years.
Among them, there are external factors, such as overcapacity, rising raw material costs and so on.
There has always been a joke in the clothing industry that even if all the garment factories in China are shut down, the inventory will be enough for the people of the whole country to wear for three years.
A Ningbo factory owner introduced that due to a series of factors such as rising raw material prices and rising logistics costs, the profits of Ningbo's export knitted garment enterprises are currently very thin.
China Economic Weekly said that the current garment factories mainly rely on running volume to maintain profitability, if the order volume does not go up, there is no way to make money. The profit of a shipment is less than a dollar.
These words are not alarmist, and they are not empty. According to data from the National Bureau of Statistics, in the first half of 2021, there were 33,000 textile enterprises above designated size in the country, with a cumulative revenue of 2.34 trillion yuan, but the total profit was only 197.89 billion yuan.
The increasingly diluted profits have put garment factories across the country in a very awkward position.
I can receive orders, although the profit is a little thinner, but I can still survive. Failure to receive orders, disbandment of workers, and closure of factories may be the fate of factories.
Coupled with the epidemic, the original orders of big brands from Europe and the United States have dropped sharply, and what is in front of traditional clothing factories is a matter of life and death.
In this case, the factory does not have the qualification of "picking and choosing", who can provide a large number of orders, who is the "grandfather". The small orders that were originally not looked at by the big factories have returned quickly, and they have also become fragrant.
According to relevant data, the garment industry currently receives small orders, accounting for 70% of the total number of orders, and only about 30% of the basic and best-selling large orders that have been popular in the past.
The industry has basically formed a consensus view, the future fragmented order demand will be more and more, small single fast return has inevitably become the ultimate way out of the leading garment factory.
SHEIN, on the other hand, is undoubtedly the biggest customer of the factory in recent years.
A GRADE A supplier of SHEIN gave feedback to The Blue Ocean egainnews that SHEIN now places more than 3 million yuan of orders a year. As long as you receive the order from SHEIN, this year is basically "drought and flood protection", no worries.
More importantly, SHEIN is large enough to "afford" enough factories.
At present, China's garment factories are mainly small and medium-sized factories. There are about 400,000 factories in the country, of which large factories account for only 5%-10%, and the rest are small and medium-sized factories with less than 100 people. (Source: Participating in CanPlus)
According to official data, there are at least 6,000 factories that are currently included in the supply chain system by SHEIN.
These small and medium-sized factories, which were originally more fragile, were able to survive better.
Especially since the epidemic and the "Xinjiang Cotton" incident, overseas fast fashion brands Zara, Gap, H&M, etc., have either closed a large number of physical stores or almost withdrawn from the Chinese market. SHEIN's order is particularly precious.
However, for large factories, the transformation still needs to face no small challenges.
In 2015, a well-known multinational company in the apparel industry, Hanba International, shut down a factory and reorganized its production line to develop a flexible supply chain. However, according to its insiders, during the renovation, the factory lost millions of yuan a day.
Some other large factories have seen a wave of departures after accepting small orders for quick return orders.
For these large factory workers, the original same style of clothing can be repeated for ten days and half a month, and with the growth of time, the proficiency is getting higher and higher.
After the transformation of the small order to return quickly, the clothes of the previous order have not yet been skilled, and they must begin to re-adapt to the new order. Doing different work every day has left many workers at a loss.
As a result, workers leave from time to time. The transformation of flexible supply chains and small orders for quick return has become an urgent problem for many large factories.
However, there are also factories that have successfully transformed.
A factory that originally only received large orders began to transform in 2018, specifically accepting small orders and quick return orders to cut into the field of flexible supply chain.
In terms of management, the plant is mainly based on the amoeba model, and the group is independently accounted for and self-financing.
In terms of production, we realize standardization, data control, and optimize and improve production efficiency through data statistical models.
To achieve this goal, each production link of the factory is equipped with an IPAD with instructional videos that record the specifications of the production process, through which employees can repeatedly learn and gain an in-depth understanding of production standards.
Through multiple means, the factory has not only successfully transformed into a garment factory based on flexible supply, but also achieved an annual output value of 3 billion.
But whatever the situation, the reality before the factory is:
Transformation to adapt to flexible supply chains and accept small orders and quick returns have become an inevitable trend. SHEIN's "followers" are also increasing.
Has the flexible supply chain, a small single fast return, become the antidote to China's garment supply chain? We'll see.