The supply chain sector is facing increasing pressure to be the saviour of global manufacturing and retail efforts. Major organisations, threatened by economic downturn and increasingly unpredictable customer demand, are looking to their supply chains as a source of resilience and agility. However, supply chains are having an equally complicated time, as geopolitical tensions, extreme weather events, and rising transportation costs threaten to disrupt the sector.
Four years ago, the pandemic clearly demonstrated what is now an often painful fact of life: an agile, resilient, and fast supply chain can make the difference between resounding success and thudding failure. This is especially true in the fashion industry.
While fashion retailers of all sizes have attempted to navigate the increasing complexities of supply chain management over the past four years, few have been as effective as industry success story Shein.
Chinese fast fashion giant Shein made more than $30 billion last year. It also doubled its profits year-on-year to more than $2 billion. A great deal of the company’s success, experts argue, stems from its supply chain. Now, as the supply chain woes of the pandemic are replaced by a new, comparably uncompromising landscape, Shein is looking to sell more than the estimated 1.2 million articles of clothing it makes every day. It wants to sell the success of its supply chain.
The Shein supply chain
Shein produces an average 314,877 new styles per year. By comparison, the more “traditional” fast fashion brand H&M creates an estimated 4,414 products per year. The company’s ability to manufacture and ship an order of magnitude more clothes than its competitors lies in its large supplier base and the digital transformation of those suppliers.
“We reimagined the supply chain, which is a daunting task, and we have done it by digitising the small-and medium-sized factories to give them visibility to see their own capacity, continued order flow and seamless efficiency,” Donald Tang, Shein’s executive chairman, said in a webinar last year.
This heightened digitalisation of its supplier management and sourcing process means that, with roughly 5,400 third-party contract manufacturers in China, Shein can deliver more than 10,000 new products per day. It also dramatically expedites the delivery cycle, with lead times measured in days, not weeks. As a result, it ships roughly 5,000 metric tons of goods via air freight per day.
Data analytics integrated throughout this process are what allows Shein to produce initially small batches of product, evaluate demand, and then rapidly scale production up or down accordingly.
Shein-as-a-service and the state of retail supply chains
According to a recent letter to investors from Tang, Shein is planning to offer its small batch, on-demand manufacturing model as a service to other fashion retailers. The move marks a significant evolution of Shein’s business model.
Neil Saunders, managing director of retail consultancy GlobalData Retail, said in a recent interview: “Shein is moving beyond being a seller of low-price fashion to one that has many strings to its bow, including marketplaces, services for sellers and now services for designers and apparel brands.”
Shein seems to be moving towards a similar spoke and hub organisation that allowed Amazon to disrupt multiple industries at once, as each independent business unit leverages the others to drive growth. For some experts, it highlights just how disruptive the Chinese company will be to global fashion in the next few years.
It’s “time to sound the alarm,” says Rick Watson, founder of RMW Commerce Consulting. “In terms of disruptive capability to retail, Shein’s innovation is much more disruptive and will force all other big players to develop a similar model or die — Amazon, Walmart, Target, everyone.”
- Collaboration & Optimization
- Digital Supply Chain
