Analysis of SHEIN supply chain model and its challenges

In the global apparel market, Chinese apparel giant SHEIN has quickly emerged in the European and American markets with its unique business model and Internet platform capabilities. However, behind its success, it faces many challenges brought by the supply chain model.

Characteristics of SHEIN supply chain

Strong production and supply base

Guangzhou is one of the production bases of more than 400,000 clothing factories in China, and half of the clothing suppliers exclusively supply SHEIN. SHEIN announced in 2022 that it will invest US$2.3 billion in the Guangzhou Supply Chain Center to equip it with the latest technology and procedures, which is rare in the industry.

Good coordination system

Faced with numerous factories and styles, SHEIN has established its own manufacturing execution system (MES) to record all raw materials and factory data to facilitate production life cycle management.

Detailed database

SHEIN is good at collecting and applying consumer behavioral data and supply chain data, such as analyzing user browsing behavior, collecting popular style data from social media, etc., and is data-oriented to better serve its production decisions.

Unique design cooperation model

SHEIN joins a growing list of designers and social media influencers to develop trendy apparel. For example, since the launch of the SHEIN X incubator project, it has cooperated with creative people and artists from more than twenty countries.

Confident negotiation skills

In China’s global apparel supply chain, SHEIN’s huge scale gives companies strong negotiating power.

Challenges faced

Fast settlement and short cycle

SHEIN is known for its fast checkout speeds and short turnaround times. Supplier partners are rushing to join the ranks of SHEIN, because this e-commerce platform usually completes the payment of the products on the 15th of this month after completing the inventory last month.

Strict control of inventory cycle

SHEIN claims that the production cycle for swimwear is 5 days, for women’s clothing is 7 days, and for denim is 12 days, and it strictly controls this. In order to meet SHEIN’s return cycle requirements, suppliers may need to stock up. However, once sales are not satisfactory, SHEIN will immediately remove the product from the shelves, and the inventory risk will be borne by the supplier.

Inbound quality inspection and assessment

SHEIN conducts mandatory assessment on the quality inspection of inbound orders, and requires that the ratio of incoming orders to return orders must reach 9:1. This may result in 10% of the same product being returned to the supplier regardless of whether there is a problem.

Rough supplier management

Although SHEIN’s supply chain is fast and efficient, its management of suppliers is still relatively rough. Due to the large volume of orders and the variety of styles, suppliers are often in an order-driven state and lack a clear supplier management model.

Time pressure

SHEIN has a strong influence in the e-commerce industry, and suppliers have to work overtime and even abandon orders from other customers to meet SHEIN’s delivery time. This puts tremendous time and production pressure on suppliers.

Supplier management priority

SHEIN’s supplier management priorities seem to be basically arranged in the order of cost, delivery time, quality, supplier relationship and supplier growth. This may result in some suppliers feeling neglected, especially those looking to build stronger relationships.

Summary

Although SHEIN has some shortcomings in supply chain management, this does not hinder its success in the field of fashion e-commerce. By carefully examining and improving the supply chain management model, SHEIN is expected to further improve production efficiency, improve product quality, and establish a more solid partnership. These efforts will help ensure that SHEIN maintains its leading position in the fierce market competition while providing consumers with a better shopping experience.