group project supply chain system the case study of shein course principles of logistics and supply chain management

As a result, our teamconsistently referred to the material covered in this course when writing this essay inorder to gain a deeper comprehension of the supply chain that we utilize and t

VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITYINTERNATIONAL UNIVERSITY - SCHOOL OF INDUSTRIAL

ENGINEERING & MANAGEMENT

Ho Chi Minh City, VietnamDecember - 2023

II SHEIN SUPPLY CHAIN MANAGEMENT 18

2.1 Supply chain network 18

III ANALYSIS OF SHEIN SUPPLY CHAIN 26

3.3 Stability of Shein Supply Chain 30

3.3.1 The treatment of workers 30

3.3.2 Environmental destruction 30

3.4 Synchronization of Shein Supply Chain 32

3.4.1 Physical resources and operations 32

LIST OF FIGURES

Figure 1.1 Shein logo 7

Figure 1.2 Shein products 8

Figure 1.3 Shein clothing 8

Figure 1.4 Shein accessories 9

Figure 1.5 Shein beauty and health goods 9

Figure 1.6: Shein workers 11

Figure 1.7: Shein suppliers 13

Figure 2.2: Polyester 20

Figure 2.3: Viscose 21

Figure 2.4: Cotton 21

Figure 2.5: Packaging 22

Figure 3.1: Water pollution 25

Figure 3.2: Fast fashion 27

Figure 3.3: Reality 27

Figure 3.4: The treatment of workers 29

Figure 3.5: The evoluSHEIN 30

Figure 5.1: Ethical concerns 39

LIST OF TABLES

Table 1.1: Most popular international B2C e-commerce sites in Vietnam as of 1stquarter 2021, by monthly websites (in millions) 10Table 1.2: Revenue in Fashion segment ( 2017 - 2021) 10Table 1.3: Ranking of popular e-commerce platforms (multi-industry) on social

networks in 2022 15Table 3.1: Shein Fiber Portfolio 26

In order to have this project completed successfully, it is unattainable without thesupport of many individuals We would like to express our special gratitude to them.Our group is incredibly appreciative of Assoc Prof Nghiem Thi Bich Ha's constantsupport and the priceless chance she gave us to conduct in-depth research Herunwavering support provided us with insightful guidance and a more thoroughunderstanding of the topic of our research, which helped us fulfill the project promptly.With all of our hearts, we offer our profound gratitude for the learning opportunitiesprovided by my cherished consultant.

With genuine appreciation, we would like to express our gratitude to all of themembers who contributed to bringing this report to completion Without their support,we would not have been able to complete this project.

Principles of Logistics and Supply Chain Management aims to develop an

understanding of the role of logistics management in operations and supply chainmanagement, including the contribution of logistics to creating and adding valuethrough domestic and global supply chains and in enabling organizations to achievetheir strategic purpose and objectives in a holistic manner As a result, our teamconsistently referred to the material covered in this course when writing this essay inorder to gain a deeper comprehension of the supply chain that we utilize and to guideour research into the supply chain of a particular business.

Established in 2012, Shein is a worldwide retailer of fashion, beauty, and lifestyleproducts Shein, a global fashion retailer, uses digital supply chain technology anddemand measurement to make fashion accessible It uses industry trends and researchto interact with customers and designers, and it collaborates with vendors to makelimited quantities of products Shein's proprietary software searches for third-partysuppliers to meet demand.

This abstract gives an overview of Shein's supply chain system and examines itssupply chain network in terms of environmental concerns as well as the most pressingissues in fast fashion In addition, our group also addresses the advantages as well aschallenges associated with quality problems, ethical and environmental concerns, anda lack of transparency in the supply chain system, and we also provide

recommendations and solutions to help them address these issues by putting theknowledge we have gained from this course to use.

I INTRODUCTION1.1 About Shein

Shein, which was once known as ZZKKO or SheInside, a global fast-fashion andlifestyle e-retailer, was founded by Chris Xu in 2008 in Nanjing, China Since 2012,Shein has changed to become a fully integrated retailer The Wall Street Journalreported that Shein generated US$24 billion in revenue in 2022—nearly as much aswell-known shops Zara and H&M.

Following a fundraising round in April 2022, Shein was estimated to be worth $100billion The business maintained its supply networks and warehouses in China butrelocated its whole headquarters from China to Singapore in 2022.

Shein offers a wide range of clothing in all sizes, including rare plus size models, menand children's categories, and home decorations With a global warehouse network,Shein can ship to over 220 countries and regions worldwide.

A Piper Sandler survey showed that Shein is the fifth most popular clothing brandamong teenagers, after Nike at the top and Lululemon in second place Over 50% ofShein's customers are members of Generation Z.

Figure 1.1 Shein logo1.2 Shein in Vietnam

In Vietnam, according to the Network Information Monitoring and Analysis System(Reputa), Shein reached the top 10 most popular e-commerce companies on socialnetworks in October 2022 Shein builds an e-commerce system including website andmobile app In addition, Shein promotes for tactics such as Social Commerce,Ecommerce Marketing, Affiliate Marketing, KOC, and others to boost the visibility ofthe brand and create more attraction among customers.

1.3 Products

Shein is a new brand in China and a well-known manufacturer of clothing and beautygoods such as dresses, t-shirts and accessories Furthermore, Shein also has someproducts related to beauty and health like trapping, care personal devices, so on.

Figure 1.2 Shein products1.4 Clothing

Shein’s signature item is its line of clothing.Many users love the Shein brand's outfits,they provide many trendy clothing which is suitable at the current time Moreover,Shein serves customers with varieties of clothing including t-shirts, skirts, jeans,modern wear and many strange styles Shein's clothes not only bring satisfaction toconsumers in terms of quality but are also reasonable in price.

Figure 1.3 Shein clothing1.5 Accessories

Beside producing clothing goods, Shein also sells a lot of products of accessories Theline of accessories is variable and beautiful meeting the needs of customers likeneglects, rings, bracelets, earrings and other lovely jewelry Numerous customers buythem at Shein instead of jewelry stores because of the cheaper price and having moreunique designs.

Figure 1.4 Sheinaccessories

1.6 Beauty and health goods

Shein's beauty and health goods are also one of the most favorite products ofconsumers At Shein, consumers can freely choose beauty products such as powder,foundation, eyelash curler and other beauty products Furthermore, Shein also provideshigh-grade perfume lines but the prices are extremely suitable for buyers Additionally,this is also one of Shien's famous products that consumers love and choose.

Figure 1.5 Sheinbeauty and health goods

1.7 Markets

1.7.1 Market’s scale

Shein has grown very quickly in Vietnam in recent years By 12/2022, Shein was theleading fashion shopping application in Vietnam, ranking at number 8 out of the 10most popular E-commerce platforms on social media.

Here are some of Shein's file field analysis tools in Vietnam:

Age: Shein is mainly favored by young consumers, from 18-35 years old.Gender: Shein is loved by both men and women.

Income: Shein attracts both high and low income users.

Location: Shein is commonly used in big cities such as Hanoi, Ho Chi Minh

City and Da Nang.

-> Shein is continuing to expand its market share in Vietnam by expanding itsproduct portfolio, improving product quality and customer service.

Table 1.1: Most popular international B2C e-commerce sites in Vietnam as of 1stquarter 2021, by monthly websites (in millions)

Table 1.2: Revenue in Fashion segment ( 2017 - 2021)1.8 Workers

According to public information, Shein has about 7,000 employees in Vietnam,including warehouse and office staff.

Figure 1.6: Sheinworkers

● Warehouse staff

Shein's warehouse staff in Vietnam mainly work at warehouses in Di An, Binh Duongand Que Vo, Bac Ninh They are responsible for receiving goods from suppliers,inspecting goods, packaging goods and shipping goods to customers.

● Office staff

Shein's office staff in Vietnam mainly work in the office in Ho Chi Minh City Theyare responsible for tasks such as:

1 Marketing and sales: Manage online and traditional sales channels, build

marketing, advertising and customer care strategies.

2 Product development: Market research, product design, product manufacturing.3 Warehouse management: Manage warehouse systems, control inventory and

1.9 Import and Export

1.9.1 Import

Shein imports products from other countries to Vietnam to serve its business activities.Shein's imported products mainly include raw materials, accessories, and equipment.According to statistics from the General Department of Vietnam Customs, Shein'simport turnover from Vietnam reaches 1.5 billion USD in 2022, an increase of 20%compared to 2021 Shein's main imported products include fabrics, fibers, metals andmachinery.

1.9.2 Export

Shein exports fashion products from Vietnam to other markets around the world,including the United States, Europe and Asia Shein's export products are mainlyproduced in factories in Vietnam, using cheap and abundant labor.

According to statistics from the General Department of Vietnam Customs, Shein'sexport turnover from Vietnam reaches 3.7 billion USD in 2022, an increase of 25%compared to 2021 Shein's main export products include pants clothing, shoes,accessories and jewelry.

1.9.3 Development potential

Shein is a rapidly growing company, so the demand for its goods and services is alsohuge This creates many export and import opportunities for Vietnamese businesses.Below are some of the development potential of Shein's import and export in Vietnam:

Export: Shein plans to expand the scale of operations in Vietnam, so demand for

exported goods from Vietnam will continue to increase.

Import: Shein plans to invest in manufacturing plants in Vietnam, so the demand for

raw materials, accessories and equipment imported from Vietnam will also increase.

To take advantage of these opportunities, Vietnamese businesses need to improve thequality of products and services to meet Shein's needs.

1.10 Suppliers/Manufacturers

The founder Chris Xu has had good relations with suppliers who make Shein clothesof good quality with a relatively less turnaround time This has helped him secureexcellent quality goods from vendors while keeping the prices low With the massive

success of Shein now, the brand has a set of apparel vendors who make clothes basedon the designs submitted by the Shein team These vendors are given a strict

turnaround time of ten days to finish and ship the clothing Most of these vendorsbelong to the Guangzhou district of China.

Figure 1.7: Shein suppliers

1 Quanzhou Youfan Import and Export Trading Company

- Location: Fujian, China

- Specializes in: Women's clothes, sportswear, caps, socks

2 Quanzhou Zhoushang Trading Co.

- Location: Fujian, China

- Specializes in: Yoga clothes, women's underwear, women's t-shirts, etc.

3 Fujian Surprise Network Technology Ltd.

- Location: Fujian, China

- Specializes in: Ladies' fashion jewelry and accessories

4 Zhejiang New Joys Trading Co., Ltd.

- Specializes in: Jeans, shirts, dresses, jackets

6 Dongguan Wojieya Clothing Co., Ltd.

- Location: China

- Specializes in: One-piece dresses, shirts, t-shirts, long tops, coats, sweaters

7 Guangzhou Weixin Garment Co., Ltd.

- Location: China

- Specializes in: Ladies' latest dresses, jumpsuits, jackets, pants, and tops

8 Dongguan Yarui Clothing Ltd.

- Location: China

- Specializes in: Dresses, jackets, bodysuits, blouses, t-shirts

9 ApparelCN.com

- Location: Zhejiang, China

- Specializes in: Women's dresses, leggings, tops, sportswear, and fitness andyoga wear

10 Quanzhou Yongchun Yuxin Trading Co., Ltd.

- Location: China

- Specializes in: Dresses, jumpsuits, co-ord sets

Shein produces an astounding number of items on a daily basis—the primary reasonwhy the company has an unsustainable model According to Molly Miao, CEO ofShein, each item is only made in tiny batches—between 50 and 100 pieces everyday—until it becomes popular and is then mass-produced However, the manufacturersleave behind approximately 6.3 million tons of carbon dioxide annually due to theirlarge oil consumption and rapid use of virgin polyester This amount is far less than the45% target to reduce global carbon emissions by 2030 that the United Nations hasstated fashion companies must meet in order to slow global warming.

SUPPLIER COMMUNITY EMPOWERMENT PROGRAM was created to foster

the vital partnerships with suppliers in the SHEIN ecosystem and support their supplierpartners and their communities in the different stages of their development journey.Through the program, SHEIN has been implementing long-term initiatives toempower their partners across four key pillars: factory enhancement, technologyinnovation, training support and community engagement At the end of 2022, SHEINannounced an additional commitment of US $15 million in funding over four years tothe Supplier Community Empowerment Program to facilitate material improvementsto factories In 2022, SHEIN spent US $1.3 million to upgrade 83,000 m² of supplierworkspace covering 29 facilities and approximately 4,500 workers.

1.12 Technical Innovation

In addition to material improvements to factories, SHEIN'S Supplier CommunityEmpowerment Program works to support suppliers in their technical innovation, wastereduction, training and operational management and production efficiency

optimization The program has enabled many suppliers to meet market demand moreefficiently while reducing waste and conserving resources.

1.13 Shein in Vietnam : Competitors

Vietnam is a country with an abundant young population, along with fashion trendsthat are increasingly growing and blooming Therefore, Vietnam offers a potential andeffective market for leading fashion brands With the emergence of more and moree-commerce platforms in Vietnam, there are many competitors to Shein in Vietnam,such as Lazada, Shopee, TikTokshop, etc.

Table 1.3: Ranking of popular e-commerce platforms (multi-industry) on socialnetworks in 2022

This is some information about competitors.

-electrical appliances, kitchen equipment and food Currently, Shopee is pilotingfresh food sales in some districts of Hanoi and City HCM.

c TV and household electrical appliances.

d Health and Beauty (skin care, hair care, body care, medical equipment,functional foods ).

e Mother, Baby and Toy Products (diapers, diapers, carriages, chairs,slings, baby toys, educational toys ).

f Grocery supermarket (food, candy ).

g Household and lifestyle goods (electrical tools, lamps, lightingequipment, home decoration, furniture, books, stationery ).

h Women's fashion and accessories (women's clothing, women's jewelry,accessories, handbags ).

i Men's fashion and accessories (men's clothing, men's watches,accessories, bags ).

j Children's fashion and accessories (costumes, shoes, sandals, bags ).k Sports and tourism (sports apparel, sports shoes, equipment, sports

l Navigation equipment, cars, motorbikes.● Revenue in 2022 : 26.5 trillion VND.

1.13.3 TikTok Shop

● On February 28, 2022, Tik Tok officially launched Tik Tok Shop

● TikTok Shop's products are similar to Lazada and Shopee, however TikTokShop pursues the Shoppertainment model, which is a combination of Shoppingand Entertainment, different from the usual online shopping model.

● Revenue from February 2022 to Third quarter 2023 : 10.112 trillion VND(Revenue increased 16% after 1 year of launch).

1.14.4 TiKi

● Tiki.vn was established in March 2010.

● Tiki Trading retail unit and Trading Floor provide 10 million products from 26industries serving millions of customers across Vietnam.

● Revenue in 2022: 5.7 trillion VND.

1.14.5 Sendo

● In September 2012, Sendo launched to consumers, originally an e-Commerceproject developed by FPT Online Services Joint Stock Company (FPT online).● Sendo application brings you a super warehouse with 31 essential categories,

more than 10 million products from the largest shop community in Vietnamwith more than 200,000 shops for you to freely choose to buy.

● Revenue in 2022: 1 trillion VND.

With the analysis table from Reputa, we can see that the top competitor is Shopee,followed by Lazada and TikTok Shop and Shein is not in the rankings This is achallenge for Shein in the Vietnamese market Shein needs to have a strong consumer

policy to attract and widely promote consumers to be able to compete directly with thegiants in the industry.

II SHEIN SUPPLY CHAIN2.1 Supply chain network

With the introduction of new web technologies and the explosion of e-commerce,last-mile logistics drew much attention from not only online sellers but shippingcompanies, placing them in a position to either exploit a ‘cannot-miss’ opportunity togain a tactical, competitive advantage, or else succumb to the dire consequences frommissing out on sales and profits at the hands of rival companies who would not skip onthe golden prospect to improve their business operations It is the final stage of thedelivery process, involving the transportation of goods from distribution centers tocustomers' doorsteps Efficient last mile logistics is crucial for customer satisfactionand can significantly impact the overall success of a supply chain In this one of thefiercest and most competitive arenas, you either had to be the hunter or be the hunted.Consequently, ecommerce companies had to consider, plan, and make investments intheir logistics if they wished to succeed and outperform their rivals.

In order to gain trust from customers and increase sales, e-commerce businesses haveto highlight prompt, dependable, easy delivery as a key component of their businessplan Because of this, a lot of these online retailers offered delivery times that wereassured, much like Amazon's same-day delivery, as a cutting-edge strategy to beat offrivals, especially those who had traditional brick-and-mortar retail storefronts.

2.1.1 Upstream activities

The upstream supply chain encompasses activities associated with suppliers providingraw materials to manufacturers Involved in this process are raw material suppliers,intermediate component suppliers (second and first–tier suppliers) Before beingmanufactured, the designs are achieved by customer listening tools, 3D design, digitalsampling, modular sampling, pre-designed mockups and patterns and library of colors,fabric and trim Shein has its own dedicated clothing designer who sketches uniqueand impressive designs consistent with online data and trends until sample patterns aremade, this process usually takes around 11 days The clothing designed by Shein willthen undergo strict quality assurance testing by professional designers, and models areinvited to try on clothing to achieve a perfect appearance in order to promote theirproducts on distribution channels.

Garment manufacturing is shortened in cycles of 7-10 days of production and readyfor pre-sale as soon as production is completed using advanced machinery technology,ensuring the highest precision and design details, bringing the best quality products tousers The finished products are then shipped to distribution centers in varying

quantities.

2.1.2 Downstream activities

The downstream supply chain involves distributing finished products to wholesalers,distributors, retailers (first and second–tier customers) and lastly, customers Itencompasses processes such as distribution, order fulfillment, and sales One of thekey features of the downstream supply chain is its focus on customer-driven

operations, aiming to meet the demands and preferences of end consumers.

While Shein initially gained popularity as an online fashion retailer, they have beenexperimenting with brick-and-mortar stores to provide customers with an offlineshopping experience Shein has started to expand its presence by opening physicalstores in certain locations However, the availability of Shein physical stores may varydepending on the customer’s location Some key points about Shein's physical storesincludes:

● Locations: Shein has opened physical stores in select cities around the world.The specific locations and number of stores may change over time as Sheincontinues to expand its offline presence It's recommended to check Shein'sofficial website or contact their customer service to find out if there is aphysical store near you.

● Store Experience: Shein's physical stores typically offer a curated selection oftheir fashion items, allowing customers to browse and try on clothing andaccessories before making a purchase The store experience may vary, but itgenerally aims to provide an extension of the online shopping experience in aphysical setting.

● Additional Services: Shein physical stores may offer additional services such asin-store pickup for online orders, assistance from store associates, and theability to return or exchange items purchased online.

Shein has implemented a strategy shift by sending more low-priced apparel and homegoods to U.S warehouses from China to speed up shipping times for shoppers,

expanding its bulk shipments to the U.S in a bid to compete with established retailerson delivery times as it eyes an initial public offering Shein has managed to narrow thespeed gap with retailers such as Amazon, as their shipment to the customers who payfor their Prime Membership service now takes only one or two days to arrive.Virtually,all came from China, where Shein relies on a network of suppliers to produce its

expansive assortment of low-priced merchandise In Vietnam, Shein advances in itsecommerce advantages in order to reach customers' demands, thus maintaining itsgradually growing profit at the cost of environmental damage and cheap labor.

Figure 2.1: Digital applications need to be connected along the value chain2.2 Distribution center:

For large corporations, distribution centers play a crucial role in the supply chain,handling everything from order fulfillment to product shipping and storage Shein hasbeen successful in keeping and growing its global distribution center across borders asa multinational corporation The majority of packages are shipped from the mainwarehouse, which is more than 10,000 square meters in size, in Nanjing, in easternChina.Specifically, the expanded warehouses in the USA, Spain, France, Russia,Germany, Italy, Australia, Switzerland, and the Middle East have expedited logisticsshipping and product delivery worldwide.Having been established with the goal ofproducing high-quality goods, Shein acknowledged the need to modernize its shiftingsystem by fusing direct online customer shifting, along with theirstrategic leveragesupply chain.

Distribution centers serve as the final destination for Shein products Shein has madesignificant investments in the infrastructure of distribution to handle and transportpackages from Guangzhou to customers worldwide Along with other

direct-to-customer shipping businesses in Guangzhou and China, it has also been ableto take advantage of its size to reduce costs and speed up delivery for clients In

addition, Shein has been able to deal directly with the manufacturers without the use ofbrokers, middlemen, or agents thanks to their co-location with their Guangzhou-basedvendor base This lowers their overall product costs and provides their teams withquick decision-making while providing direct and instant access to any innovation

passing through their supply chain Still, there seems to be a difference in retailexpenses.

A few factors have helped to offset the challenge of Shein having to charge a higherretail price due to direct shipping to customers, which is primarily done by air Theyinclude having no physical stores, paying little to no import taxes in the nations wheresales are made, and sourcing directly from manufacturers Except for a few pop-upshops that appear and disappear in major cities to gain market visibility, Shein does notrun any full-time stores in any country, in contrast to traditional retailers In

comparison with a traditional brick-and-mortar retailer, this helps it save on store rentsand other related operational costs.

2.3 Sourcing

2.3.1 General sourcing

- Preferred Sources of Materials:

● Polyester: Since polyester makes up the majority of SHEIN's fiber portfolio,

switching to recycled polyester will have a big impact on our decarbonizationeffort They hope to save 3 million tonnes of CO2e over the next five years byconverting at least 31% of their polyester-based products to recycled polyesterby 2030 in order to reach their targets By introducing our first evoluSHEINline and adding recycled polyester (rPET) to our fiber inventory, they areachieving this.

Figure 2.2: Polyester

● Viscose: They think that synthetic cellulosic materials have enormous potential

for use as a fiber of choice They signed up for CanopyStyle in 2022, and nowthat they've reached their 45% goal, they've promised to transfer 60% of theirdirectly produced man-made cellulosic fibers (viscose, rayon, acetate, etc.) tosuppliers who have been authorized by Canopy by the end of 2023 They alsoencourage the preservation of forests and expedite Next Generation fiber

options Under Canopy's leadership, they are making rapid progress toward thisobjective.

Figure 2.3: Viscose

● Cotton: To strengthen their due diligence in the cotton supply chain and find

ways to boost preferred fiber procurement, SHEIN has a strong program forcotton traceability SHEIN has created a proprietary Traceability ManagementSystem that incorporates supply chain paperwork from suppliers of yarn, fabric,and completed products SHEIN also maintains stringent chain of custodydocumentation for company-branded items Their third-party testing supportstheir traceability efforts; they collaborate with Oritain, the top global providerof forensic cotton testing, to make sure their manufacturing suppliers adhere totheir strict requirements, enabling compliance with relevant laws and

Figure 2.4: Cotton

● Reclaimed Materials: SHEIN and Queen of Raw joined together in 2022 to

start obtaining premium extra deadstock fabric from other manufacturers This

is an opportunity for these excess materials, which were meant for incineratorsor landfills, to be worn and used.

● Preferred Materials: SHEIN is a part of the international non-profit Textile

Exchange, which creates and manages industry standards for the best materialsand fibers for the fashion and textile industries As they strive to use moreethical fibers in their products, they turn to Textile Exchange for advice on howto minimize the raw material impact.

● Packaging:

Figure 2.5: Packaging

SHEIN is dedicated to utilizing more environmentally friendly packaging substitutes.With the aim of using 50% preferred materials in all of our packaging by 2030, theyare decreasing the amount of single-use plastics and increasing the amount of

post-consumer waste content in their product packaging For all packages going toEuropean nations, they started using recycled polyethylene (PE) plastic express bags inAugust 2022 50% of the recycled PE plastic used to make these express bags comesfrom circular waste processes, which reduce the need for extracting raw materials anduse less energy and water than using virgin materials.

In August 2022, all products under SHEIN's premium brand MOTF will also use100% recycled PE plastic bags; this move is anticipated to save three tons of virginplastic per month Packaging bags used by ROMWE, SHEIN, and other SHEINbrands will eventually be replaced by bags composed of materials that are sourcedethically.

In collaboration with GRS-certified suppliers, SHEIN's recycled PE plastic expressbags, MOTF packaging bags, and evoluSHEIN packaging bags have earned

certification to the Global Recycled Standard (GRS) This internationally recognizedcertification necessitates tight social and environmental compliance and supports thetraceability of recycled material throughout the entire supply chain Textile Exchangeis in charge of managing the GRS standard By 2025, SHEIN has also promised to stopusing paper products derived from important forests.