How is Shenzhou’s tenfold and one hundred times trip to Vietnam and Cambodia made?
Date: 2018-01-16 15:37
What did we gain from Vietnam and Cambodia and how do we make ten times more shares?
Overseas distribution management quality, full of comprehensive competitiveness
We all know that Shenzhou International is a fighter in manufacturing companies, but what is the legendary competitive advantage? Is it really sustainable?
With the weakening of China’s labor cost advantage, investment in Southeast Asia has become a common choice for the industry, but the truly successful overseas production capacity layout is not easy. The main reasons include: 1. Although the labor costs in Southeast Asia are low, but the quality of employees, cultural customs and other reasons It will also result in significantly lower output efficiency than domestic ones. 2. Southeast Asian countries have incomplete public infrastructure, unsound industrial chains, and do not have a mature foundation for the release of mid- to high-end production capacity; 3. Southeast Asian countries have already attached great importance to issues such as environmental protection, and sewage disposal. The regulations such as indicators are strict, so the operating costs of the factory are not low, and there are uncertainties in resource qualifications such as land and emission rights.
From 2005, when it tried to build factories in Cambodia and started the Vietnam fabric factory project in 2013, after 12 years of accumulation, Shenzhou International has successfully achieved a vertically integrated production layout in Vietnam and Cambodia, and has the largest fabric factory in Vietnam. Cambodia has 11,000 garment factories, Vietnam garment factory (with an expected scale of 20,000 people) is in continuous production process (completely expected to start production in 2019), and the company has basically determined to continue to expand garment and fabric production capacity in Vietnam.
We believe that with the gradual maturation of factories in Vietnam and Cambodia, the efficiency of employees will continue to increase, and they will move closer to the Ningbo headquarters factory to superimpose cheaper local labor costs, operating costs, and tax reduction concessions. The profitability of overseas production capacity in the future is expected to exceed Domestic production capacity.
How does a sturdy moat become a premium supplier
We believe that although processing and manufacturing are traditional industries with a stable growth rate, potential leading companies look for savings, strengthen their leading edge, become truly kings, have strong investment value, contribute short-term and steady growth to earnings growth, and achieve stable performance in the medium and long term. Growth, premium valuation premiums and dividend income.
Moat: excellent fabric research and development capabilities, rapid production delivery capacity
There are two points in the moat of Shenzhou International:
1. Excellent fabric research and development capabilities. The company has strong fabric innovation and research and development capabilities, with over 1,000 fabrics developed annually. The company’s exemplary products include Airism, a sweat-absorbent/breathable/soft functional fabric jointly developed with Uniqlo, and TechFleece, a light/warm/breathable fabric developed jointly with Nike, and Flyknit, a knitted upper, and a new material developed by Netease. Coffee carbon and so on.
2. Fast production delivery ability. The company has a very efficient industrial chain, from yarn purchasing, weaving, to printing and dyeing, and garments. All aspects are standardization and rapid progress. There is no obvious inefficiency and short board. At present, the company's Ningbo plant can achieve a 15-day fast delivery cycle (from customer orders to delivery); more than 50% of orders from Cambodian plants are within 45 days of delivery time, and try a large batch of 35-day delivery cycles .
Willing to invest in R&D, accumulate
Prior to the listing, the company insisted on investing 60-90% of all profits into equipment upgrades and upgrades. For example, in 1997, tens of millions of yuan was spent on the introduction of the world's most advanced knitting circular knitting machine in place of a domestic Taiwanese machine. In 1998, the company invested nearly 2.8 million U.S. dollars in the purchase of an Italian lapping machine and invested 10 million yuan in the construction of a 10,000-ton sewage treatment project. At the same time, a number of dyeing and weaving experts were introduced from Shanghai.
In the years following its listing, the company insisted on investing about 50% of its profits in equipment transformation and upgrading. More than 900 million Hong Kong dollars raised and raised in 2005 were used for equipment upgrades, replacing old dyeing machines and weaving machines with the most advanced international equipment.
After the leading position of the industry is solid, the company still maintains high R&D investment. In recent years, the company still maintains a huge investment in innovation and R&D. It has invested more than 500 million yuan to build two world-class R&D centers, engaged in thousands of research-related personnel, and developed more than 1,000 new fabrics each year.
At the same time, the company continued to increase the investment in upgrading machinery and equipment. Since 2009, the amount of equipment purchases has been basically no less than 3-4 billion yuan each year, and it has been on an upward trend. Some of these reasons for expansion have also reflected the company’s emphasis on high-quality equipment. . High-quality equipment can not only enhance the company's overall R&D capability, but also drive the continuous improvement of production efficiency. The per capita output of the company nearly doubled in 2007-2016.
Forward-looking R & D layout, dare to constantly challenge new areas
The company’s R&D strength is reflected not only in its existing advantages, but also in its ability to continuously follow industry trends, make forward-looking research and development, and continuously adjust its business structure and product direction.
The company always chooses to cooperate with more outstanding brand customers. In the 1990s, it positioned its customers in Japan and started business with UNIQLO in 1997. Decathlon was the second largest customer of the company from 2005 onwards. In 2006-2007, it gradually established a deep relationship with Nike and Adidas.
Continue to enter areas with more growth potential. The company has gradually expanded from leisure to sports and underwear, enjoying the growth dividends of the global sports industry over the past decade.
Facing brand customers' new R&D concepts, they dare to invest and execute. The research and development concepts of brand customers often have certain advancement. Whether the research and development direction is successful or whether new products can become explosions are highly uncertain. Therefore, the strategic vision and R&D capabilities of suppliers are very much tested. This is the advantage of Shenzhou International.
Take Flyknit as an example. When Nike sought a suitable Flynit partner globally in 2011, many large-scale premium suppliers gave up for various reasons. In 2012, Shenzhou International became Nike's Flyknit shoe technology product partner. In 2000, we achieved mass production of Flyknit products. At present, Flyknit products account for about 6% of the company's revenue.
Vertical integration model
The company adopts the vertical integration mode of fabric factories and ready-to-wear factories to complete all aspects of fabric development, design, proofing, and production. Therefore, Nike, Adidas and other brand customers choose to design a research and development team at Shenzhou International Factory. , with the company in product design and production to maintain close cooperation. According to the modification proposed by the brand designer, the company can complete the modification in a few hours, greatly shortening the lead time of the product and the cycle of launching new products.
Based on the vertical integration model, the company continues to increase production efficiency and shorten delivery time through the modularization of production processes. Modularized product systems, through different combinations, can rapidly produce different products in a short period of time, significantly shortening the training period for workers; at the same time, the company centralizes all production processes, effectively reduces time and logistics costs, and reduces unit fixed production. Costs make production more flexible.
The moat is becoming stronger
The company's fabrics' R&D capabilities and rapid delivery capabilities are comprehensive manifestations accumulated over many years and are difficult to duplicate or exceed.
Long-term accumulation of equipment investment and process parameters
The textile manufacturing industry has a lot of trivial and complicated links. The research and innovation of fabrics can only be solved through the joint development of multiple nodes of spinning, weaving, dyeing and finishing. On the one hand, it needs sufficient funds, talents, and time to invest in advanced machinery and equipment, and improve production processes and efficiency. On the other hand, it requires R&D personnel to achieve breakthroughs in technological path innovation in some areas.
Large-scale fabric factories and equipment are the basic guarantees for continuous fabric R&D attempts. Large-scale production of fabrics
To ensure that the company can quickly produce new products and try, and based on constant attempts to quickly adjust the fabric parameters.
Fabric parameter database and fabric R&D talents are the key to the sustainability of R&D. After a long period of continuous investment, the company has accumulated an abundance of fabric R&D talents, fabric parameter database and a variety of advanced R&D/production equipment. When brand customers put forward specific fabric requirements, the company can build a solution to customer needs in one day based on a rich database of fabric parameters and R&D experience, including several possibilities, existing deficiencies, and improvement solutions for customer needs. Provide customers with complete test reports, risk/cost assessment results, etc. within a week.
Sharing of resources and information with top customers, the catalytic R&D capability is continuously optimized. Brand customers are closer to the market and can grasp the changes in market demand and future trends. The company cooperates with the four major customers to set up fabric R&D centers to share resources and information and jointly develop new product fabrics. This helps the company to maintain its sense of smell and update iterations.
Vertical integration mode is harder to catch up and imitate
The formation of vertical integration requires time accumulation, capital investment, and management experience. Each of the different links has its own difficulties and barriers. Fabric R&D needs to have long-term production facilities and R&D investment accumulation, and it needs to reach a certain scale effect and strong R&D capabilities; for fabric companies, downstream garment manufacturing industry needs sufficient skilled labor resources due to its labor-intensive characteristics. Support.
Since the establishment of the company, it has been an integrated operation and has a good foundation and mature operating experience. The company’s chairman’s father is a fabric specialist, and the company has continued to rapidly accumulate experience in garment production, and has continued to accumulate expertise and develop talent in the process of interacting with Japanese customers.
Under the existing circumstances, the vertical integration of upstream and downstream layouts is difficult to objectively compete with customers. The upstream extension of the manufacturer will compete with the original upstream supplier and face the risk of loss of the supplier. In contrast, the company's fabrics are all self-produced and there is no competition in the industry.
There are environmental restrictions on the layout of fabric printing and dyeing, and it is necessary to obtain emission permits and high environmental costs. Since its inception, the company has focused on environmental issues, and has been at the forefront of environmental protection investment and governance in the industry, and has also received strong support from the local government.
Future risks and flexibility
The foundation of the company's security lies in the advantages of its moat, which has been precipitated for many years, namely, excellent fabric research and development capabilities and rapid production delivery. Therefore, the company's greatest risk and flexibility come from changes in the moat: 1. Does the moat have long-term value; 2. Will the moat be overturned by later ones?
The value of the moat, no doubt
Fabric development, rapid delivery, is an inevitable trend in the apparel manufacturing industry. The nature of commodities is content, and the new round of consumer upgrades cannot be ignored. The attractive and premium capabilities of future goods and brands are brought about through content conversion. Behind the upgrade of consumption is the upgrading of the industrial chain, including the development of fabrics and rapid response, to achieve a breakthrough in the level of product fashion and to step on the pace of consumption upgrades.
1.Fabric R&D meets consumer demand and builds brand core competitiveness
The functional demands of consumers have been continuously improved, driving the continuous development of fabrics research and development. Consumers’ demand for apparel functionality continues to increase, including wearing comfortable skin, keeping warm in winter, breathable in summer, and so on. The invention of pure cotton materials, chemical fiber materials, and various functional coatings continues to meet the diverse functional needs of consumers. Future consumer demand for apparel features will continue to increase. This will also continue to promote the continued development of fabrics. Manufacturing companies with fabric R&D capabilities will obviously benefit.
Fashion relies on research and development, and technology is as stylish. Fashion is a major theme in current apparel consumption. Embroidery, dyeing, finishing, etc. play a crucial role in it. The transformation of these processes requires the support of research and development. At the same time, fashion also requires disruptive material development, such as nylon stockings. The sculpted S-curve and the sculpted shape of Taimian have caused quite a stir in the fashion circle. In addition, the new technology itself has gradually become a part of fashion. For example, 3D printing clothing, 3D printing shoes, etc., have become a new trend product, and its charm is coming from technology itself. It can be seen that with the continued popularity of fashion consumption, the development of fabrics will become a constant theme.
Fabric R & D build brand differences in product barriers. Fabric R&D innovation is the key to fabricating core competition barriers for fabric manufacturers and apparel companies. In 1879, Thomas Burberry (Burberry founder) developed the Gabardine fabric. Its strong, waterproof and breathable properties quickly won customers for Burberry. Afterwards, he developed Tielocken waterproof windbreaker and became the originator of modern windbreaker. UA specializes in sweat-absorbent breathable sportswear products. With its Hi-Gear thermal equipment, ColdGear cold equipment and other technology fabrics, UA has become a leading brand in the field of leotards. Uniqlo has continued to develop and launch products such as polar fleece, Heattech, Airism, and light and thin feathers. It continues to meet the basic functional needs of consumers and has become a leading global apparel brand.
2. Rapid response to consumer demand for upgrades
As consumers are chasing new trends, and demand for fashion is rapidly changing, the demand is difficult to predict accurately. Brand owners are beginning to pursue a shift from order-based to system-based tracking. Zara's fast-reverse model has become the target of current apparel brands competing to learn and imitate.
Under this background, the push supply chain model encounters a development bottleneck, and the ultimate goal of the flexible supply chain is to provide a more flexible, flexible, and informatized flexible supply chain. The ultimate goal of this flexible supply chain is to ensure product quality. Realize rapid processing or large or small, multi-batch orders. Rapid response capability has become an increasingly important competitive factor for future processing and manufacturing companies.
Intelligent manufacturing is a challenge, but also an opportunity
We believe that in the long run, smart manufacturing is the company's biggest opportunity and challenge.
The production model has evolved from the most traditional push to the present to the most advanced intelligent production mode. It has gone through about three stages:
The first stage: push production. Push production is the most traditional mode of production. The planning department dismantles the final product into tasks and allocates the production departments according to the market demand. Each department delivers the finished product to the next process as planned and promotes the production of the next department. . In this mode, in order to ensure on-time delivery, the planning department must be able to accurately control the entire process, and must also guarantee a certain inventory.
The second stage: lean manufacturing (pull production). This model refers to arranging the production of the previous process according to the demand of the latter process, emphasizing that the processes do not work intermittently, and the product flows between processes, thereby reducing the waiting time for semi-products, reducing process losses, and shortening the production cycle. To achieve this model, it is often necessary to build a standard management model through data analysis, and form a standardized system such as a quality management system and a product life cycle management system. Under the lean manufacturing model, processing companies can more accurately arrange production rhythms according to customers' needs and establish an equalized production process, which is particularly in line with the demand for rapid response in the context of consumption upgrades.
The third stage: data-driven predictive modeling analysis and decision-making optimization. With data-driven predictive modeling analysis, explicit problems are revealed and solved one by one. On the one hand, through the modeling and analysis of related information in the past, real-time dynamic optimization can be achieved by combining current production, environmental, and personnel multi-factor changes; on the other hand, real-time monitoring and system integration of the entire supply chain can be realized through the development of the Internet of Things. Combine data analysis to improve the efficiency of the overall supply chain.
On the one hand, Shenzhou International is an excellent practitioner of lean manufacturing in the apparel field. On the other hand, in the context of smart manufacturing, it also raises higher requirements and challenges for the company. The company has realized that it is necessary to continuously increase investment in the IT field and strengthen data management capabilities. If the company can achieve the transition from the second stage to the third stage, it is expected to usher in a leap-forward development and the competitive barrier advantage will become more prominent.
Conclusion: In addition to the black swan event such as political risks, we believe that the company's greatest risk and flexibility lies in whether it can realize its own IT and data capabilities upgrading under the general trend of smart body manufacturing and move toward the direction of unmanned factories. We believe that the company has a long-term strategic vision and self-disruptive innovation genes, and has actively promoted changes to ensure the leading edge in the future. If the company wins in this round of changes, the company's moat advantage will be more pronounced, and it is expected to replicate this advantage in more areas, achieve better growth and increase profitability.
Source: CITIC Securities
Date: 2018-01-16 15:37
What did we gain from Vietnam and Cambodia and how do we make ten times more shares?
Overseas distribution management quality, full of comprehensive competitiveness
We all know that Shenzhou International is a fighter in manufacturing companies, but what is the legendary competitive advantage? Is it really sustainable?
With the weakening of China’s labor cost advantage, investment in Southeast Asia has become a common choice for the industry, but the truly successful overseas production capacity layout is not easy. The main reasons include: 1. Although the labor costs in Southeast Asia are low, but the quality of employees, cultural customs and other reasons It will also result in significantly lower output efficiency than domestic ones. 2. Southeast Asian countries have incomplete public infrastructure, unsound industrial chains, and do not have a mature foundation for the release of mid- to high-end production capacity; 3. Southeast Asian countries have already attached great importance to issues such as environmental protection, and sewage disposal. The regulations such as indicators are strict, so the operating costs of the factory are not low, and there are uncertainties in resource qualifications such as land and emission rights.
From 2005, when it tried to build factories in Cambodia and started the Vietnam fabric factory project in 2013, after 12 years of accumulation, Shenzhou International has successfully achieved a vertically integrated production layout in Vietnam and Cambodia, and has the largest fabric factory in Vietnam. Cambodia has 11,000 garment factories, Vietnam garment factory (with an expected scale of 20,000 people) is in continuous production process (completely expected to start production in 2019), and the company has basically determined to continue to expand garment and fabric production capacity in Vietnam.
We believe that with the gradual maturation of factories in Vietnam and Cambodia, the efficiency of employees will continue to increase, and they will move closer to the Ningbo headquarters factory to superimpose cheaper local labor costs, operating costs, and tax reduction concessions. The profitability of overseas production capacity in the future is expected to exceed Domestic production capacity.
How does a sturdy moat become a premium supplier
We believe that although processing and manufacturing are traditional industries with a stable growth rate, potential leading companies look for savings, strengthen their leading edge, become truly kings, have strong investment value, contribute short-term and steady growth to earnings growth, and achieve stable performance in the medium and long term. Growth, premium valuation premiums and dividend income.
Moat: excellent fabric research and development capabilities, rapid production delivery capacity
There are two points in the moat of Shenzhou International:
1. Excellent fabric research and development capabilities. The company has strong fabric innovation and research and development capabilities, with over 1,000 fabrics developed annually. The company’s exemplary products include Airism, a sweat-absorbent/breathable/soft functional fabric jointly developed with Uniqlo, and TechFleece, a light/warm/breathable fabric developed jointly with Nike, and Flyknit, a knitted upper, and a new material developed by Netease. Coffee carbon and so on.
2. Fast production delivery ability. The company has a very efficient industrial chain, from yarn purchasing, weaving, to printing and dyeing, and garments. All aspects are standardization and rapid progress. There is no obvious inefficiency and short board. At present, the company's Ningbo plant can achieve a 15-day fast delivery cycle (from customer orders to delivery); more than 50% of orders from Cambodian plants are within 45 days of delivery time, and try a large batch of 35-day delivery cycles .
Willing to invest in R&D, accumulate
Prior to the listing, the company insisted on investing 60-90% of all profits into equipment upgrades and upgrades. For example, in 1997, tens of millions of yuan was spent on the introduction of the world's most advanced knitting circular knitting machine in place of a domestic Taiwanese machine. In 1998, the company invested nearly 2.8 million U.S. dollars in the purchase of an Italian lapping machine and invested 10 million yuan in the construction of a 10,000-ton sewage treatment project. At the same time, a number of dyeing and weaving experts were introduced from Shanghai.
In the years following its listing, the company insisted on investing about 50% of its profits in equipment transformation and upgrading. More than 900 million Hong Kong dollars raised and raised in 2005 were used for equipment upgrades, replacing old dyeing machines and weaving machines with the most advanced international equipment.
After the leading position of the industry is solid, the company still maintains high R&D investment. In recent years, the company still maintains a huge investment in innovation and R&D. It has invested more than 500 million yuan to build two world-class R&D centers, engaged in thousands of research-related personnel, and developed more than 1,000 new fabrics each year.
At the same time, the company continued to increase the investment in upgrading machinery and equipment. Since 2009, the amount of equipment purchases has been basically no less than 3-4 billion yuan each year, and it has been on an upward trend. Some of these reasons for expansion have also reflected the company’s emphasis on high-quality equipment. . High-quality equipment can not only enhance the company's overall R&D capability, but also drive the continuous improvement of production efficiency. The per capita output of the company nearly doubled in 2007-2016.
Forward-looking R & D layout, dare to constantly challenge new areas
The company’s R&D strength is reflected not only in its existing advantages, but also in its ability to continuously follow industry trends, make forward-looking research and development, and continuously adjust its business structure and product direction.
The company always chooses to cooperate with more outstanding brand customers. In the 1990s, it positioned its customers in Japan and started business with UNIQLO in 1997. Decathlon was the second largest customer of the company from 2005 onwards. In 2006-2007, it gradually established a deep relationship with Nike and Adidas.
Continue to enter areas with more growth potential. The company has gradually expanded from leisure to sports and underwear, enjoying the growth dividends of the global sports industry over the past decade.
Facing brand customers' new R&D concepts, they dare to invest and execute. The research and development concepts of brand customers often have certain advancement. Whether the research and development direction is successful or whether new products can become explosions are highly uncertain. Therefore, the strategic vision and R&D capabilities of suppliers are very much tested. This is the advantage of Shenzhou International.
Take Flyknit as an example. When Nike sought a suitable Flynit partner globally in 2011, many large-scale premium suppliers gave up for various reasons. In 2012, Shenzhou International became Nike's Flyknit shoe technology product partner. In 2000, we achieved mass production of Flyknit products. At present, Flyknit products account for about 6% of the company's revenue.
Vertical integration model
The company adopts the vertical integration mode of fabric factories and ready-to-wear factories to complete all aspects of fabric development, design, proofing, and production. Therefore, Nike, Adidas and other brand customers choose to design a research and development team at Shenzhou International Factory. , with the company in product design and production to maintain close cooperation. According to the modification proposed by the brand designer, the company can complete the modification in a few hours, greatly shortening the lead time of the product and the cycle of launching new products.
Based on the vertical integration model, the company continues to increase production efficiency and shorten delivery time through the modularization of production processes. Modularized product systems, through different combinations, can rapidly produce different products in a short period of time, significantly shortening the training period for workers; at the same time, the company centralizes all production processes, effectively reduces time and logistics costs, and reduces unit fixed production. Costs make production more flexible.
The moat is becoming stronger
The company's fabrics' R&D capabilities and rapid delivery capabilities are comprehensive manifestations accumulated over many years and are difficult to duplicate or exceed.
Long-term accumulation of equipment investment and process parameters
The textile manufacturing industry has a lot of trivial and complicated links. The research and innovation of fabrics can only be solved through the joint development of multiple nodes of spinning, weaving, dyeing and finishing. On the one hand, it needs sufficient funds, talents, and time to invest in advanced machinery and equipment, and improve production processes and efficiency. On the other hand, it requires R&D personnel to achieve breakthroughs in technological path innovation in some areas.
Large-scale fabric factories and equipment are the basic guarantees for continuous fabric R&D attempts. Large-scale production of fabrics
To ensure that the company can quickly produce new products and try, and based on constant attempts to quickly adjust the fabric parameters.
Fabric parameter database and fabric R&D talents are the key to the sustainability of R&D. After a long period of continuous investment, the company has accumulated an abundance of fabric R&D talents, fabric parameter database and a variety of advanced R&D/production equipment. When brand customers put forward specific fabric requirements, the company can build a solution to customer needs in one day based on a rich database of fabric parameters and R&D experience, including several possibilities, existing deficiencies, and improvement solutions for customer needs. Provide customers with complete test reports, risk/cost assessment results, etc. within a week.
Sharing of resources and information with top customers, the catalytic R&D capability is continuously optimized. Brand customers are closer to the market and can grasp the changes in market demand and future trends. The company cooperates with the four major customers to set up fabric R&D centers to share resources and information and jointly develop new product fabrics. This helps the company to maintain its sense of smell and update iterations.
Vertical integration mode is harder to catch up and imitate
The formation of vertical integration requires time accumulation, capital investment, and management experience. Each of the different links has its own difficulties and barriers. Fabric R&D needs to have long-term production facilities and R&D investment accumulation, and it needs to reach a certain scale effect and strong R&D capabilities; for fabric companies, downstream garment manufacturing industry needs sufficient skilled labor resources due to its labor-intensive characteristics. Support.
Since the establishment of the company, it has been an integrated operation and has a good foundation and mature operating experience. The company’s chairman’s father is a fabric specialist, and the company has continued to rapidly accumulate experience in garment production, and has continued to accumulate expertise and develop talent in the process of interacting with Japanese customers.
Under the existing circumstances, the vertical integration of upstream and downstream layouts is difficult to objectively compete with customers. The upstream extension of the manufacturer will compete with the original upstream supplier and face the risk of loss of the supplier. In contrast, the company's fabrics are all self-produced and there is no competition in the industry.
There are environmental restrictions on the layout of fabric printing and dyeing, and it is necessary to obtain emission permits and high environmental costs. Since its inception, the company has focused on environmental issues, and has been at the forefront of environmental protection investment and governance in the industry, and has also received strong support from the local government.
Future risks and flexibility
The foundation of the company's security lies in the advantages of its moat, which has been precipitated for many years, namely, excellent fabric research and development capabilities and rapid production delivery. Therefore, the company's greatest risk and flexibility come from changes in the moat: 1. Does the moat have long-term value; 2. Will the moat be overturned by later ones?
The value of the moat, no doubt
Fabric development, rapid delivery, is an inevitable trend in the apparel manufacturing industry. The nature of commodities is content, and the new round of consumer upgrades cannot be ignored. The attractive and premium capabilities of future goods and brands are brought about through content conversion. Behind the upgrade of consumption is the upgrading of the industrial chain, including the development of fabrics and rapid response, to achieve a breakthrough in the level of product fashion and to step on the pace of consumption upgrades.
1.Fabric R&D meets consumer demand and builds brand core competitiveness
The functional demands of consumers have been continuously improved, driving the continuous development of fabrics research and development. Consumers’ demand for apparel functionality continues to increase, including wearing comfortable skin, keeping warm in winter, breathable in summer, and so on. The invention of pure cotton materials, chemical fiber materials, and various functional coatings continues to meet the diverse functional needs of consumers. Future consumer demand for apparel features will continue to increase. This will also continue to promote the continued development of fabrics. Manufacturing companies with fabric R&D capabilities will obviously benefit.
Fashion relies on research and development, and technology is as stylish. Fashion is a major theme in current apparel consumption. Embroidery, dyeing, finishing, etc. play a crucial role in it. The transformation of these processes requires the support of research and development. At the same time, fashion also requires disruptive material development, such as nylon stockings. The sculpted S-curve and the sculpted shape of Taimian have caused quite a stir in the fashion circle. In addition, the new technology itself has gradually become a part of fashion. For example, 3D printing clothing, 3D printing shoes, etc., have become a new trend product, and its charm is coming from technology itself. It can be seen that with the continued popularity of fashion consumption, the development of fabrics will become a constant theme.
Fabric R & D build brand differences in product barriers. Fabric R&D innovation is the key to fabricating core competition barriers for fabric manufacturers and apparel companies. In 1879, Thomas Burberry (Burberry founder) developed the Gabardine fabric. Its strong, waterproof and breathable properties quickly won customers for Burberry. Afterwards, he developed Tielocken waterproof windbreaker and became the originator of modern windbreaker. UA specializes in sweat-absorbent breathable sportswear products. With its Hi-Gear thermal equipment, ColdGear cold equipment and other technology fabrics, UA has become a leading brand in the field of leotards. Uniqlo has continued to develop and launch products such as polar fleece, Heattech, Airism, and light and thin feathers. It continues to meet the basic functional needs of consumers and has become a leading global apparel brand.
2. Rapid response to consumer demand for upgrades
As consumers are chasing new trends, and demand for fashion is rapidly changing, the demand is difficult to predict accurately. Brand owners are beginning to pursue a shift from order-based to system-based tracking. Zara's fast-reverse model has become the target of current apparel brands competing to learn and imitate.
Under this background, the push supply chain model encounters a development bottleneck, and the ultimate goal of the flexible supply chain is to provide a more flexible, flexible, and informatized flexible supply chain. The ultimate goal of this flexible supply chain is to ensure product quality. Realize rapid processing or large or small, multi-batch orders. Rapid response capability has become an increasingly important competitive factor for future processing and manufacturing companies.
Intelligent manufacturing is a challenge, but also an opportunity
We believe that in the long run, smart manufacturing is the company's biggest opportunity and challenge.
The production model has evolved from the most traditional push to the present to the most advanced intelligent production mode. It has gone through about three stages:
The first stage: push production. Push production is the most traditional mode of production. The planning department dismantles the final product into tasks and allocates the production departments according to the market demand. Each department delivers the finished product to the next process as planned and promotes the production of the next department. . In this mode, in order to ensure on-time delivery, the planning department must be able to accurately control the entire process, and must also guarantee a certain inventory.
The second stage: lean manufacturing (pull production). This model refers to arranging the production of the previous process according to the demand of the latter process, emphasizing that the processes do not work intermittently, and the product flows between processes, thereby reducing the waiting time for semi-products, reducing process losses, and shortening the production cycle. To achieve this model, it is often necessary to build a standard management model through data analysis, and form a standardized system such as a quality management system and a product life cycle management system. Under the lean manufacturing model, processing companies can more accurately arrange production rhythms according to customers' needs and establish an equalized production process, which is particularly in line with the demand for rapid response in the context of consumption upgrades.
The third stage: data-driven predictive modeling analysis and decision-making optimization. With data-driven predictive modeling analysis, explicit problems are revealed and solved one by one. On the one hand, through the modeling and analysis of related information in the past, real-time dynamic optimization can be achieved by combining current production, environmental, and personnel multi-factor changes; on the other hand, real-time monitoring and system integration of the entire supply chain can be realized through the development of the Internet of Things. Combine data analysis to improve the efficiency of the overall supply chain.
On the one hand, Shenzhou International is an excellent practitioner of lean manufacturing in the apparel field. On the other hand, in the context of smart manufacturing, it also raises higher requirements and challenges for the company. The company has realized that it is necessary to continuously increase investment in the IT field and strengthen data management capabilities. If the company can achieve the transition from the second stage to the third stage, it is expected to usher in a leap-forward development and the competitive barrier advantage will become more prominent.
Conclusion: In addition to the black swan event such as political risks, we believe that the company's greatest risk and flexibility lies in whether it can realize its own IT and data capabilities upgrading under the general trend of smart body manufacturing and move toward the direction of unmanned factories. We believe that the company has a long-term strategic vision and self-disruptive innovation genes, and has actively promoted changes to ensure the leading edge in the future. If the company wins in this round of changes, the company's moat advantage will be more pronounced, and it is expected to replicate this advantage in more areas, achieve better growth and increase profitability.
Source: CITIC Securities
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