In Guangzhou, China, a chain of factories gives rise to fast-fashion giant Shein

Tucked away in the town of Nancun in Guangzhou’s Panyu district, a maze of apartment buildings and small factory complexes, is the Shein supply center. In nearby Dexing Industrial Park, walls and sidewalks are covered with recruitment ads for workers needed to fill the flood of orders pouring in from Shein.

One factory looking for “cross-border” sewing workers promises a new-hire bonus of 1,000 yuan ($138), an annual bonus of 8,000 yuan and a rent subsidy of 300 yuan. Another factory, needing “unlimited” labor, boasts of “central air conditioning” and “on-time wage payments.”

The drab, five-story, matchbox-shaped building houses at least seven workshops — Shanghong Garments, Hongze Clothing, Yuejie, Hongshi Clothing and Aixi Fashion, according to signs. It’s just one of hundreds of similar buildings in Panyu, which is home to more than 7,000 manufacturers, according to government data.

Shein and its rivals are the beating heart that keeps these small factories running. Throughout the day, trucks emblazoned with the Shein logo stop to load up freshly sewn boxers and cocktail dresses. Many of those products will soon reach consumers half a world away who bought them with the tap of a smartphone.

“Shein’s key advantage is its agile supply chain, which is fast and flexible, and its large existing user base,” said Yao Kaifei, CEO and founder of BrandAI, a software-as-a-service start-up focused on cross-border e-commerce.

However, Shein has not always enjoyed the close relationships with its suppliers that it has now.

In the early days of the company, founder Xu Yangtian and supply chain chief Henry Ren Xiaoqing spent a lot of time personally visiting garment factories in Guangzhou to win contracts.

Many suppliers initially rejected Shein’s offer because the company placed orders in much smaller quantities than traditional exporters and reordered only if an item was popular with customers, said Liu Mingguang, a former supply chain adviser at Shein.

The company typically asks factories to produce about 100 pieces of a new item, while other customers typically ask for 10 to 20 times that, according to a manager at a denim factory that has worked with Shein. Orders from Shein, which sells budget clothing ranging from $5 tank tops to $20 jeans, are also less lucrative.

Shein’s orders generate a gross profit margin of about 6 percent, compared with 10 to 20 percent for orders from other customers, the manager said. Compounding the problems are Shein’s tight delivery schedules, which often force factories to halt production for other customers and work overtime.

But slowly, Shein managed to sign up a vast network of manufacturers by doing what many of its competitors did not: always paying on time. The trust it built with its suppliers eventually gave it an advantage over its competitors, as shoppers around the world began to flock to Shein’s seemingly endless selection of affordable, fashion-forward clothes.

“To sustain (Shein’s) success in an ever-changing marketplace, it needs an agile supply chain and connected commerce capabilities,” said Derek Deng, a senior partner at Bain in Shanghai. “Sustainability can be achieved when a company can create synergy between its supply chain and distribution channels to adapt to the rapidly changing needs of the local market.”

To manage its complex network of suppliers, Shein has developed an internal digital system and requires new partners to participate in training sessions organized by its supply chain management department.

Through a website called Gaywohuowhich means “give me the goods” in Mandarin, sellers on the Shein platform can access a wide range of data, including product lists, orders and inventory management, according to documents provided by the supplier.

When a product sells well and stock runs low, the system automatically reorders it from factories. This allows Shein to replenish stock within seven days, compared with 14 days for Spanish fashion giant Inditex, Zara, according to suppliers.

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Shein is also facing increasing competition from rivals. Amazon.com recently launched a budget store offering cheap clothing, household goods and other items, allowing Chinese sellers to ship directly to American customers.

To stay competitive, Shein is trying to attract a wide range of sellers to its platform, which would allow it to offer a wider selection of goods, from skincare and beauty products to pet supplies, home decor, toys and small household appliances, targeting women in particular.

Last year, the company established a business development team dedicated to this initiative.

One Shenzhen business development executive, who declined to be interviewed, said that if Shein focused solely on its own brands as it has done so far, growth would plateau.

Shein needs to expand the categories of merchandise it offers to gain a larger market share, said the manager, who is responsible for recruiting new vendors and supporting new employees. His work efficiency is tied to the number of vendors he can attract.

Miao Miao, Shein’s chief operating officer, has been spotted at vendor events but rarely speaks publicly. A Shein vendor manager said he was surprised when a director privately praised him at a vendor recruitment event.

But as Shein pushes ahead with its initial public offering (IPO) plan, the company will have to be more open about its activities.

Just as Guangdong merchants were initially hesitant to partner with Shein, the fast-fashion giant will now have to convince investors it can deliver consistent sales.

“Shein needs to seek opportunities to grow and differentiate itself while maintaining profits,” BrandAI’s Yao said.