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How one Chinese manufacturer stays ahead of sourcing

As Chinese export manufacturer the Dishang Group opens an all-singing, all-dancing new headquarters in Weihai, China, Drapers visits to find out how the business is adapting to the changes in sourcing.

Dishang building 1 af

Dishang building 1 af

Dishang HQ

Lihua Zhu is a perfectionist. Very little gets past the founder and chairman of the Dishang Group, who picks up every detail, whether it is his policing of unkempt desks or lunchtime dishes not meeting his exacting standards at the group’s new headquarters. This laser-like focus has helped make the business a powerhouse of Chinese manufacturing. Founded in 1993, the Dishang Group is one of China’s largest clothing export manufacturers. With an annual turnover of $1.5bn, it pumps out 73 million garments a year and counts Zara, Matalan and Adidas among its customers.

China has long been seen as the king of apparel manufacturing, but its position at the top is not as concrete as it once was. Although the global superpower leads on expertise and efficiency, rising labour costs have scuppered its reputation as a low-cost place to produce. As a result, the sourcing map has changed. Many retailers are now looking to countries with cheaper production costs such as Cambodia, Bangladesh, Vietnam and Myanmar.

This shift could put pressure on the Chinese manufacturing industry, but Zhu has refused to scale back. Dishang opened shiny new 24-storey headquarters last month. Based in Weihai, on China’s east coast in Shandong, the skyscraper replaces the company’s old base in the city and has been designed as one-stop shop for Dishang’s customers.

Techs appeal

Unable to compete solely on price, Chinese manufacturers are now concentrating on technical know-how. Dishang’s new base is home to some impressive kit. Customers can browse an extensive digital database of 50,000 fabrics without having to physically trawl through trade shows. If they spot a particular pattern they like, they can upload a picture into an internal system and be shown similar styles. The supplier aims to give customers a technical advantage by enabling them to create new products and receive samples as quickly as possible in as little as 4-5 days. Fabrics can also be tested at an onsite centre. 

A 3D-modelling system can scan fit models to create an onscreen sample, which can then be digitally altered to reflect changes to the fit, colour or pattern. Without having to repeatedly tweak and reproduce physical samples, the production process can be speeded up to match fast fashion’s accelerating pace.

Dishang 3D modelling close up

Dishang 3D modelling close up

Dishang 3D modelling

“The business has been going for 25 years and to be honest, we didn’t put a lot of money into our office – it went into research and development,” Zhu tells Drapers over tea on the new building’s top floor. “By opening this new site, we’re showing customers the strength of the business – that’s important.”

Foreign policy

Recognising the potentially stormy waters ahead for production within China, Dishang has also accelerated its offshore arm over the past five years. It opened two factories in Cambodia in 2015 and opened in Bangladesh the following year. Another two factories are planned to open in Bangladesh later this year and in early 2018. Most recently, Dishang has expanded into Myanmar, opening two new factories in 2016 and 2017. Although African countries such as Morocco are also emerging as new sourcing hubs, the company has so far steered clear.

Lihua Zhu

Lihua Zhu

Lihua Zhu

However, Zhu has not let go of Chinese manufacturing completely. Two new factories have opened in western China this year. 

“We saw the labour costs in China increasing over the decades and have opened the offshore factories to remain competitive at a price level,” he says. “One of the challenges of the offshore bases is efficiency, which we’re working to improve. We’re also exploring the domestic market in western China. There, we can still use Chinese workers, which is more efficient. If we manufacture there, the local government also gives benefits such as tax breaks. It’s a relatively undeveloped region and we’re looking to open more factories.”

Better transport links have opened up a previously untapped stream of production in the region, he adds: “Of course, China is a very large country and getting from here in the Shandong province to the western side of the country can take up to four hours by plane. We haven’t opened factories there before because of the adverse transportation – there were no direct flights or trains. Now, because of faster trains, we can be there in two hours.”

Focusing on design is another way Chinese manufacturers such as Dishang are staying on top of changes in the global sourcing market.

“We’ve moved from being a pure manufacturing business to doing more of the design and creative work,” explains Phil Roebuck, a director at Dishang’s UK office in Harrogate. “Of course, we still do the manufacturing but that’s the minimum you have to do now. Customers want more design work, because they need new styles all the time.”

Dishang showroom 2

Dishang showroom 2

Dishang fabric selection

The UK’s relationship with China outside the current constraints of the European Union is yet to be decided. Chancellor Philip Hammond has described Britain as a “natural” partner in the west for China. Research from the British Retail Consortium has found the cost of importing dresses could fall by 12% and leather handbags by up to 3% if the UK can secure new deals with countries such as China. Zhu takes a similarly positive approach to the future relationship between the two nations.

“Personally, I’m not worried about Brexit. I even think it could be quite a good opportunity if the UK can later have a free trade agreement with the Chinese government. There are also opportunities for exporters in the UK – China is a huge market and we love a lot of British production. There are mutual benefits to a free trade agreement if it’s something that we can set up.”

Zhu is determined that not only Dishang, but the Chinese manufacturing sector as a whole, continues to evolve.

“The challenge Chinese manufacturing faces is to be perfect,” Zhu tells Drapers. “That means putting a huge focus on design, improving the management of our factories, working more efficiently, making more profitable product. We have to be good companies and good manufacturers.”

 

Dishang by numbers

$1.5bn annual turnover

73 million garments produced each year

15,000 employees

35% of business is from Europe

 

Manufacturing locations

Cambodia

China

Bangladesh

Myanmar

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