In Guangzhou, China, a network of factories gives birth to fast-fashion giant Shein

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

One factory looking for cross-border seamstresses promises a hiring bonus of 1,000 yuan ($138), an annual bonus of 8,000 yuan and a rent subsidy of 300 yuan. Another factory, which needs an unlimited workforce, boasts of having central air conditioning and paying wages on time.

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

Shein and its competitors are the beating hearts of these small factories. All day long, trucks plastered with Shein logos pull up to load up freshly sewn boxer shorts and cocktail dresses. Many of these products will soon be delivered to consumers halfway around the world, who bought them with a click of a smartphone.

Shein's core advantage lies in its agile supply chain, which is both fast and flexible, and its large existing user base, said Yao Kaifei, CEO and founder of BrandAI, a software-as-a-service startup focused on cross-border e-commerce.

But Shein hasn't always enjoyed the close relationships it has with its suppliers today.

In the company's early days, founder Xu Yangtian and supply chain manager Henry Ren Xiaoqing spent a lot of time visiting garment factories in Guangzhou in person to close deals.

Many suppliers initially rejected Shein because the company placed orders in much smaller quantities than traditional exporters and only reordered if an item proved popular with buyers, said Liu Mingguang, a former supply chain adviser for Shein.

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

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

But little by little, Shein managed to gain a foothold in a vast network of manufacturers by doing what many of its competitors don’t: always paying on time. The trust it built with its suppliers eventually gave it an edge over its competitors, as shoppers around the world were drawn to Shein’s seemingly endless selection of low-cost clothing that was in line with fashion trends.

Agile supply chain and connected commerce capabilities are needed to support [Sheins] “Success in a changing market,” said Derek Deng, senior partner at Bain in Shanghai. Sustainability is possible when the company can create synergy between its supply chain and distribution channels to adapt to the ever-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 attend training sessions organized by its supply chain management department.

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

When a product sells well and stocks run low, the system automatically orders from factories. That allows Shein to replenish its inventory in seven days, compared with 14 days for Zara, Spanish fashion giant Inditex, according to suppliers.

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Shein also faces increasing competition from rivals. Amazon.com recently launched an online store offering low-cost clothing, home goods and other items, allowing Chinese sellers to ship directly to U.S. buyers.

To remain competitive, Shein is working to attract a wider range of merchants to its platform, which would allow it to offer a wider variety of products ranging from beauty and skin care products to pet supplies, home decor, toys and small appliances, primarily targeting female consumers.

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

If Shein focuses solely on its own brands as before, growth will hit a ceiling, said one of the company's Shenzhen-based business development directors, who declined to be named because he was not authorized to speak to the media.

Shein needs to expand the categories of merchandise it offers to capture a larger market share, said the manager, who is responsible for recruiting new salespeople and helping newcomers. His job performance is tied to the number of merchants he can attract.

Miao Miao, Shein’s chief executive, has been spotted at events hosted by suppliers, but he rarely speaks in public. An employee who manages sellers on Shein said he was surprised when the chief executive praised him privately at a merchant recruitment event.

But as Shein moves forward with its initial public offering (IPO), the company will need to be more open about its operations.

Just as Guangdong retailers were initially reluctant to work with Shein, the fast-fashion giant will now have to convince investors that it can deliver consistent sales.

Shein must seek growth opportunities and differentiate itself while maintaining profits, BrandAI's Yao said.