Content Published Last Week

1. Shein's Supply Chain: How it Works

2. Shein: Perspective of a Denim Supplier

3. Shein vs Zara vs ASOS: A Supplier's Perspective

4. Intuitive Surgical: Selling Da Vinci Systems, Simulators & Competition

5. Wayfair CastleGate: The Value to Suppliers

6. Bench Walk, PACCAR Judgment, & Litigation Finance

7. HEICO / Wencor

8. Alteryx: Designer Cloud, Trifecta Acquisition & Product Strategy

9. Constellation Software: Operating KPIs

10. Kelly Partners Group: New Ventures, Operating Structure & Management

Shein's Supply Chain: How it Works and Why it Matters

Much has been written about Shein’s rapid growth: its estimated $20bn in sales, the $100bn valuation, its mysterious founders, the daily launch of thousands of SKUs at rock bottom prices, and, of course, the sustainability issues. But there isn’t much explaining how the business really works.

How does Shein place orders and receive goods from suppliers? How does sampling work? How and where does it source fabric? Order economics? How are prices so low?

We’ve spent hours with Former Shein Managers and suppliers to walk through the process of yarn to finished goods to understand how Shein’s supply chain really works.

We get into detail on the sustainability issues across its fabric and garment supply base. We share the unit economics of a pair of denim jeans from cotton to manufacturing to the listed price on shein.com. We also explore what it's like to use Shein’s proprietary supply chain software and just how it can afford to pay suppliers within 4 DAYS:

Shein’s payment terms are such that after you ship the garments, you receive your payment in two or three days. This is very important for us. Because you are buying fabric, I will pay this money six months after I receive it. Because you need time for production, if you get your money earlier, you can use it for another job in these six months. So you are producing your garments in three weeks and you are getting your money in one month. After these five months, you can use this money for your other jobs and you are paying your money to the fabric mill. That's the advantage for a supplier or manufacturer. - Current Shein Supplier

This piece of research is interesting for anyone studying or operating in e-commerce and retail. The core tenets of Shein’s supply chain philosophy can be deployed in a sustainable manner.

This also isn’t just about fashion; it’s insight into a new type of supply chain. Shein has redesigned the retail supply chain to be demand-focused, not supply focused like traditional retail. Its core principles are category agnostic. Temu and others are replicating Shein’s philosophy across general merchandise, furniture and higher-end fashion. This will potentially have significant implications for Amazon and other Western retailers.

This analysis lays out each step in Shein’s supply chain and is best read in parallel with Zara’s Supply Chain as a reference to Shein’s efficiency.

Intuitive Surgical: Selling Da Vinci Systems, Simulators & Competition

In an interview with a former VP of Clinical Sales at Intuitive, we explore the robotic surgery sales process, the role of simulation and the looming competition:

Intuitive has evolved into a technology-driven organization, particularly in terms of instruments and accessories. This is where a lot of the competition lies. If Intuitive can stay on the cutting edge of technology, surgeons simply won't leave. Meanwhile, other companies are trying to commoditize an industry that's still in its infancy, much like computers. - Former VP Clinical Sales at Intuitive Surgical

Intuitive has data for over 8m procedures. This puts ISRG years ahead of competitors and offers the foundation to build a digital ecosystem that could further entrench its advantage:

Currently, we provide data for free, showing the efficiency of surgeons and identifying those who need further work. But we could start charging for this service because it helps to standardize the quality and profitability of surgeries, regardless of the surgeon. The more you can scale across your staff, the more predictable your outcomes become, and that's valuable. But we don't sell that today...In the future, we might be able to target even smaller vessels, removing just the tumor. What if we could differentiate between tumor cells and non-tumor cells? After the tumor is removed, it's sent to a lab to ensure that all the cancer was removed. If we could see this by injecting you with a substance and looking at your kidney under a different wavelength of light, we could confirm that all the tumor was removed. This would require more computation, a safe chemical that adheres to cancer cells, and other advancements. - Former VP Clinical Sales at Intuitive Surgical

Wayfair CastleGate: The Value to Suppliers

Through its CastleGate offering, Wayfair offers suppliers the opportunity to forward position inventory in its US FCs. While CastleGate increases delivery speed and reduces cost, it also has limitations:

we don't have any control or visibility into where they (Wayfair) decide to place our products in their overall network. Once they take it into a singular facility, whether it's coming from Asia consolidation or from our domestic warehouses, they exclusively decide how to disseminate that product across their warehouse network. We don't have a say in that. This is one area where we, as a manufacturer, would like to have more visibility and input, but it is completely controlled by them based on their data on how they want to redistribute the product throughout their network. - Wayfair Supplier

In this interview, the VP of a Wayfair Supplier sheds light on how CastleGate adds value to suppliers and the main challenges suppliers face when using the service.

Bench Walk, PACCAR Judgment, & Litigation Finance

On 26 July 2023, the UK Supreme Court ruled by a majority in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 that litigation funding agreements (“LFAs”) which entitle funders to payment based on the amount of damages recovered are Damages-Based Agreements (“DBAs”). Consequently, such LFAs are unenforceable unless they comply with the relevant regulatory regime for DBAs – and cannot be used at all to fund opt-out collective proceedings before the Competition Appeal Tribunal (the “CAT”).

This interview with the Head of Origination at Bench Walk Partners, a leading UK-based litigation funder, explores how UK funders are adapting to this judgment.

We also explore Bench Walk’s portfolio, how it conducts financial and legal DD compared with Burford Capital.

Burford may claim that, but they won't even consider a case if the damages are less than, say, $70 million. We, on the other hand, start reviewing cases where the damages are $10 million. This might be too small for Burford. I still have friends at Burford who sometimes refer smaller cases to me. We're not strictly focused on large portfolios. If a case is good, we're interested in investing. This approach gives us a spread of money coming in and going out. If you invest a large sum in one portfolio, it might take a long time to see a return. But if you invest in smaller cases, which usually take 18 months to three years, we can see a return quicker. - Current Head of Origination at Bench Walk Partners

HEICO / Wencor

In this podcast (Spotify / Apple), we discuss the process and structure of our recent analysis on HEICO's acquisition of Wencor. We explore:

1. The structure of the aftermarket value chain

2. Synergies between HEI / Wencor across PMA, MRO, and distribution

3. Advantages of owning MRO and distribution with PMA assets

4. How HEI bargaining power changes post-acquisition

5. Why the alternate bill of materials strategy is an opportunity for HEI

Alteryx: Designer Cloud, Trifecta Acquisition & Product Strategy

In this interview, a former VP of Product Strategy at Alteryx walks through the Trifacta acquisition, the threat of GenAI, and how the product management philosophy has evolved over time:

The thing about the Alteryx on-prem product, not as much as Trifacta, is if you look at some of the Designer capabilities for Designer Cloud is that the world is stuck in spreadsheets and even though there is big data and a repository of big data, the question then becomes will everybody go to cloud warehouses? And after that they can start to use large language models and do a fair amount. That was the question Alteryx wrestled with as they were trying to figure out what was their transition from on-prem to cloud. Would there continue to be a need for the capture of small data sets around the organization versus a large centralized repository of data? - Former VP Product Strategy at Alteryx

Constellation Software: Operating KPIs

In this podcast (Spotify / Apple), we discuss the process and structure of our recent analysis on Constellation's 5 operating KPIs. We explore:

1. How CSI reports revenue and cost lines in consolidated vs opco accounts

2. The 5 major KPIs CSI uses to manage VMS businesses

3. CSIs moat vs other VMS acquirers

4. What one can learn from the 5 KPIs in operating VMS

Kelly Partners Group: New Ventures, Operating Structure & Management

Kelly Partners Group is a fast-growing acquirer of accountancy and advisory practices in Australia. In this interview, a former practice leader describes KPG’s operational model and the economics of the partnership:

I believe it's the standard model Brett uses when he acquires new practices. Essentially, he or the holding company, Kelly+Partners Group, would have a 51% stake in my business, and I'd have a 49% stake. I paid a management and administration fee to Kelly+Partners Group for things like office space, IT, and administrative support. The target was to generate about half a million dollars a year in revenue. After deducting costs, I'd be taking home slightly less than half of that, somewhere between 200,000 to 250,000 Australian dollars. - Former KPG Practice Leader