In the Chinese manufacturing sector, particularly in the textile industry, there is a very classic and successful model known as "cluster industry" or "block economy".
The most typical example is:
Shaoxing Kaizhou: The world's largest distribution center for textile fabrics.
Dongguan Dalang: A famous town for woolen sweaters in China.
Suzhou Shengze: A major center for silk and chemical fiber fabrics in China.
Gaoyang, Hebei Province: The Land of Towels.
In these places, a town or a county is home to hundreds or even thousands of highly specialized small factories, all concentrating on a specific category (such as only producing denim, only making wool sweaters, only making lace trimmings, etc.). The advantages and disadvantages of this model are very prominent.
What are these advantages? (Why was it successful?)
This cluster model has created a "ant army" type of strong competitiveness, and its advantages mainly lie in the following aspects:
The utmost specialization and collaborative division of labor
This is not a simple aggregation of hundreds of small factories; rather, it is a deeply divided ecosystem. An end product (such as a shirt) can be broken down into dozens of stages: spinning, weaving, dyeing, post-treatment, accessory production, sewing, packaging, etc. Each small factory focuses solely on one or a few of these stages and strives to optimize its technology and efficiency to the utmost.
For example: In a cluster that produces denim fabric, there are factories specializing in bleaching and dyeing, factories specializing in weaving, factories specializing in water washing, factories specializing in breaking up the fabric, and factories specializing in sewing buttons and zippers. They are connected through efficient market-oriented cooperation.
Significant cost advantage
Low procurement costs: A large number of enterprises purchase raw materials in bulk, giving them strong bargaining power over upstream suppliers.
Low production costs: Specialized production leads to high utilization rates of machinery and equipment, skilled workers, and high labor productivity.
Low transaction costs: When customers come to this cluster, they can purchase all the necessary items in one place, saving on search, negotiation and logistics costs. Information and talents flow extremely quickly within the cluster.
Unparalleled supply chain efficiency and flexibility
Quick response: When an order comes in, the enterprises within the cluster can quickly establish a production network. If you place an order today, you will be able to find all the suppliers in the surrounding area tomorrow, and samples can be produced within a week. This is a speed that cannot be matched by large integrated factories.
Flexible production capacity: When the order volume is large, it can be divided among multiple factories for simultaneous production; when the order volume is small, only a few factories can be selected. This flexibility significantly reduces the risks associated with market fluctuations.
The spillover effects of knowledge and technology
Colleagues gather together, and new technologies, new designs, market information and innovations will spread rapidly. This "comparing, learning, catching up, helping and surpassing" atmosphere has driven the continuous progress of the entire industrial cluster.
Strong brand effect and market influence
When a place becomes known as "China's Sock Capital" or "China's Button Capital", it establishes brand recognition in the minds of global buyers. When customers want to purchase a certain product, the first place they think of is that place, thus creating a pattern of "buying globally and selling globally".