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The Sheico Miracle
From Roadside Vendor to Global Wetsuit Giant

A meek roadside stand has grown into a diving suit giant with a 65% hold on the global market. This is the story of how a father and son cast off a previous industry dependence on Japanese materials and created their own miracle.

It's an early July morning. At 8 a.m. sharp, 3,500 workers at the Sheico factory in Thailand are in formation doing morning calisthenics. After the exercises are completed, an announcement is made: "The president will say a few words…" A slightly built Taiwanese gentleman with neatly combed, slicked-back hair takes the stage and says, "Hello, colleagues. Today I would like to tell you all a story…" Pi-Goong Shiue tries hard to get his message across in heavily accented Thai and then offers a small gift to the employee that answers his questions correctly.

It takes only ten minutes for 77-year-old Shiue to deliver a message he took two weeks to prepare. He asked one of his Thai executives to translate the story and then used Romanization to memorize the Thai words. Hsueh went over his speech every morning on his MP3 player while jogging. "The moral of this story is that whatever we do, we have to work harder than the next guy in order to have a chance to succeed." After he finishes speaking, the aged president of the company, who flies to the Thailand factory monthly to tell his employees such stories, receives thunderous applause.

The story Pi-Goong Shiue shares with his employees is in fact the very epitome of what made Sheico the leading wetsuit manufacturer it has become today.

Circumventing Monopoly, Becoming Number One

Pi-Goong Shiue and his son Min Shiue joined together to transform their street vending operation in Luodong, Ilan County into the international giant it is today. The company earns annual revenues of US$200 million and employs 8,000 workers in Taiwan, China and Thailand. The father and son team worked hard to break through European, American and Japanese monopolies in the industry, making sure over 65% of the global wetsuit users wear "Sheico inside." From the world-record holder for the deepest dive to the main characters on the hit US TV show Baywatch, it seems everyone these days associated with the water is wearing Sheico wetsuits.

During peak season, the ten conference rooms at the Sheico headquarters in Ilan are often busy with a back-to-back succession of product meetings, serving the company's five hundred worldwide customers. "I'm only a simple businessman," the modest and unassuming elder Shiue says, clearly embarrassed when he hears someone call him the "world number one."

Forty years ago, Pi-Goong Shiue left his teaching position at an Ilan elementary school, and set up a sales stand on the sidewalk, in order to support eleven brothers and sisters. He would buy shoes in Taipei and sell them in Ilan. "His former colleagues would pass by and laugh at him for giving up his teacher's job to be a street vendor," relates A-SO Boutique President Luo Shui-mu, who is from the same village as Shiue and also started out as a street vendor. Pi-Goong Shiue had a head for business, though, and eventually opened his own shop that sold his own brand of rain gear and galoshes.

In 1979, Shiue's oldest son Chih-cheng Shiue visited an exhibition in Munich just when the worldwide craze for surfing was taking off. It was the first time he had ever laid eyes on surfing shoes, and he found them to be very novel. "At that time, no one in Taiwan had seen anything like them; the only place in Asia making them was Japan," says Sheico managing director and Shiue's second son Min Shiue. Pi-Goong Shiue's factory at the time had shoe-manufacturing equipment in place, so he decided to order some samples and extra machinery, and imported some of the needed raw materials from Japan. He started out with his first order for five hundred pairs of surfing shoes and then gradually expanded to surfing gloves and wetsuits.

From Raw Materials to Finished Products

At that time, the well-known brand Da Hsin had a monopoly on the rain gear and galoshes market. Pi-Goong Shiue realized his own brand couldn't keep up, so Sheico shifted production from rain gear and galoshes to wetsuits and other diving-related products. The process was made easier as the production line had already shifted gradually toward wetsuit manufacturing.

"Sheico is the number one company in Asia, and even the world, that engages in the whole process of manufacturing wetsuits, from raw materials to finished products. This is a big advantage," offers Walter Yeh, Executive Vice President of the Taiwan External Trade Development Council, who hosted Sheico representatives in Holland when he was stationed there ten years ago.

In 1981, the company had been manufacturing wetsuits for only three years when Min Shiue, who had just taken over as managing director, discovered that the raw materials and cloth which they had to buy from Japan accounted for 50% of costs. This not only made it hard for Sheico to turn a profit, but also threatened to affect orders if Japanese suppliers delayed delivery or stopped providing materials altogether. Min Shiue says, "We no longer wanted to be held by the scruff of the neck."

As the company was familiar with using synthetic rubber in making rain gear, Min Shiue persuaded his father to take a stab at developing their own materials instead of relying on Japanese supplies. Pi-Goong Shiue watched his son work hard all day, then pour over texts on synthetic rubber at night and take extra classes on the subject on his days off. At that time environmental protection regulations were rather lax, so father and son would burn waste material in open spaces at the factory after hours to try and come up with new materials.

The two bought equipment, conducted a countless number of experiments and made mistakes both large and small. After two years of trial and error, Sheico finally produced a raw material 30% cheaper than what Japanese suppliers were offering and then sold it to other wetsuit manufacturers. "Previously, we could only import raw materials from Japan and then do tertiary processing. But we successfully developed our own material, and European and US customers began accepting the products we were making with it," says an obviously proud Min Shiue. Their efforts made Sheico the first company globally to produce its own material and then use it for manufacturing its own wetsuits.

Chang Li-bing, an official with Taiwan's Industrial Development Bureau, explains that wetsuits are a low-quantity product with a wide range of models and complicated accessories. Sheico's comprehensive process is the key to its cost competitiveness. "Their ability to keep costs low is what makes them stronger than the rest," Chang observes. This is made possible through the company's approximately one-hundred strong R&D department that can come up with designs and raw material development quickly, in order to stay on top. Of its over five hundred customers, only 20% have design departments, with the others looking directly to Sheico for their design needs.

The successful development of raw materials and the comprehensive manufacturing process was the first turning point allowing Sheico to go global.

After its Taiwan manufacturing lines became filled to capacity, Pi-Goong Shiue began to look for factory sites overseas. Father and son went to Thailand to inspect some sites and bought some land within a week due to the number and urgency of orders they had to fill. They went about training Thai employees while the factory was being built, and once it was completed, production began immediately. Shortly afterwards, the pair hurried to China to buy some more land for a factory. The two sites employ over 7,000 workers combined and account for more than half of Sheico's production.

Sheico's market share has progressively climbed from the 30% it claimed a decade ago to the two-thirds it enjoys today. When Min Shiue traveled to England on business recently, he visited four or five retail shops and found over 80% of Sheico products on the shelves, "I never thought we'd be able to accomplish this much," the younger Shiue comments. He has been with his father from the beginning when he was driving a truck and doing wholesale business. The elder Shiue says his son is a "business prodigy."

Yet not long after ascending to the top, Sheico faced its biggest crisis, almost causing the company to collapse.

In September of 1996, a huge fire broke out at Sheico's Ilan factory. Before the damage could be assessed, another fire engulfed the site the next day. The two blazes destroyed over half of Sheico's factory facilities, with damage centered mostly in the production line and equipment. Competitors seized the opportunity to wrest away business, telling Sheico customers there was no way the company could restore operations within six months.

Min Shiue made the immediate decision to make the company's losses known and ordered the sales department to issue letters to customers as well as daily updates to assuage client concern over the rebuilding process. Pi-Goong Shuie made his way to the bank to talk about refinancing. Additionally, as Sheico had always had excellent credit with suppliers, they were willing to allow Shiue to delay payments.

The day after the second fire, Min Shiue scurried around looking for second-hand equipment to buy. Three days after the fires, Sheico had erected tarp awnings on some of the empty sites around the factory grounds and set up the first production line inside them. "Seven days later, we were back at 15% production capacity," related Min Shiue. He added that at the time, machines were running non-stop, twenty four hours a day with meals being delivered to workers on site. Just three months later, Sheico miraculously recovered to full production capacity. Min Shiue recalls, "In the end, we were only a month and a half behind on deliveries."

Pulling Together Like a Family

During that period, Sheico employees worked overtime without complaining and even wrote a joint letter to Pi-Goong Shiue. Factory chief KC Huang notes, "The employees were willing to take a 20% pay cut and also wait three months for their checks, to help keep the company going." Five months after the blazes, Sheico employees received their year-end bonuses and were surprised to find that Pi-Goong Shiue had not only managed to avoid cutting anyone's salary, but had also increased bonuses by half a month. "Everyone pulled together to help me, just like family," he says gratefully.

Sheico didn't slow down after the fires, and even branched out into manufacturing spandex. Copying their earlier strategy for making wetsuits, Sheico, in contrast to other enterprises such as Formosa Plastics, Far Eastern and Tung Hwa that directly bought needed technology from overseas, began experimenting with raw materials to come up with its own method of production, becoming Taiwan's first company to rely on its own spandex yarn. At the end of last year, Sheico had already produced 6000 tons of spandex yarn, garnering 5% of the global market. And Sheico used its existing business connections to delve into a business no other Taiwan company ever had: elastic water sports apparel.

Recently, Min Shiue has become busy again. He has discovered that the company has been expanding by over 1,000 people for the last three years running. The scale and production capacity has become increasingly larger, surpassing the control capabilities of the current management framework. Delivery dates and cost control have become harder to handle, making it easier for competitors to find loopholes to steal away some business. "We can't wait for business to drop in our laps, we have to be prepared in advance," offers Min Shiue. He has readied NT$10 million to spend over the next three years on improving current company management organization, while 77-year-old Pi-Goong Shiue gets ready to take another overseas factory inspection tour the next day.

Father and son have already laid the groundwork to take Sheico to new heights.

Translated from the Chinese by Steven Marsh

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