On the afternoon of November 19th, Li Zhiyuan signed the delivery certificate and watched the delivery of trucks loaded with lawn mower products out of the factory gates, and felt relieved. However, soon he began to worry again.
Since the beginning of this year, from the rise in labor costs to the overall increase in raw materials prices, the “old foreign trade†that has been importing and exporting mechanical products for 10 years is not optimistic about the situation in 2011.
Li Jinyuan's company is located in Yongkang, Zhejiang Province, where "China's hardware capital" is the title. There are about 10,000 companies engaged in hardware production in Yongkang. The dependence on foreign trade is as high as 67%. The rise in raw material and labor costs this year, and the accelerated appreciation of the exchange rate, have made companies overwhelmed.
As of now, the total order amount in Li Jinyuan's hand has already exceeded last year, but the profit has dropped by about 15% from last year. If you add product prices and financial means to hedge part of the cost, profit margins can reach approximately 90% of last year.
On the 24th to the 26th of every month, the Foreign Trade and Economic Cooperation Bureau of Yongkang Municipality sent a “Monitoring Questionnaire for Foreign Trade Operational Mechanisms in the City†to various enterprises. On the one hand, it forecasted the trend of foreign trade and prompted enterprises to pay attention to risks. On the other hand, Companies also need to fill in related information and summarize it with the Municipal Foreign Trade and Economic Cooperation Bureau.
Through continuous attention to early warning information, Li Jinyuan found that for such foreign trade companies, the exchange rate and labor price fluctuations have always been ranked first in warning information, and these two factors are also factors that enterprises cannot control independently.
Retail Enterprise: Integrate Supply Chain
When soaring prices are passed down the supply chain to the downstream, there is not much room for the retail industry to maneuver. On the one hand, retailers need to do a good price strategy and keep their image of “everyday price†in the minds of consumers. On the other hand, they must increase prices of goods, utilities, rent, and labor costs. Extend more profit margins.
According to the author's understanding, domestic retail companies are actively exploring internal potential by adjusting procurement strategies, integrating supply chain resources, and promoting marketing methods to combat the “last mile†of inflation.