Subcontracting Enterprises To Reduce Production Of Domestic OEM Footwear Enterprises Collective Confusion

Light asset strategy: unbearable lightness

Light asset strategy

The market mature enterprises, especially multinational corporations, only invest a small amount of hard assets, earn profits through output management, technology and brand, and focus on product development, sales, service and brand promotion strategy. This strategy has spawned a group of "OEM" enterprises focusing on manufacturing and processing in China.

Recently, Adidas President Hainer said that due to the increasing wage demands of Chinese employees and increased production costs, the company intends to reduce the proportion of production in China in the future.

Adidas China did not deny this statement, which led to the industry's concern about the future of its domestic foundry industry and raw materials supporting industry.

Adidas's strategic adjustment stems from the long-term implementation of the "light assets strategy".

From the national policy to the cost of raw materials to labor costs, they feel that Chinese manufacturing may not be as cheap and good as they used to be, and the strategy of light assets will allow capital to "retreat".

"The old bird flew away, where is the new bird?

This involves the employment of tens of thousands of people.

Some experts have described the imminent crisis.

Customers change the "foundry" strategy

"Adidas is our customer."

Guo Weiwen, spokesman of Guangdong Wan Bang shoes company, explained the relationship between the two parties briefly and clearly.

Wan Bang is one of Adidas's largest foundries in China. It is invested by Taiwanese businessmen. All the products produced are Adidas's orders. At present, there are nearly 20 thousand employees.

Guo Weiwen told reporters that Adidas's procurement strategy is indeed adjusted according to the situation of enterprises.

It is understood that Adidas's orders in Wan Bang have not decreased and business has remained stable.

"In the face of the current domestic cost situation, Adidas has also raised its purchasing price accordingly."

But Guo Weiwen did not want to disclose how much the increase was.

It only means that there is no problem in the company's business.

But she also expressed concern that if the cost of manufacturing in China is still in its present state, the future is not optimistic.

Previously, Yang Yelin, Deputy Secretary General of Guangdong footwear industry association, told reporters that the export price of domestic footwear should be increased by 20%-35% in order to maintain profitability.

Wang Ying, Secretary General of the footwear branch of the China Light Industry Arts and crafts import and Export Association, seems to have shifted the focus of Adidas's production away from the profit seeking nature of enterprises. Otherwise, the mode of Chinese foundry will not appear.

Nowadays, not only in the Pearl River Delta, the production costs in many places are increasing, but the demand for foreign major consumer markets has declined. It is also inevitable for brands to move to cheaper places.

From the perspective of the representative factory, the pfer of branding obviously brought them great pressure to survive, which is reflected in all parts of the country.

Who will pay for unemployment?

Adidas's "light asset strategy" has only a cooperative relationship with the foundries.

It seems undisputable that businesses are going to buy in other Asian countries with lower manufacturing costs.

"Everyone advocates industrial upgrading, but the key is that these factories involve tens of thousands of people, and the old birds fly away. Where are the new birds?"

Ding Li, director of the scientific research division of the Guangdong Academy of Social Sciences and regional economic research expert, are more worried about the problems behind Adidas's "flight away" and the foundry dilemma.

In his view, Guangdong still can not talk about upgrading the manufacturing industry. First, we must upgrade from the assembly industry to the manufacturing industry, then brand and creativity.

"We can not deny the rationality and economic and social contribution of the policy of attracting foreign investment in that year, nor should we emotionally accuse enterprises of breaking the bridges."

Ding Li believes that labor-intensive industries can also gather strength, and the key is that government regulation must be carried out step by step and planned.

In August 1st, the Ministry of Finance and the State Administration of Taxation jointly issued the notice on adjusting the export tax rebate rate of some textiles and garments, pointing out that from August 1, 2008, the export rebate rate of some textiles and clothing increased from 11% to 13%.

The textile and garment industry is grateful.

Looking forward to the "brother" industry, the shoe industry is waiting for the export tax rebate.

With the large-scale investigation of the Ministry of Commerce, many export oriented shoe making enterprises in the Pearl River Delta are anxiously awaiting.

Any effective way to reduce costs will help retain customers who are implementing the strategy of light assets.

China's cost advantage red light

Guangdong Wan Bang shoe industry is affiliated to Wan Bang Group. It is understood that Wan Bang Group has established a shoe factory in India.

"Now the footwear industry in Vietnam and India is becoming more and more perfect."

Guo Weiwen said that according to her understanding, many of the supporting enterprises that have been certified by Adidas have begun to enter these areas.

Although it has just started, the operation cost of these areas is better than that of China from the current situation.

"At present, domestic policy adjustment, labor law, RMB appreciation and other issues have brought cost pressures."

Guo Weiwen said that the hope of Wan Bang is only the enterprise itself, the key is to see how the customer adjusts.

It is difficult for enterprises to implement "light assets strategy" to be "constrained", and the fluctuation of exchange rate makes the whole situation chaotic.

At present, the associated foundry and supporting enterprises seem to be "rescued" by the government.

"There is a relatively good situation."

Wang Ying pointed out that parts of Guangdong and Fujian, which had been foundry factories for foreign brands, were protected by the production process and management process. They had been regarded by Chinese famous brands such as Lining and Anta to become their foundry factories.

Although Lining and Anta adopted similar "light asset mode" in order to expand production scale and sales network, their products are mainly used for domestic sales, while domestic production still has cost advantages, and the market situation is relatively good.

Industry observation

20% enterprises plan to move factories to other countries.

The Shanghai American Chamber of Commerce and associated Alan consulting company recently released a report entitled "competitiveness of China's manufacturing industry in 2007-2008 years".

The report is on the right track.

After a survey of 66 manufacturing firms (mostly foreign companies), nearly 20% of the companies planned to pfer their factories to other countries.

According to the ranking, these countries are India, Vietnam, Thailand, Malaysia and Brazil. The reason for leaving China is the rising cost and the appreciation of the renminbi.

"Of course, 83% of the enterprises, that is, the vast majority of enterprises do not have any plans to leave China," said Alan, vice president of Greater China, booth consulting. "These enterprises are still optimistic about China, but what is worrying is that 17% of the companies have already made specific plans to move factories to other neighboring countries."