The Price Of Raw Materials Has Gone Up, And China Made It Into A High Cost Era.

"Cost crisis weakens the competitiveness of China's manufacturing industry, but it will not hinder China's becoming the world's manufacturing center.

Not only China, but also the countries all over the world are affected by the global price rise of energy, grain and raw materials.

Affected by the sharp rise in domestic steel prices, TOYOTA has begun to increase the price of its sales models in the North American market. "

Baosteel, Wuhan Iron and steel and other large steel mills recently raised the factory price of the third quarter by 300~600 yuan / ton, which will continue to rise sharply in the past few quarters.

At the same time, international crude oil prices have reached a record high and are currently hovering at $140 a barrel.

The rapid rise of raw material prices has brought unprecedented crises to China's manufacturing industry, which has always relied on low-cost competition.

How to resolve the crisis and change the crisis into opportunities will be the first issue before every Chinese manufacturing enterprise.

The price of raw materials has surged since 2008, and the producer price index (PPI) of industrial products has been running at a high level.

As of May 2008, producer prices rose 9.2% year-on-year, and raw material, fuel and power purchase prices rose by 11.9%.

The current comprehensive economic environment determines that the price elasticity of products in many industries in China is relatively high, and the industry's pricing power is not strong enough to pmit the cost pressure to the downstream, and its profit space is compressed.

In April of 2008, the price of Chery and Jianghuai, which were announced by the cost pressure, dropped by 2..75% and 26.4% in the same month, or two times the average decline of passenger cars in the same month.

Air conditioners, fridges, color TV and other household electrical appliance enterprises have started to raise prices, resulting in double sales scale and profit stagnation.

Cost crisis has hit exporters of low-end products.

Most export enterprises adopt the mode of long term contract pricing. Under the background of rising prices of raw materials, the rise of production costs can not be immediately reflected in product prices.

Export enterprises have no independent brands, and bargaining power with foreign large importers is weak, so it is difficult to raise export prices.

Especially after more than half of the small and medium-sized export enterprises such as textiles, clothing, shoes and hats, the after tax profit margin is concentrated within 5%.

According to statistics of the China Textile Industry Association, only 44200 of the textile factories with 1/3 recorded profits.

In 2008, the clothing and accessories of Guangdong exported to US $6 billion 650 million from 1 to April, down 15.1% from the same period last year.

The solution to the cost crisis is under the pressure of high cost.

Many companies purchase raw materials in centralized or cross enterprise way to reduce the cost of incoming goods.

The implementation of unified procurement of companies, and then unified deployment according to the needs of departments, not only can achieve a large number of goods to save costs, but also can determine the reserves of raw materials by analyzing the market trend, thereby avoiding the risk of price fluctuations.

Haier implements the "four major" centralized procurement strategy, namely, "big orders, big customers, big markets, big resources", which centrally purchases large raw materials such as steel plates, chemical materials, electronic components and so on, and saves 20% to 30% of the cost.

Some small and medium-sized enterprises seek Industrial Synergy, avoid low price competition, and pmit cost pressure to consumers.

Us, GREE, Galanz and other home appliance enterprises in Guangdong seek price alliance, refusing large and low price orders, consistent with the outside world.

Seven mainstream commercial vehicle companies in China have jointly established the light truck industry alliance and collectively raised the selling price of light truck products.

In order to alleviate the cost pressure, some enterprises began to invest or cooperate on the upstream of the industrial chain.

Sun paper set up a subsidiary company in Laos to engage in the construction of nursery and demonstration forests, and to make use of the cheap raw material resources in Southeast Asia to alleviate the cost pressure caused by the sharp rise in prices of raw wood pulp and waste paper.

Changhong and upstream steel, plastics and other suppliers have set up a joint laboratory of steel and engineering plastics to develop new alternative materials.

Enterprises with product advantages can increase their added value and profit margins through differentiated management strategies such as brand, technology and new market development.

Some textile export enterprises in Foshan, Guangdong, have made great efforts to develop new export markets such as South America, and have gained higher profits than traditional European and American markets.

Based on the production of ordinary polyester fibers, Jiangsu Sheng Hong Group has developed ultra-fine fibers for the production of top grade sportswear fabrics, and products are in short supply.

Entering the high cost era, for a long time in the future, high cost is a threshold in front of Chinese manufacturing enterprises.

The PPI will remain high in the future, and the pressure of price rise will still be affected by the rising price of international oil prices and the pressure of domestic money and credit rebounding. At the same time, in order to expand domestic demand, China's wage will continue to rise and the labor cost will be increased.

In addition, it is expected that the government's control of oil prices and electricity prices will be gradually liberalized in the future.

High cost era will accelerate structural adjustment of industry.

Enterprises will consider more energy conservation and consumption reduction, improve labor productivity, improve technology, and complete the pformation from cost advantage to technological advantage.

In order to reduce export dependence, curb imbalances in international payments and ease inflation, the government will also vigorously promote industrial restructuring, start the domestic demand market and expand employment.

The cost crisis will weaken the competitiveness of China's manufacturing industry, but will not hinder China's becoming the world's manufacturing center.

Not only China, but also the countries all over the world are affected by the global price rise of energy, grain and raw materials.

Affected by the sharp rise in domestic steel prices, TOYOTA has begun to increase the price of its North American market models.

Chinese enterprises can reform the raw material purchasing mode to reduce costs.

Large enterprises can develop international procurement channels and implement effective allocation of resources worldwide.

Panasonic has reduced the cost of steel by using the global procurement network, so its washing machine products can be reduced in China.

Small and medium-sized enterprises can jointly purchase raw materials from different enterprises, so as to gain the advantage of purchasing scale and bypass raw material intermediaries.

Experts suggest that enterprises should shift from saving raw materials and increasing labour productivity to establishing a new source of profit for efficient supply chain systems.

In modern commodities, logistics and other non productive costs occupy a large proportion. Compressing logistics costs can compensate for the rising cost of raw materials.

Chinese enterprises should improve their weak supply chain logistics system so as to achieve the goal of reducing overall cost.

DELL, WAL-MART and other industry leaders, with the help of supply chain management, has created a further improvement of the profitability of enterprises.