Dongguan Shoe Enterprises Exposed The Foundry Dilemma: &Nbsp; The More Production, The More Serious The Loss.

Due to the high price of raw materials and insufficient orders, the profits of shoe material enterprises are almost zero. In the second half of the year, they may face a "shutdown tide".

Zhong Zhengfang was happy to hold a stack of RMB. 2950 yuan. This is his June salary.

Dongguan giant in Xiaohe village, Dao Jiao Town footwear industry Limited company (hereinafter referred to as the giant shoe industry) is very busy, because the boss paid nearly 200 employees of the factory to pay a total of 500 thousand yuan in June. Zhong Zhengfang is an old employee in the heat treatment group of the giant shoe industry. He first thought of sending half of his salary to his wife and children.

Cheng Liangbo, general manager of the giant shoe industry, is unhappy because 300 thousand of these wages are high interest loans. Since January this year, after deducting the expenses and bad debts of 1 million 890 thousand yuan accounts receivable, the annual sales volume of the giant shoe shoe company, which is about 40000000 yuan, is only a few hundred thousand yuan in the past six months.

"Last year we still had 5%~7% profits, and now we are lucky to lose money." Raw material Price increases, low prices for peers, orders for manpower, rising labor costs and zero profits of enterprises have led to the 36 year old Cheng Liangbo HUAFA.

"The collapse of the tide is too exaggerated, the word" shut down "may be better. Cheng Liangbo believes that the risk of stagflation is very high. If the price of raw materials is still high, from the perspective of profitability and crisis, Dongguan's most small and medium shoe enterprises will first consider survival in the second half of the year. Many shoe companies may choose to "go out of business" to push through the more difficult situation than in 2008.

　 False prosperity

Businesses are busy but not increasing profits.

As I approached the gate of the giant shoe industry, I heard the sound of machines roaring in the workshop. Compared with several cool factories nearby, there are still many workers at the gate of the giant shoe industry, which are busy loading and unloading.

In the factory, nearly 4000 square meters of factory buildings, more than 100 workers are busy on the assembly line, the factory area has accumulated a lot of raw materials and semi-finished products.

From the footwear giant Dongguan Yuyuan shoe factory job hopping Chen Jiuming, now the deputy manager of the giant shoe industry. He told reporters that the company can be as busy as it is now because it has received orders from two international shoe brands, TIMBERDLAND and LACROSSE, to ensure that enterprises do not have to rely on "heaven for food".

"We are working in white now, though hard, but there is no profit." Chen Jiuming told reporters that this is the most difficult situation he has encountered in shoe industry for 19 years: instead of having no orders or production, he seems busy but unable to increase profits for enterprises.

The prosperity of the surface conceals the present situation of the small or even loss of the footwear industry chain. Chen Jiuming said that there are three reasons for this situation: the price of raw materials, the vicious competition of foreign trade orders, and the rising cost of labor in recent years. Affected by this, the profit margins of enterprises are seriously squeezed. {page_break}

　　 OEM dilemma

The more production, the more serious the loss.

As a small business based on foundry, the giant shoe industry has been trying to build its own brand since last year. And cooperation with foreign brand shoe companies is the first step in its transformation.

I've been working for over 10 years, and I think it's over. If we go on like this, we will be eliminated in less than one or two years. Cheng Liangbo, who spent more than 10 years in shoe industry, felt deeply about earning hard money from OEM. He said that it is good to guarantee that the company will not fail now. "The boss is actually the hardest part of working people."

"We dare not take too much. If we take more, the more we produce, the more we lose." Chen Jiuming said that if the foreign orders were received in March, according to the industry rules, the delivery price of the contract should not be changed at least for a quarter or even 1 years. But at present, raw materials have gone up so much that it is likely that the order for March will be lost at the time of delivery in August.

In fact, the price of the rubber needed for shoe materials is 16000 yuan to 17000 yuan / ton in the first half of 2010, but now it has risen to 34000 yuan / ton. Because the price of raw materials has been rising, and now it is impossible to determine the price has stabilized, it also causes great difficulties to the production and order of shoe enterprises.

The increase in labor costs and financing difficulties have added to the already difficult shoe industry. Reporters learned that the giant shoe industry now has nearly 200 workers, an average monthly wage of a worker 2500 yuan. Two years ago, the average wage would only cost 2000 yuan to 2100 yuan per month.

In addition, due to the high demand of foreign orders for shoe materials, the imported rubber from the Republic of Korea needs about 3000000 yuan in monthly import, and all are cash deliveries. Owing to the fact that the company is small and medium-sized enterprises, banks have difficulty in obtaining loans and borrow money from friends and usury, which aggravate the cash flow and operational pressure of enterprises.

　　 Market expectations

Footwear industry or "business shutdown"

A series of difficulties in the shoe market will trigger the "collapse tide" of Dongguan shoe enterprises.

"Orders can guarantee production without losing money." Cheng Liangbo said that the shoe enterprises' business difficulties are facts, but when it comes to the "collapse tide", it is exaggerated. After all, in the best economic times, shoe companies are also closing down. {page_break}

He believes that although the shoe companies in Dongguan are still forging ahead, they hope to survive the crisis, but who can see the next spring, it is hard to say.

He explained that the difficulties faced by the shoe industry were more serious than in 2008. The second half of this year may be the key to the shoe industry. Many small and medium-sized enterprises in Dongguan have been intermittently stopped production. Some shoe companies retain production, but have begun to gradually cut spending. If the economy can not get better in the short term, raw material prices are not stable and foreign orders are not sustainable, many shoe enterprises in Dongguan will face the dilemma of life and death.

　 Underemployment

Affecting corporate confidence

Footwear industry, as the traditional processing industry in Dongguan, like the toy industry, is facing the rising of raw materials caused by inflation, the shrinking of foreign market demand, the difficulties caused by the reduction of orders, and the increasing cost of human resources in recent years, and financing is becoming more and more difficult.

Chen Jiuming, deputy general manager of the giant shoe industry, also said that now Dongguan shoe enterprises, no matter big or small, are facing difficulties. Large enterprises have scale advantages, but once overseas demand is reduced, they may be devastating. "Yuyuan and other big shoe factories have begun to shift to the layout of inland provinces and cities, which is a big trend and small businesses have to find ways".

In fact, small businesses like gigantic shoe industry are flexible, but their stability is poor. Shoes enterprises want to tide over difficulties. Unless the prices of raw materials are relatively stable, orders have certain continuity, and enterprises can guarantee certain profit margins. Otherwise, the shoe industry will usher in a new round of shuffling.