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The Net Profit Of OEM Is Declining Year By Year, Where Is The "World Factory" Going?

2014/6/2 13:33:00 64

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Dongguan Taozhen town Dongjiang riverside industrial area, Yuyuan shoes factory three green and white factory buildings are scattered, and the world's largest brand shoe foundry base such as Nike has become the business card here for many years.

in the middle of 4 months, after the nearly half a month of labor dispute caused by social security disputes, some long-standing problems are testing Yuyuan industry. In the world's largest shoemaking OEM giant, it reflects the general difficulties faced by most Chinese manufacturing industries.

Demographic dividend is fading away. With the rising cost of raw materials, labor and energy, the manufacturing industry has become increasingly difficult and the profit margins have become very small.

labor cost puzzle

from a small factory with only a few dozen people to around 410 thousand employees in the world in 1988, Dongguan Gao Gao has become the core production base of Yuyuan industry, the fifty thousand largest player in Gao Gao town.

at present, Yuyuan industry has three factories in Gao Gao town, namely, the old three factories, the new three factory and the one shoe factory in the little Tan Industrial Area along the Dongjiang River, in the six factories, seven factories and eight factories in Jiangcheng, as well as the low Yuan Bao Yuan C building.

Among them, the third factory is the brand of OEM Nike, with more than 10000 employees.

One shoe factory, six factory and seven factory are made for Adidas, and the eight factory is Solomon's brand.

And low Chung Bao Yuan C specializes in making ASICS.

In addition, Yuyuan industry also has production bases in Dongguan, such as Huang Jiang, Zhongshan and Zhuhai. At present, there are 182 production lines and 160 thousand employees in the mainland of China.

May is the rainy season in the south.

In mid May, reporters visited Yuyuan shoe factory in Dongguan.

At 12 noon, the workers at noon of the third day factory came out, and most of them were women workers about 30-40 years old.

It is understood that Yuyuan's female employees account for about 70%.

workers told reporters that the cause of the strike was that employees found that Yuyuan did not buy sufficient social security and housing fund for workers in accordance with the relevant requirements of the labor law.

According to reports, the average wage level of Yuyuan shoe factory workers in Dongguan is 2700-3000 yuan, but the company pays 1310 yuan according to the minimum wage level stipulated by the local government.

Labor began in April 14th, when the local government came forward to mediate, it was completely subsided on the 28 day of the month.

April 27th, Yuyuan industry announced that the Board agreed to pay 230 yuan per person per month for 45000 employees per month.

This alone will increase spending by $31 million.

In addition, Yuyuan said that the direct economic loss was $27 million.

More than one worker told reporters that the 230 yuan living allowance was released from this month, and the factory also indicated that the social security would be paid according to the actual wage of the employees in the future.

for the Yuyuan industry with a net profit margin of only 5.7%, "the adjustment of employee benefits has a significant negative impact on group finance".

In the year of 2013, the total business income of Yuyuan was $7 billion 583 million, an increase of 4.1% over the previous year, but net profit decreased by 7.1%, only 434 million 800 thousand dollars.

If the monthly subsidy of 230 yuan per month is applied to the 160 thousand production workers in the whole country, this alone amounts to 110 million dollars, which is equivalent to the 25% profit in 2013.

despite the fact that Yu Yuan did not mention social security information in the announcement information, the further increase of labor cost after "a href=" http://www.91se91.com/news/index_c.asp "labor tide < /a > is inevitable.

Recently, Yu Yuan's advertisement for large scale recruitment of general workers in the Dongguan Huang Jiang Industrial Area has shown that the newly recruited workers will receive welfare benefits such as medical and old-age insurance, and the working hours of each month are also strictly limited.

> a href= "http://www.91se91.com/news/index_c.asp" > big client < /a > or adjusting order /p >

for a long period of half a month, even the upstream customers such as Adidas and Nike have been alerted.

According to the Wall Street journal, Adidas, a German sporting goods company, is redistributing orders from suppliers in China to reduce the impact of Yuyuan factory labor disputes on the supply of sports shoes.

and according to Reuters, Mark Parker, chief executive of Nike company (MarkParker), is attending the lunch meeting of the club of Boston University executives in Boston, saying that Nike is considering pferring the production base in China after a large-scale strike at the supplier factory.

Miss P, the media leader of Nike China, told the China Times reporter that the understanding of the media and the expression of CEO at that time were wrong.

Nike has long-term cooperation considerations on its partners, but it also ensures flexibility in global sourcing. If a supplier has problems, it can maintain the flexibility of production.

Nike will not withdraw from China's production base.

And now Yuyuan's factory has returned to normal, and Nike's influence is not large.

at the same time, a number of employees who made Nike shoes in the third factory said that after resuming work, the operation of the Department was normal, and no order was reduced, nor did the work feel any easier than before.

However, at the bottom of the third factory, the small department (responsible for the processing of Nike sole) told reporters that many colleagues in the Department reflected that due to the longer duration of the strike, the factory moved some of its orders to factories in Vietnam and Indonesia in order not to affect customers.

although in recent years, Yuyuan tried to get rid of its dependence on OEM by developing its own brand and setting up direct stores, but its 85% income still came from OEM.

All OEM brand shoes have counterparts in the sales department, but the process of a single business is 10-12 months.

If you adjust the order halfway, it will have a significant impact on Yuyuan's revenue.

As the biggest tycoon of footwear industry, Yuyuan industry has taken quite a lot of orders from Nike. However, in the face of strong competitors, Yu Yuan has difficulty in negotiating profits with Nike on the basis of the profits from OEM. Nike itself claims that they have quite a number of partners in the Chinese market.

> a href= "http://www.91se91.com/news/index_c.asp" > pfer capacity < /a > confusion /p >

labor cost has become the fastest growing cost in the three major cost components of Yuen yuan industry's direct labor cost, main material cost and production cost.

In 2012, the cost of a pair of foundry shoes accounted for 15.4% of the total labor cost and 17.2% in 2013.

This makes Yu Yuan net profit decline in recent 5 years. In 2009, Yuyuan's net profit margin was 9.2%, then declined year by year, and its net profit margin dropped to 5.7% in 2013.

Mr. P, director of investor relations at Yuyuan, admits that after the financial crisis, the manufacturing industry is much harder than before, and the costs are all rising sharply.

During the visit, Yu Yuan employees said that Yuyuan's plant lease in Gao Gao town is due to expire next year. After the strike, the factory may move to other places next year. P

it is reported that since 2000, Yuyuan has invested and built factories in Vietnam, Indonesia and other places where labor costs are much cheaper in Vietnam. In recent years, it has gradually increased the scale of production in these 34% places. At present, the production base of Vietnam and Indonesia is equal to the production base of the mainland of China from the layout of Yuyuan's shoe manufacturing capacity distribution (China, 34% Vietnam, 31% Indonesia and 1% other regions).

According to the reporter, the cost of artificial land in Vietnam and Indonesia is much lower than that in the mainland.

however, the above responsible investor relations said that at present, China is still the ideal place to open a factory, because the infrastructure facilities are relatively good, such as convenient pportation, mature supply chain and high quality of employees.

If you are a high-end product, you prefer to manufacture in China.

a founder of a manufacturing industry in Shenzhen over the past decade has said that labor costs in China have risen sharply in recent years, much higher than those in Southeast Asia such as Indonesia and Vietnam.

Therefore, for low value-added industries such as garment industry, it is necessary to move factories to Southeast Asia where labor force is cheaper.

From the historical development process of shoemaking industry, the production began to pfer to Japan, and then to the four dragons of Southeast Asia, which was pferred to China 20 years ago.

With the rise of all kinds of costs in China, the future must be pferred to Vietnam and other relatively backward areas.

"for the shoemaking industry, because of the relative complexity of the process, the technical difficulty is higher, and the skills and supply chain requirements of employees are also high.

Therefore, China's footwear industry still has certain advantages, and there is no way to completely move out.

According to the current situation, although the pressure can be temporarily relieved, there is always a process of investment in a local industry. Once Vietnam and other Southeast Asian countries mature, they will eventually migrate. "

The founder of the company told reporters.