2021-03-11
At present, there are still many uncertainties in the external environment. China’s domestic new infrastructure and the “14th Five-Year Plan” policy continue to support the increase in demand, so this wave of raw material price increases is still uncertain when it will continue. In the long term, we must also think about how connector companies can maintain stable and advantageous development while facing the unstable supply of upstream raw materials and the continuous changes in costs?
Rising raw materials will also intensify competition. Every change in the market is a process of shuffling. Companies that blindly engage in price wars and have no long-term plan will be eliminated in the shuffling. Therefore, the smaller the enterprise, the more clearly its target market should be, and various situations should be considered in product production planning, and the positioning should be clearer.
“The company itself should find out its own market direction, and don’t touch the areas where the price is too low and does not meet the company’s own market goals.” said Wang Yu, the marketing associate of Gekang Electronic Technology (Shenzhen) Co., Ltd.
Li Jianpu, general manager of Shenzhen Bubujing Technology Co., Ltd. said that if the product itself relies on the high added value of technology and patents instead of simple and crude low prices, it will not lose the market because of the rise in raw materials.
Zhai Chongyang, marketing manager of Kunshan omnidirectional Electronics Co., Ltd., said: “if the gross profit margin of your products sold to customers is only 3-5 points, then the 1-2 points of the price rise of raw materials will have a great impact, and even affect the life and death of an enterprise. And we do in the high-end market, we can absorb the 1 ~ 2 points of the price increase of raw materials. “
Li Yanhong, general manager of Changzhou Kotwa Electronics Co., Ltd., said that the company has actually considered how to deal with this situation in the long run, and the main thing is to increase the value of its products.
“Connectors with high proportion of raw materials and low product positioning will be more sensitive to the rising price of raw materials. Therefore, we need to control the proportion of material cost in the unit price of our products. The most important thing is to position the product in the high-end line by its quality, performance and positioning. When the price of raw materials rises, the added value of connectors will not be affected by the fluctuation of raw materials. ” Li Yanhong said.
The internal production, management, and product planning of the enterprise must do a good job of control and planning. From all aspects, companies need to reduce costs, and increase the degree of automation in production to improve digestion.
Xiao Lan, general manager of Shenzhen Toplink Technology Co., Ltd., believes that the space for effective use of materials to reduce consumption in the design or manufacturing process is very limited. Therefore, it is necessary to deal with and make up for it through the reduction of manpower cost, management cost and other strategies, in order to effectively maintain favorable competitiveness in the future competition.
Wang Yu said that first of all, the financial and management indicators of the enterprise must be in place, and human resources and productivity must be planned. Second, create a flexible supply chain, diversified supply channels, “don’t put all your eggs in one basket.”
He Xueping also said that in response to the increase in the price of raw materials, the Yangtze River Connector should increase the degree of automation in production and the production capacity of molds to enhance price competitiveness. “Because the price of raw materials has risen, we may develop a new set of molds to offset some of the costs caused by the rise in raw materials.”
Zhai Chongyang said that in the face of the rise in raw materials, all-round electronics is vigorously investing in automation to reduce dependence on personnel. Because for labor-intensive industries, relying heavily on labor will have a big impact. Therefore, the company is undergoing digital transformation and automated ERP management.
“Through this year’s epidemic, we have made adequate emergency measures and plans. Whether it is from product material costs or production and delivery, we basically control these risks within our own tolerance range.” Zhai Chongyang added.
It is true that companies must have appropriate risk premiums in the product development and pricing, in order to deal with uncontrollable things like the increase in the price of raw materials.
Li Jianpu also said: “This round of raw material price increases step by step has not yet discussed price increases with customers. We have already included the risk premium in product development. The increase in raw material prices will only weaken profits slightly. But it is within the controllable range.”
It is very important to establish a long-term trust mechanism in the hearts of customers. The company’s brand, technology and product quality are all important factors in establishing trust in the hearts of customers.
Li Jianpu believes that when a company’s brand is strong enough, then the company’s products have a certain bargaining power.
Cao Zhen, marketing manager of Nico Maidi (Tianjin) Electronics Co., Ltd., said: “Raw materials are increasing in price, but relatively speaking, this situation highlights that our brand’s price-performance ratio will be higher than other brands.”
“The performance is particularly obvious in the military and industrial markets. In this kind of technically demanding application scenario, the first thing to pay attention to is quality, not price. Because connector companies are upstream manufacturers, they may be lost because of price increases. Part of the business. But if you have quality and technology, you can stand up. Although customers can find another company because of the temporary increase in prices, they will come back again because of the quality of our products.” Cao Zhen added.
In addition, you can also take this opportunity to try to use domestically produced materials. The unstable international situation in the past two years and the US sanctions against China have caused many companies to switch to domestic products. Many connector companies in my country have also received many orders due to the trend of domestic substitution. Driven by this wave of rising prices for raw materials, domestic substitution of raw materials is gradually deepening into the consciousness of manufacturers at all levels.
In Xiao Lan’s view, most of the raw materials used in connectors have always been imported, and now we can try to develop domestically-made alternative raw materials.
For qualified enterprises, the futures market can also be used to hedge raw materials. However, the future is uncertain, and the hedging method still has certain risks, and companies need to make predictions and preparations before they can proceed.
“When the price of raw materials is low, we have stored 100 tons of copper. We will hoard raw materials every year. It is indeed worth saving for futures.” Li Jianpu said.
Xiao Lan also pointed out that bulk commodities such as plastic materials, copper, precious metals, gold and silver can be hedged through the futures market, but professional skills and scale are required to guarantee. “For example, from the perspective of our industry, we can unite this industry to do some futures hedging, which I think is feasible.”
As the tide rises and falls, companies should also review the current situation, take a long-term view, and calmly and actively respond to every storm. Not only the materials, but in the face of changes in the supply chain, companies should think about how to survive the waves of scouring instead of losing their competitiveness.
In the face of rising prices of raw materials, companies engaged in price wars have previously compressed their gross profit margins to the extreme. Faced with rising prices of raw materials, operating pressure will increase and they will lose their competitive advantage at low prices. Through the increase in raw materials during this period, it can be seen that in the face of cost instability brought by the supply chain, companies should plan a market-oriented long-term price and supply coordination mechanism to form a tough and orderly supply chain ecosystem and long-term effect price system.
Dongguan Slocable Photovoltaic Technology Co.,LTD.
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