How to reverse the decline in exports of small and medium machinery manufacturing

Orders increased suddenly in May this year

Mr. Zhang, the person in charge of an export-oriented machinery processing company in Wuxi, Jiangsu, told reporters that he was deeply puzzled that the increase in orders for this year suddenly dropped by nearly 20% in May this year and by 10% compared to orders in April. He felt a little uncomfortable. "The raw materials that have already been purchased cannot be digested, and they have to use more inventory."

He thought he was not doing well and the customer gave orders to other suppliers. Later, it was learned that it was not he who did not do well, but that the increase in orders did indeed decrease.

He returned the letter to his factory in a suspicious manner, exactly on June 8 before the Dragon Boat Festival holiday. The General Administration of Customs released the status of import and export nationwide in May this year. In May of this year, the country’s exports totaled 1.14 trillion yuan (equivalent to 182.77 billion US dollars), an increase of 1%. In April of this year, the country’s total exports were 1.17 trillion yuan (equivalent to US$187.06 billion), an increase of 14.7%.

The General Administration of Customs also issued information that at the same time, the year-on-year growth of China’s foreign trade import and export dropped sharply in May this year. On the one hand, it basically stopped the arbitrage trade between Hong Kong and Hong Kong, and the trade between the Mainland and Hong Kong fell rapidly. On the other hand, due to the slowdown in the domestic economy, Low external demand, high operating costs of enterprises, rising real effective exchange rate of the renminbi, deterioration of the trade environment and other factors have combined effects.

“I only came to understand this. The original sharp decline in orders in May was related to the previously reported trade in arbitrage between Hong Kong and Hong Kong.” A stone in Mr. Zhang’s mind was regarded as falling, although he did not know whether his customers had participated. But at the same time, he is worried that if orders continue to decline, companies will face pressure to survive.

Similar to Mr. Zhang, there is Mr. Wang from Shanghai. They are the heads of export-oriented machinery processing companies. From 2003 to 2013, they all experienced similar development experiences in export-oriented machining enterprises.

2003-2006: Factories expand tenfold in three years

Prior to 2003, Mr. Wang worked as a technical person in charge of a large multinational company. He was responsible for the quality assessment of suppliers. “Later, finding suitable suppliers was difficult to find, and simply pulled a few people out to go it alone, which solved the company's product supply problem. , also brought new opportunities for themselves."

After 2004, the prospects for the development of machinery companies have been good, especially in Chongqing, Shanghai and the surrounding areas. More and more European construction machinery companies have come to Chongqing and Shanghai to establish their manufacturing plants and global procurement. center. The business of their factories has also grown as the number of global purchases of some customers has increased.

"At the beginning of 2005, our export volume was only a few million yuan, and by the middle of 2006, we had already reached two or three million yuan." Mr. Wang said that at that time was their peak period, and every week there were ten Several containers were brought to his factory to pull goods, and then shipped by river to Shanghai Port Waigaoqiao Free Trade Port and then shipped there from Europe.

His factory scale has rapidly expanded tenfold in three years and the number of employees has expanded from less than ten people to more than one hundred. What's more, their profits are growing at the same time.

"At the time, German buyers were happy because they purchased mechanical parts from China and they were able to save about 10%." What Mr. Wang said is Saving, which is how much money is saved in the terms that are often loved to hear in global purchasing. If a product can save 20%, for a German company, if they purchase 100 million yuan worth of mechanical products a year, they will save them 20 million yuan in purchase costs.

Tasteful German buyers have also transferred their procurement of mechanical parts to manufacturing facilities in the United States, Italy, France and other countries. Only one global leading global construction machinery company headquartered near Frankfurt, Germany, has purchased more than 300 million yuan a year in the world and can save 60 million yuan in purchasing costs in one year. Purchasing as a traditional cost center is also becoming a real profit center under this wave of global procurement.

“At that time, the business of foreign-funded enterprises was very hot and the export was very large. As long as there were processing equipment and several technicians, a small-scale processing plant could be made into a medium-scale business with a turnover of RMB 30 million.” Mr. Wang If you recall the rapid expansion of that time. Unlike Internet companies, which rely on venture capital expansion, their expansion is basically rooted in traditional channels of financing loans, which are full of risks but are not at ease.

2007-2008: Prices and Orders Fall into the Abyss

When Mr. Wang and his company are enjoying the joy brought about by the rapid growth, bad signs will come. After New Year's Day in 2007, German buyers came to his factory and began to let them cut prices. Mr. Wang told the reporter that the Germans had asked for a 10% reduction at the beginning, so that they had no profit and ended up with a 5% drop.

What he did not expect was that he had to cut prices, as well as a mining machinery company headquartered in Sweden, and eventually ended the purchase negotiations by 5%.

The implementation of price reduction negotiations, supply continues. Until June 2007, the German buyer notified him that the United States would reduce its orders, and the purchase of small rollers would be reduced from 200 units per month to 200 units per three months.

"After April 2008, we could hardly see orders from the United States. The news of the financial crisis broke out in the United States." Mr. Wang recalled that in the following 2008, orders from Europe gradually decreased. Spectacular scenes of more than a dozen containers a week, no container came over one month.

"The order was almost completely gone. I never saw this situation. I almost lost my direction. What did the factory's 200 or 100 employees do, and where did the wages come from? It was the most pressing thing for me at that time." Mr. Wang He said that he was a bit panicked at the time and did not know how to face the sudden blow.

2.2: Factory is hard to get back to life

On the 16th month of the first month of 2009, Mr. Wang came to his factory as in previous years. However, unlike the previous years, the factory was completely empty of people and empty workshops. He could hear his own response.

He could not help but pinch a few feet of semi-finished steel structure placed on the ground. The boring sound of steel irritated his inner anger. He yelled loudly and tried to vent his grievances and embarrassment buried in the heart for the past six months.

After about 5 minutes, his cell phone rang. As if he had been struck by an electric shock, he suddenly jumped up and took out his cell phone. A strange number appeared on the cell phone. “We saw from the Internet that your factory provided machining parts for XX, and we had exactly this need,” said the phone.

As the other party requested a visit to his factory, he also temporarily called an old employee who stayed in the city. He seized the time to do a clean-up, put some rusted machinery on the lubricant, and commissioned the machine for inspection. Make sure to use it.

The company that came to inspect was a privately-owned road construction machinery company in China. Prior to this, in November 2008, China began to gradually implement the “4 trillion” stimulus plan for stimulating domestic demand. The company has therefore expanded Domestic purchases.

For those domestic buyers, although the profit was less than 5%, he still felt that he saw a glimmer of hope. The factories and workshops that had been quiet for more than half a year processed the machinery and equipment and slowly began to rotate again.

In 2010, although orders in the United States did not improve, orders in Europe began to recover gradually. Although the purchase volume was significantly lower than before 2008, more than a dozen people were able to maintain their operations. All machinery and equipment were available every week. use. "Although I don't make much money, the machinery and equipment bought for a few million yuan won't be sold like scrap iron." Mr. Wang comforted himself.

From two years from 2010 to 2012, Mr. Wang, like other similar machinery processing companies, spent his life in tough times.

2013: Export declines to domestic orders

By 2013, "although orders from machinery processing plants have recovered from 2008, orders have declined in recent months and are expected to decline in the second half of this year." Mr. Zhang told reporters.

Mr. Zhang and Mr. Wang of Shanghai, they all served well-known multinational companies. Before the financial crisis in 2008, their customers were mainly European machinery manufacturers.

The reduction in the orders of mechanical processing companies has led to a decrease in the demand for steel products. In a chain reaction, the market price of steel products has also dropped. As some large steel trading companies and steel mills have signed an underwriting agreement, steel trade companies need to stockpile a certain amount of inventory. After the steel demand drops sharply, steel and steel trade companies are under pressure from inventory costs to revitalize inventory funds, which are lower than the factory's The price, the price of the machinery sold to the machinery, and the ex-factory price of the steel, which is higher than the selling price of the market, appear to be "upside down."

Mr. Zhang revealed that many steel trading companies that they had worked with previously either switched to other products or closed down. "At present, we are in a state of defensive business. After that, we still want to enlarge our vision and do more domestic products. Although profits are not as high as foreign-funded enterprises, the number is relatively stable."

In this decade, both Mr. Wang and Mr. Zhang have realized the same principle. Based on the economic downturn in Europe and the EU’s dual economic background, based on the domestic or another alternative to make a living.

In the opinion of Mr. Wang, working with the top German machinery giants earned not only profits but also improved machining capabilities. "The requirements of German companies for technology are very rigorous. The one-mm or less millimeter measurement of the processing dimensions will not work. It must be processed according to the design dimensions."

“What impressed me most was that they went to a Jiangsu steel pipe manufacturer to review the manufacturing capabilities of the suppliers. The time and temperature for the steel pipe to be soaked in special liquids could not be the same as the design time.” Mr. Zhu, who is engaged in procurement, told reporters.

Another person in charge of the machining company told the reporters that they had started their processes at 12 o'clock in the middle of the night but their German customers would rather drive from the hotel to the factory for half an hour in order to check the production process. Check it out at 12 o'clock in the middle of the night.

"This serious and rigorous attitude will also greatly help improve our own management capabilities."

"Now compared with that in 2008, the mental capacity is much stronger." Mr. Wang told reporters, "For the sharp decline in export orders, the only way to deal with this problem is to make orders for domestic enterprises. You cannot walk on the leg of exports alone. It's up."