boyutpedia Chapter 181 Crisis Warning and Transformation Choices
Chapter 181 Crisis Warning and Transformation Choices
In the sweltering summer of 1985, Zhangcheng was shrouded in a continuous plum rain for half a month. In the office building of Chenqing Precision Manufacturing Joint Venture, the air conditioner outdoor unit hummed in the rain. On the solid wood table in the conference room, there was a thick stack of materials from the industry summit. The document on top, titled "1985 Southern Hardware Industry Survey Report," was marked with dense red circles by Lin Chen.
With a clatter, Lin Chen placed the calculator on the table, the number "40%" on the screen particularly glaring. He looked up, his gaze sweeping over the core team members sitting around the table—Su Qing was bent over checking financial statements, her pen moving rapidly across the paper; Liu Guangtian, wearing work clothes stained with machine oil, had just rushed over from the workshop, beads of sweat still clinging to his forehead; Uncle Wang, the head of the technical department, was wearing reading glasses, meticulously studying a research report, his brows furrowed; and Xiao Chen, the sales manager, was fidgeting, his fingers unconsciously tapping on the table.
"Take a look at this data first." Lin Chen pushed the research report to the center of the table, his voice carrying a hint of seriousness. "According to the industry data released at the summit, the average profit margin for our main low-end hardware accessories was 12% last year, but in the first half of this year, that figure has fallen to 7.2%, a year-on-year decline of 40%. More importantly, the demand from downstream customers is undergoing a qualitative change—purchasing managers from state-owned home appliance factories and automobile factories have privately told me that they are eliminating a number of low-precision suppliers and instead looking for manufacturers that can produce precision parts that meet international standards."
Xiao Chen suddenly looked up, his face full of disbelief: "Impossible, Director Lin! Our sales of low-end parts actually increased by 15% in the first half of the year, and Mr. Li from Guangzhou even placed an additional order for 20,000 sets of plowshare parts. How could profits have dropped so much?" As he spoke, he flipped through his sales ledger. "Look, the order volume is clearly steadily increasing. Is there something wrong with the statistics?"
"Sales have increased, but costs have risen even faster." Su Qing put down her pen and pushed a financial statement in front of Xiao Chen. Various costs were marked on it with different colored pens. "In the first half of the year, the price of pig iron increased by 30 yuan per ton, the price of coal increased by 25%, and even the cost of wooden crates for packaging was 18% higher than last year. In order to maintain our market share, we didn't dare to raise prices, so our profits were naturally squeezed. Boss Li's order seems to be large, but he pressured us to lower the price by 5%, and after deducting transportation costs, there's basically no profit."
Liu Guangtian frowned as he took the report, his rough fingers tracing the data: "But our production line just completed its automation upgrade, and the scrap rate dropped from 8% to 1.5%. Logically, the cost should have come down. Could it be that the equipment maintenance costs are too high?" He recalled that he had just replaced the imported bearings on three machine tools last month, and the repair costs alone amounted to more than 20,000 yuan. He couldn't help but feel a little uneasy.
"Equipment maintenance costs only account for 5% of the total cost, so it's not the main reason." Lin Chen shook his head, got up, walked to the blackboard by the wall, and wrote the four characters "low-end competition" in large letters with chalk. "Now, small hardware factories in the south are springing up like mushrooms after rain. Last year, 17 new factories were added around Zhangcheng. They don't invest in research and development, and they use inferior steel to produce parts, which are 30% cheaper than ours. Although the quality is poor, the rural market and small workshops are attracted by the low prices and have taken away a lot of our low-end orders. If we continue to cling to the low-end market, we will be dragged down by these small factories in less than two years."
Uncle Wang adjusted his reading glasses and put down the research report: "Director Lin means we should switch production? But precision parts aren't easy to make. When I was in a state-owned factory, it took us three years to develop just one precision bearing, and we scrapped hundreds of tons of steel. Although our factory is bigger now, our technological reserves are still far behind those of large state-owned factories." His tone was worried, after all, most of the factory's technical backbone came from agricultural implement factories and were good at forging rough-machined parts like plowshares and wrenches, but knew almost nothing about precision manufacturing.
"Director Wang is right!" Old Zhao, the workshop foreman, chimed in. "My workers are all seasoned veterans with five or six years of experience. They can forge plowshares with their eyes closed, but if you ask them to make precision parts, they don't even know how to use measuring tools. Besides, switching production requires introducing new equipment, which is a huge investment. If it fails, all our savings from the past few years will go down the drain!"
A buzz of discussion erupted in the meeting room, with most of the veteran employees looking troubled. They were used to producing low-end parts and felt that although profits were low, orders were stable, and there was no need to take such a big risk. Xiao Chen was especially anxious, stamping his feet: "Our export orders are still growing. Our Southeast Asian customers really value our plowshare parts. If we switch production, what will happen to these old customers? Re-developing customers for precision parts will take at least a year. How will the factory operate during that time?"
Lin Chen didn't rush to refute, but patiently listened to everyone's opinions. He knew that these concerns were not unfounded; transformation meant breaking the existing stable pattern, and there would be huge challenges in terms of technology, equipment, and the market. But he also knew that there was no way out without transformation. In his previous life, he was eliminated in the industry transformation because he clung to the old technological model, and he would never repeat the same mistake in this life.
As the meeting room gradually quieted down, Su Qing slowly began to speak. She placed a new report on the table, clearly listing comparative data between the high-end and low-end markets: "Please take a look at this data. According to market research, the output value of the domestic home appliance industry increased by 58% last year, and the automotive industry by 42%. These industries have a huge demand for precision bearings and gears, and the profit margin is as high as 35%, three times that of low-end parts. Our neighboring hardware factory in Dongguan, after switching to the production of precision home appliance parts last year, saw its profits in just six months exceed its previous full-year profits."
She paused, her gaze sweeping over everyone present: "I know you're all worried about the investment and risks, but I've already done the calculations. Introducing a set of second-hand precision grinding machines and testing equipment will cost approximately 80 yuan. Our net profit last year was 52 yuan, and with the profits from the first half of this year, plus some loans from the bank, the funds are sufficient. Moreover, we can transform in stages. We can first set up one production line to trial-produce home appliance bearings, and retain two production lines to produce low-end parts. This way, we can both retain our old customers and explore new markets, keeping the risks under control."
"Don't worry about the technical aspects," Lin Chen added at the opportune moment. He took a stack of drawings from his drawer and placed them on the table. "These are the design drawings I've made for precision bearings for home appliances recently, combining our forging advantages with advanced processes based on system analysis. I've already contacted the senior experts at the Shanghai Machine Tool Factory. They can send technicians to guide us in debugging the equipment and also help train our workers. Director Wang, you used to work in a state-owned factory with precision machining, so we'll be relying on you to lead the technical breakthroughs."
Uncle Wang picked up the blueprints and examined them carefully. The design was extremely detailed, not only specifying precise dimensions and tolerances but also including forging processes and heat treatment procedures—clearly the result of careful consideration. He looked up, his worry lessening and replaced by anticipation: "Director Lin, these blueprints are very professionally designed. If we could get experts from the Shanghai Machine Tool Factory to provide guidance, the technical aspects shouldn't be a problem. But what about worker training? Most of our workers have no experience with precision machining; I'm afraid they won't be able to keep up in a short time."
"I already have arrangements for this," Liu Guangtian suddenly said, pulling a notebook from his pocket with a detailed training plan. "I've discussed it with my colleagues in the technical department, and we plan to select 20 young and promising workers to go to the Shanghai Machine Tool Factory for a three-month internship to learn the operation and maintenance of precision equipment. I will go with them and bring back the skills they learn, which will then be used to train the other workers in batches. In six months at most, we will be able to build a skilled precision machining team."
Seeing that Liu Guangtian and Su Qing were well-prepared, the veteran employees gradually softened their stance. Xiao Chen frowned and asked, "What about our export orders and existing clients? If we reduce the production of low-end components, our clients might switch to other manufacturers."
"We can't lose our old customers," Lin Chen said with a smile. "I plan to talk to Mr. Li in Guangzhou and Mr. Chen in Southeast Asia and sign long-term cooperation agreements with them. We will guarantee to supply them with the low-end components they need, but the price will be increased by 5%. At the same time, we will recommend our precision components to them and try to make them our first batch of high-end customers. Mr. Chen has extensive connections in Hong Kong. If we can open up the international high-end market through him, our development space will be even greater."
To boost everyone's confidence, Lin Chen also presented a letter of intent: "This is a letter of intent I discussed with Hongxing Home Appliance Factory last week. They need 50 sets of precision bearings this year. If we can deliver on time, they are willing to sign a three-year long-term contract with us. The profit from this order will be 175 million yuan, which is enough to cover our equipment investment."
The atmosphere in the meeting room completely changed. Looking at the data, drawings, and potential orders, everyone's previous worries and doubts gradually gave way to excitement and anticipation. Xiao Chen exclaimed excitedly, "Director Lin, Manager Su, if we really have such a large order, then our transformation will have been totally worth it! I'll talk to Boss Li and Boss Chen tomorrow and try to get a long-term cooperation agreement signed!"
Old Zhao stood up, patted his chest, and said, "Leave the worker training to me. I guarantee I'll select the best workers to go to Shanghai for internships and will definitely live up to the factory's expectations!"
Uncle Wang looked at the blueprints, his eyes gleaming: "Director Lin, leave the technical challenges to me. I will lead the technical department to overcome these difficulties as quickly as possible and ensure the product quality meets standards!"
Seeing everyone's reactions, Lin Chen finally felt relieved. He knew that the road to transformation wouldn't be smooth sailing and would encounter various difficulties, but as long as the team worked together, no challenge was insurmountable. He stood up, raised the teacup on the table, and said, "Since everyone agrees on the transformation, let's work together to make Chenqing Hardware a leading enterprise in domestic precision manufacturing! I believe that as long as we adhere to technology as our core strength, we will definitely be able to carve out our own niche in this era of change!"
"Okay!" Everyone raised their teacups, which clinked together, making a crisp sound that echoed in the conference room and in everyone's hearts.
After the meeting, Lin Chen and Su Qing stayed in the conference room, organizing the documents on the table. The rain outside the window gradually stopped, and a ray of sunlight shone through the clouds, illuminating the conference room floor and bringing a touch of warmth.
"I didn't expect everyone to reach a consensus so quickly," Su Qing said with a smile. Her face showed a hint of fatigue, but even more excitement. "I thought it would take a lot of explaining."
"It's mainly because you prepared such comprehensive information that it dispelled everyone's concerns." Lin Chen looked at her with gratitude in his eyes. "You've worked so hard these past few days, handling financial data, market research, and coordinating with the bank."
"We're partners, if I don't work hard, who will?" Su Qing gave him a reproachful look. "But speaking of which, we need to hurry up with the equipment import and loan application. I've already contacted Director Zhang at the bank, and we'll go to the bank together tomorrow to try and get the loan approved as soon as possible."
"Okay." Lin Chen nodded, picking up the blueprints for the precision bearing, his heart filled with anticipation. He knew the road to transformation was destined to be fraught with difficulties, but he was confident he could lead his team to overcome all obstacles. With Su Qing's financial support, Uncle Wang's technical expertise, Liu Guangtian's worker training, and the team's concerted efforts, he believed Chenqing Hardware would definitely carve out a new path in the precision manufacturing field.
Just then, the office door was pushed open, and Liu Guangtian walked in carrying a package: "Director Lin, Manager Su, the technical data sent by the old expert from the Shanghai Machine Tool Factory has arrived, along with a sample of a precision measuring tool."
Lin Chen took the package, opened it, and found a thick stack of technical documents and a brand-new precision micrometer inside. He picked up the micrometer, examined it carefully, and saw that its precision was extremely high—exactly the measuring tool he needed. He looked up, his eyes gleaming with determination: "Excellent! With these documents and tools, our transformation plan can start much faster. Guangtian, tomorrow you take the technical department colleagues to study these documents, and the day after tomorrow we'll go to the Shanghai Machine Tool Factory to inspect the equipment."
Liu Guangtian nodded vigorously: "Yes, Director Lin, I guarantee I'll complete the mission!"