New highlights of cable company's profits: innovation in procurement methods

Wire and cable manufacturing is a low-profit industry. With the increasing competition in the market and the openness and transparency of price information, corporate profits have been continuously reduced. Only from the point of view of product manufacturing, there are three main links related to product profit: First, reduce the cost of raw material procurement; Second, fine control of the production process, reduce waste, improve production efficiency; Third, increase sales prices. The possibility and space for high-priced sales is very small; for the production process control, it is related to the company's equipment, technology, talent, experience, etc., and it is not a day's work. Therefore, the control of procurement costs becomes very important.

The main raw materials for wire and cable include conductors and insulation. The main conductors are copper and aluminum. Insulation mainly consists of plastics and rubber, of which copper has the highest price. Therefore, copper is taken as an example to analyze the purchase cost. Copper prices are changing every day, and none of the cable manufacturers need to worry about copper prices and copper prices on a daily basis. In the past five years, the price of copper has ranged from 25,000 yuan per ton to 80,000 yuan, which is a thrilling experience.

In general, the company’s focus on copper prices mainly comes from the London Metal Exchange (LME), the Shanghai Futures Exchange (SMM), and the Changjiang spot price. These prices are all the prices of copper cathodes, and the cable companies use copper as their materials. Rods or copper wire, so also consider premiums and discounts and processing fees. Copper plate prices and premiums and discounts are changing every day. Processing costs are not the same for copper rod (silk) processing companies. Therefore, the cost of copper control by cable companies is relatively complicated. Most companies practice copper rod processing. The factory signs an annual contract, determines the processing fee standard, and then looks at the futures inventory price every day, or the spot price of the Yangtze River shall prevail. Each company is responsible for buying copper procurement personnel, and both are "pro-team" and even "boss-mother" personally. Even so, it cannot ensure that the purchase price of copper is relatively reasonable.

Here is a statistical data for reference. In 2011, the weighted average price of copper on the Shanghai Futures Exchange was 65,525 yuan, and the average mathematical price of the spot copper on the Yangtze River was 66,280 yuan. Companies can calculate their annual average purchase price of copper rods (silk), and compare them after removing processing fees to see if your purchase costs are reasonable and if there is room for compression. According to the statistics of several companies, the purchase price of their own companies is higher than the average price of the market, even more than a thousand dollars per ton. What does this mean? It means that a medium-sized cable manufacturing enterprise will be tens of millions or even hundreds of millions of yuan each year. Profit was lost.

How can we make procurement easier, prices more transparent and costs more reasonable?

In September 2011, a cable material exchange (China) appeared in the industry and used copper rods, copper wires, aluminum rods, plastics and other cable materials as trading products, aiming to use modern advanced electronic information technology to serve wire and cable. Downstream companies have become sales platforms for cable material companies and procurement platforms for wire and cable manufacturers.

The exchange is the first and only trading platform in China to use 8mm copper rods, 3mm copper wires, and 9.5mm aluminum rods as trading products. The platform brings together a large number of material companies and wire and cable companies to continuously trade in cash. All companies can directly trade through the trading system software, and they can report and pay for transactions on a daily basis. The transaction price on the disk is the material price, and the price variables are integrated, which greatly facilitates the sales of material companies and the purchase of cable companies.

Statistics show that in January 2012, the mathematical average price of spot copper on the Yangtze River was RMB 57,410/ton, the monthly weighted average price of copper spot on the Shanghai Futures Exchange was RMB 57,460/ton, and the weighted average price of 8mm copper rod on the China Cable Material Exchange was 57,500. Yuan / ton. The average price of the Yangtze River spot and the average price of copper in the last period was 57,435 yuan. The price of the 8mm copper rod was only 65 yuan higher than the copper plate price. We know that the processing fee for processing copper into 8mm copper rods is generally 800-1100 yuan. In other words, the procurement of copper rods through the China Cable Material Exchange's platform is far less costly than the company's original procurement methods.

This is because the platform of China Cable Material Exchange brings together a large number of copper rod manufacturers. Each manufacturer has different sources of upstream materials, production, management, transportation and other costs are different, and the selling prices at the exchanges are also different. Cable companies can trade at the lowest price among a large number of sellers (the quality standards for delivery products are the same, all of them are national standards), allowing companies to actually reduce procurement costs.

Ideas determine the way out. Every business owner is struggling for the survival and development of the company, and they are very careful. It is indeed worth researching and thinking how traditional manufacturing can change its concepts, innovate management, make full use of modern electronic information means, reduce the cost of purchasing raw materials for enterprises, and open up new roads for the operation and development of enterprises.