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The skyrocketing price of raw materials has brought about a "cold winter" in the building materials industry. Is cost reduction and efficiency enhancement the core of the problem?

Changes in raw material prices are related to the development of large and small industries. Ordinary people will not know the changes in raw materials. They will only notice how the price of terminal products has risen or fallen. Those engaged in bulk business will inevitably know-raw materials Prices have remained high since the first half of the year and have continued to fluctuate upward!

Starting from the end of 2020, steel, glass, and plastics have soared by 30% to 50%, driving the simultaneous growth of raw materials in other industries. The price increase is a normal currency flexibility. The currency needed for consumption is rising every year. The price of ten years ago is no longer comparable to the current price. What is usually only increased by one yuan a year, why is it increased by two yuan this time? Even doubled?

Industry funds from real to virtual under the epidemic

Currency inflation

The global outbreak of the new crown pneumonia epidemic has made everyone panicked. The result of the panic is the decline in the level of labor. Coupled with the intensive control system, the first drop is the product output. When the product hoarding drops to a certain extent, it is not enough to supply consumer demand. At this time, the final price of product production is bound to rise in a certain trend. Due to the epidemic situation, production conditions, and the rising prices of various links, which in turn will affect raw materials, the epidemic situation will cause material shortages, increased labor costs, and higher production costs.

The “loose” economic model caused by the epidemic has frequently occurred. Many countries have increased the welfare system to ensure people’s livelihood. However, the improvement of the welfare system threatens the demand for raw material processing and production, resulting in an imbalance in the leverage of supply and demand, and inflation is controlled by the “welfare state”. "It began to trigger, and some raw material producing countries and some contract processing countries, as the direct suppliers of the "welfare state," their demand was affected, leading to the beginning of inflation in many countries. However, the severity of the epidemic is different, and the value of the currency will also be generated. The main reason for the increase or decrease of raw materials directly affects the price increase of raw materials.

In order to ensure life, part of the raw material manufacturer’s funds is used for employees and daily life, and the other part is used for product production. A small part of the raw materials is used in daily life as well as industrial processing, such as coal. The price of coal is rising. It can be said to add a strong touch to the increase in raw materials. In the case of epidemic isolation in winter, many people choose to cook at home to keep warm. After all, when the national economy is on the brakes, who is willing to take higher risks? The metal smelting of processing plants also cannot do without coal heating. As a result, coal prices continue to rise, suppliers and purchasers continue to increase prices in order to maintain costs, resulting in rising prices of raw materials.

Cost reduction and efficiency increase is the most effective solution

Retain productivity

Why increase the price? The consequence of not increasing prices is a relative decline in corporate profits. If the wages of employees remain unchanged, their purchasing power will be insufficient, while other companies in the same industry have higher profits, and employees may change jobs. Although the price may be low and sell quickly, but no one produces these can only be a fantasy.

The price increase of raw materials has become an inevitable drive, and things that cannot be resisted should not be caught up in one's hands. Cost reduction and efficiency enhancement are direct and effective solutions!

The state is also supporting companies to reduce costs and increase efficiency. As early as 2017, they introduced the measures of "＊＊ Development of Price and Cost Supervision and Examination Measures" to adjust methods to increase production efficiency according to demand. The recent hotly discussed issue of "power curtailment" is actually also Because local officials and enterprises failed to effectively reduce costs and increase efficiency, they were "small baskets."

To reduce costs and increase efficiency, what are the costs? What effect does it increase?

PMdiss, the head lobbyist of Zhihu, who is good at B-side vertical product portals, stated in his article:

"With the gradual stability of the market and the courage to catch up with competitors, companies will go through a period of stability and then gradually transition to a period of recession. In the latter two stages, business encounters bottlenecks and weak growth, and the market will be gradually affected by competitors. In order to ensure a stable net profit (net profit = gross profit-costs that cannot be directly allocated), companies often start to increase revenue and reduce expenditures at the cost level. Therefore, in the latter two stages, Cost reduction is very important for companies. Obviously, cost reduction is an important tool to ensure profits."

Among them, it even mentions the "7 books and 7 effects", which is what the country is concerned about and enterprises need to work hard to improve. "Seven books" refer to the seven channel costs of the supply chain, including: procurement costs, manufacturing costs, storage costs, Transportation cost, operating cost, labor cost, and management cost; "seven effects" refer to the seven major efficiencies of the supply chain: procurement efficiency, operation efficiency, transportation efficiency, financial settlement efficiency, system processing efficiency, inventory turnover efficiency, and response efficiency.

Efficiency and cost do not exist independently. While increasing efficiency, it is necessary to consider the impact on the overall situation. The improvement of efficiency may also increase the cost. Pay attention to the direction of each node, and reduce costs and increase efficiency will become the core of the enterprise.