Under the tide of rising wages in the past two years, the company's labor cost has increased by an average of 20% every year. Li Yong must increase at least RMB 400,000 in manpower cost per year. How to absorb the increasing pressure on labor costs and enhance the profitability of enterprises is a difficult problem that many manufacturing companies have recently pondered.
One of the countermeasures: "low-end manufacturing" migration
Rainbow Textile Group is one of the largest cotton core cotton textile suppliers in the world. In order to enhance the profit margin, Rainbow Textile invested and built factories in Vietnam as early as 2006. Now they are still planning to build a second factory to transfer more manufacturing operations to Vietnam. Thanks to the favorable import of raw materials, low labor costs and local tax incentives, Tianhong Vietnam's profit is much more impressive than that of domestic factories.
Foxconn, the leading electronic manufacturing company, also moved its factory from Shenzhen to second and third-tier cities with abundant human resources and low labor costs in 2010 from Shenzhen. HP, IBM, etc. moved call centers and data centers from Beijing to second-tier and third-tier cities such as Dalian and Tianjin. "This move not only reduces the labor cost, but also reduces the cost of land, housing leases and other costs." Said Shen Liming, vice president of marketing at ChinaHRkey.
Countermeasures II: Use Information to Improve Efficiency
Xinri Electric Vehicles is trying to transition from extensive management to sophisticated management. With the increase in the cost of raw materials and labor costs, the investment in technology and management was increased in 2011, such as the introduction of ERP informatization management methods, optimization of internal operations processes, and further reduction of management costs and labor costs.
In the construction of the new plant in Xiangfan, Xinri plans to introduce automation equipment such as manipulators. "Not only can we increase productivity, but we can also increase the accuracy of production, which is higher than the quality of traditional hand-crafted products," said Hu Gang, vice president of electric vehicles at Xinri. It took 10 people to complete the work, and now seven people can complete it. At the same time, the employee's piece-rate wages have also increased, achieving a win-win situation for both the company and its employees.
"For a long time, the management costs of Chinese companies have been too high. In order to pursue high profits, the proportion of employees' wages is too low. The increase in labor prices can promote the transformation of enterprises and industrial upgrading, and can also encourage companies to extend their own industrial chain." Cao Jianhai, a researcher at the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said: "The era of blindly searching for a low-cost labor force in the market has come to an end."
Countermeasures 3: Pursuing transformation and upgrading
Under the rising cost of labor, some companies that once had to do OEM manufacturing had to embark on the road to independent brand management and upgrade to the direction of the top company of the “design and marketing†smile curve. According to the smile curve theory, the high-end position of the design and sales link in the industry chain is at both ends of the smile curve; while the profit of the manufacturing industry is the lowest, it is at the bottom of the middle of the smile curve.
In 1992, Zhang Zhifeng founded the Northeast Tiger Fur Co., Ltd., mainly clothing OEM. It is his dream to build his own brand. After years of development, he has established design and marketing centers in France and the United States. In the design of continuous innovation, through the extraction of traditional Chinese design elements and the use of expensive fabrics, combined with Western design concepts, form the design style of East and West together. In terms of brand communication, brand influence is enhanced through event marketing and event marketing. Now E. Tiger has successfully transformed into a well-known clothing brand.
Countermeasures No. 4: Improve Staff Efficiency
"Strengthening the management of human resources access, selection, selection and careful selection, and strengthen the training of human resources, improve the level of practice of human resources, the ability to practice and practice efficiency, efficient reduction." Shen Liming said.
It may take one day for the expert to work one hour, and the difference in efficiency between the two is obvious. In particular, the production process in China's labor-intensive industries is basically manual or semi-manual. Workers’ proficiency in operations affects production efficiency. Therefore, training is carried out so that the potential for rapid development of mature hands and the exploitation of existing human resources is the current labor cost. The work that must be done under rising conditions.
Guo Yanbing, vice president of Carey International, believes that the rising cost of human resources further highlights the importance of improving the productivity of the company’s employees. How to improve employee productivity to a new level through process transformation, upgrading of tools and equipment, and enhancement of training is a challenge for a company from excellence to excellence. This can also smoothly absorb the increased costs through higher output. (Hu Min)
One of the countermeasures: "low-end manufacturing" migration
Rainbow Textile Group is one of the largest cotton core cotton textile suppliers in the world. In order to enhance the profit margin, Rainbow Textile invested and built factories in Vietnam as early as 2006. Now they are still planning to build a second factory to transfer more manufacturing operations to Vietnam. Thanks to the favorable import of raw materials, low labor costs and local tax incentives, Tianhong Vietnam's profit is much more impressive than that of domestic factories.
Foxconn, the leading electronic manufacturing company, also moved its factory from Shenzhen to second and third-tier cities with abundant human resources and low labor costs in 2010 from Shenzhen. HP, IBM, etc. moved call centers and data centers from Beijing to second-tier and third-tier cities such as Dalian and Tianjin. "This move not only reduces the labor cost, but also reduces the cost of land, housing leases and other costs." Said Shen Liming, vice president of marketing at ChinaHRkey.
Countermeasures II: Use Information to Improve Efficiency
Xinri Electric Vehicles is trying to transition from extensive management to sophisticated management. With the increase in the cost of raw materials and labor costs, the investment in technology and management was increased in 2011, such as the introduction of ERP informatization management methods, optimization of internal operations processes, and further reduction of management costs and labor costs.
In the construction of the new plant in Xiangfan, Xinri plans to introduce automation equipment such as manipulators. "Not only can we increase productivity, but we can also increase the accuracy of production, which is higher than the quality of traditional hand-crafted products," said Hu Gang, vice president of electric vehicles at Xinri. It took 10 people to complete the work, and now seven people can complete it. At the same time, the employee's piece-rate wages have also increased, achieving a win-win situation for both the company and its employees.
"For a long time, the management costs of Chinese companies have been too high. In order to pursue high profits, the proportion of employees' wages is too low. The increase in labor prices can promote the transformation of enterprises and industrial upgrading, and can also encourage companies to extend their own industrial chain." Cao Jianhai, a researcher at the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said: "The era of blindly searching for a low-cost labor force in the market has come to an end."
Countermeasures 3: Pursuing transformation and upgrading
Under the rising cost of labor, some companies that once had to do OEM manufacturing had to embark on the road to independent brand management and upgrade to the direction of the top company of the “design and marketing†smile curve. According to the smile curve theory, the high-end position of the design and sales link in the industry chain is at both ends of the smile curve; while the profit of the manufacturing industry is the lowest, it is at the bottom of the middle of the smile curve.
In 1992, Zhang Zhifeng founded the Northeast Tiger Fur Co., Ltd., mainly clothing OEM. It is his dream to build his own brand. After years of development, he has established design and marketing centers in France and the United States. In the design of continuous innovation, through the extraction of traditional Chinese design elements and the use of expensive fabrics, combined with Western design concepts, form the design style of East and West together. In terms of brand communication, brand influence is enhanced through event marketing and event marketing. Now E. Tiger has successfully transformed into a well-known clothing brand.
Countermeasures No. 4: Improve Staff Efficiency
"Strengthening the management of human resources access, selection, selection and careful selection, and strengthen the training of human resources, improve the level of practice of human resources, the ability to practice and practice efficiency, efficient reduction." Shen Liming said.
It may take one day for the expert to work one hour, and the difference in efficiency between the two is obvious. In particular, the production process in China's labor-intensive industries is basically manual or semi-manual. Workers’ proficiency in operations affects production efficiency. Therefore, training is carried out so that the potential for rapid development of mature hands and the exploitation of existing human resources is the current labor cost. The work that must be done under rising conditions.
Guo Yanbing, vice president of Carey International, believes that the rising cost of human resources further highlights the importance of improving the productivity of the company’s employees. How to improve employee productivity to a new level through process transformation, upgrading of tools and equipment, and enhancement of training is a challenge for a company from excellence to excellence. This can also smoothly absorb the increased costs through higher output. (Hu Min)
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