The author once participated in the annual price adjustment meeting of Siemens. As a global supplier of Siemens, the annual price adjustment meeting is the most troublesome meeting and the most difficult negotiation process for us.
At the price adjustment meeting, the senior purchasers from Siemens asked our suppliers to reduce the price of precision
metal parts proportionally every year. To be honest, when a product is mature, it is difficult to lower the price.
When we argued with reason, what I remember most clearly is that a German executive from Siemens told us that the most important reason why Siemens switched to China to buy parts from Germany and the United States was cost. From high-wage areas to low-wage areas, this is a trend that no one can reverse. If you,Tianhui,can't lower the price, then Siemens will inevitably turn to other regions and other factories. So you have to go all out to reduce costs.
Price is the first measure of purchasing precision metal parts
On the premise of ensuring quality, price is the primary criterion for customers to purchase precision metal parts.
This is also the most important reason for overseas customers to purchase in China.
In many cases, the price is satisfied first, and then the quality is gradually improved.
If there is no good price, no matter how good the quality is, customers will also choose areas with low prices.
How can Precision Machining plants reduce the price of parts?
The price composition of precision machined parts can be divided into the following elements:
Material costs can be further subdivided into profile costs and blank costs. The cost of materials consists of two parts, the cost of base metal raw materials - this part of the cost is basically the same, and the other part is the processing cost of profiles and blanks. The material costs obtained by each precision machining factory are quite different, which are closely related to the factory's purchase volume and payment terms.
The wage level of workers, within a region, the wage level of workers is basically the same, but there is a big difference in the wage level between coastal areas and inland areas, the factory we built in Chizhou, Anhui, the wages of employees of the same level can be about 1/4 cheaper than Ningbo area .
Management level, excellent management can reduce losses, and management confusion will increase costs. This part is quite different
The cost of land and workshops, there is a big gap between the cost of land and workshops in coastal areas and the mainland, and the higher cost of land and workshops in coastal areas will significantly increase product prices.
The precision metal parts produced by Tianhui have a price advantage
Through the above analysis, we know how a precision machining factory can reduce the cost of parts. On the basis of management excellence, we have significantly reduced the price of parts through the following two steps:
To build a factory in Chizhou, Anhui, the local land cost is 1/5 of that of Ningbo, and the low land cost of the factory reduces our cost
And because of the lower wage level in Chizhou, Anhui, our costs are reduced
We have reduced the cost of raw materials by purchasing casting blanks in large quantities and forging blanks.
Therefore, in summary, our factory has a relatively obvious price advantage in the production of precision machined parts.
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