2003: Starting with Foreign Trade

Chapter 102 Controlling Zhang Haiping

Zhang Haiping has been feeling a bit uneasy lately. How could the excellent situation have taken such a sharp turn for the worse after March?

Every year there are a few months of off-season, but isn't this year's off-season a bit too early?

I recently had tea with colleagues, and everyone was saying that orders were fewer than before, as if the off-season had arrived earlier than expected. This is all because of changes in export policies, with foreign companies imposing certain restrictions on our dumping practices.

The factory is currently managing to maintain its current order volume, but it is an undeniable fact that orders from competitors are generally declining. With the arrival of the traditional off-season, it is uncertain what the situation will be like this year.

Zhang Haiping had only enjoyed the expansion for less than two months when he was already facing pressure from orders, and a sense of unease deeply troubled him.

"Hey, Mr. Tan is still in Guangzhou attending the Canton Fair. I wonder how his orders are going."

Speaking of which, the recent production capacity has been supported by orders from Jinpeng Trading. Since these are export orders, although Jinpeng Trading's requirements are higher, its profit margin is the best and most stable among Zhang Haiping's factories.

This year's Canton Fair has raised the bar and has higher requirements. Recently, I've heard of quite a few companies that have had their samples confiscated. If Jinpeng Trading can't even guarantee stable orders, then we'll really have a headache.

Expanding production capacity was also a well-thought-out plan. Now that it's started, there's no way we can just let it stagnate. We have to keep going no matter what. Zhang Haiping has also been developing new customers recently, but with little success.

The small business owners in Beicang are quite united. If a factory really has no work, other friends will share some of their orders. But you can imagine the profit margin; it's barely enough to support the workers.

Zhang Haiping also distributed orders to others, but when everyone was struggling, there wasn't much he could do.

"Mr. Zhang, what are you busy with? Why do you look so worried?"

A sound as the door opened startled Zhang Haiping, who was deep in thought. He looked up and saw that it was Tan Jincheng!

"Hey, Mr. Tan, what brings you back at this hour? Weren't you in Guangzhou attending the Canton Fair?"

Thank goodness! I was just about to yell at them when they came in without knocking. Luckily I glanced at the door.

"I flew back specifically to deliver the order to Mr. Zhang because I was worried he would be anxious."

"How about it? Aren't you touched? If you are, you can reimburse me for the airfare."

Zhang Haiping rolled his eyes at Tan Jincheng, didn't reply, casually offered him a cigarette, and then changed the subject, saying, "How's the Canton Fair? I heard the situation has changed a bit today?"

"Yes, it does have some impact, but it won't affect us much. I came back temporarily because of some business, but I did bring you an order." Tan Jincheng took the cigarette and nodded.

"Really?" Zhang Haiping's voice was noticeably louder.

"Of course it's true, so it's not unreasonable for me to reimburse your airfare. If I waited until after the exhibition to contact you, you would have been worried for another half month."

Tan Jincheng looked at Zhang Haiping with a hint of amusement, and then said, "When I came in just now, you were looking worried, wasn't that what you were worried about?"

"Hey, who can argue with that? Lately, developing new clients hasn't been going well, and some of my friends are also seeing a decrease in orders. With so many people to support, how can I not be worried?"

Tan Jincheng nodded with deep feeling. Bosses earn a lot, but they also have a lot to worry about. It's really not that easy to be a boss. There is no such thing as getting something for nothing in this world.

They have to worry about the company's business anytime, anywhere. Take Zhang Haiping for example, every day when he opens his eyes, he has to pay the wages of 60 or 70 people, pay the rent for the factory, pay for water and electricity, and at the end of the month he has to pay a fee to the raw material suppliers. These are the most basic expenses.

"I've already solved it for you, so don't worry anymore. Next month, not only will you be able to work at full capacity, but I can also do you a favor. However, the quality will remain the same as before."

Jinpeng Trading's shipments in May were substantial. In addition to James's fixed quota of $500,000, there were five other smaller orders, totaling nearly $300,000. In a month, they would ship nearly $800,000, or more than 6 million yuan worth of goods, which was indeed enough for Zhang Haiping to do favors.

Tan Jincheng knew that small factories would use their own orders to build relationships and help each other; this was the art of survival and the benefit of unity. You can't do business alone; only by uniting can you truly make money from foreigners.

"Are you sure? You can still do favors even when you're working at full capacity?" Zhang Haiping asked, his eyes wide with disbelief.

Why would I joke like that with you? See for yourself.

After saying that, Tan Jincheng took out a production schedule from his backpack, which contained the various clothing styles and quantities to be shipped next month.

Although it was already 2005, paperless office work was still not possible. Many small business owners of Zhang Haiping's generation couldn't even type. Being able to play Minesweeper, Spider Solitaire, or Dou Dizhu on the computer was enough for them to brag about.

Many factories are reluctant to buy computers. In their eyes, Tan Jincheng, who not only has a full range of computers and peripherals in his company, but also has a network cable printer installed in his residence, is a spendthrift.

Tan Jincheng always carried a backpack with paper materials when he went out, and his laptop was always in his car. To an unsuspecting person, Tan Jincheng, carrying a backpack and going to meet clients, did indeed look like a college student. Zhang Haiping watched eagerly as Tan Jincheng took out a stack of A4 papers from his backpack and handed them over. After Tan Jincheng handed them over, Zhang Haiping stared anxiously at the rows of numbers on them.

This is just the production details for May. Although James has a fixed supply each month, the specific styles and quantities needed will not be officially determined until the beginning of the month. Tan Jincheng did not release all of them at once.

Nowadays, the gross profit margin in the clothing industry is relatively high due to information asymmetry and other reasons. For example, in domestic clothing stores, it is common to find clothes that cost only a dozen yuan to buy and are sold for around 100 yuan.

After deducting rent, utilities, labor, and other costs, the profit margin at the retail end is still quite substantial. The export trade end is similar to wholesale, so the gross profit margin is naturally not as exaggerated, but it is still not low either.

The $80 monthly order only applies to Jinpeng Trading. Naturally, Zhang Haiping wouldn't get that price. The cost of a knitted garment includes fabric, labor, materials (zippers, buttons, labels, etc.), dyes and washing, as well as other expenses such as rent and equipment.

These are things Zhang Haiping needs to calculate; Tan Jincheng doesn't need to worry about them. He just needs to understand the cost components of a garment to avoid being misled by Zhang Haiping and having his profits squeezed.

What Tan Jincheng needs to do is control the cost of a garment to around 50%, eliminating various miscellaneous costs, so that each order can have a gross profit of around 40%.

With the addition of tax rebate policies, the company's gross profit margin can be maintained at a relatively high level. Tan Jincheng will also operate in this manner for the subsequent export of electronic products and two electric vehicles.

Two-wheeled electric vehicles are currently in the development stage, and their exports are only a niche market compared to clothing and electronic products. However, in the future, once we become the world's largest producer of two-wheeled electric vehicles, their export volume will double year after year.

In 2005, an electric vehicle sold for two or three thousand yuan, and it's still the same in 2023. Profit margins are thin, but that doesn't mean the industry can't continue. If all else fails, they can go public and cash out to fleece investors.

Several well-known electric vehicle brands eventually went public. As long as they persist in branding, Tan Jincheng may also be able to achieve the same.

The second company, Tan Jincheng, did not register as a simple trading company, but rather as an industrial company. This was because he had this intention in mind, as profit margins would decline in the future, making it difficult for simple trading companies to survive.

More often, they adopt an integrated production and sales model, producing and selling their own products and handling exports themselves, minimizing intermediate links to ensure profits.

After staring at the production details for a few minutes, Zhang Haiping got up and returned to his desk, presumably preparing to do a thorough calculation. Tan Jincheng didn't disturb him and sat down in front of the tea room to make tea.

Over the past six months, the relationship between Tan Jincheng and Zhang Haiping has evolved from one of absolute weakness to one of equality. With James's regular supply orders, Tan Jincheng's position has become slightly higher.

Six months ago, Tan Jincheng would not have walked in so casually and sat so leisurely making tea.

Half an hour later, Zhang Haiping looked up at Tan Jincheng and asked, "Give them all to me?"

"Okay, I'll give it all to you, that's generous of me, right? But give me a real price, don't try to play games. You know the current policies, there's no point in going back and forth, you're busy and I'm busy too."

"Of course. We've been working together for half a year, so there's no point in playing games. I'll give you a formal quote by tomorrow afternoon at the latest. The quantity needed this time is quite large, so we need to calculate it carefully."

After agreeing on the general terms, Tan Jincheng teased, "So, is it worth it for you to reimburse my round-trip airfare?"

"Why are you, a young man, always focused on the cost of two plane tickets? Why not just call up a few friends tonight and do a full-service tour?"

"Forget about the whole process, don't corrupt me with your old-fashioned ways; also, from June until May next year, I can guarantee a stable supply of at least 60% of this order every month."

"So, Mr. Zhang, I don't object to you developing new clients, but you also need to be prepared for my production capacity and not delay my work."

"A stable 60% every month? Are you sure?" Zhang Haiping jumped up from his office chair.

If this order generates 60% of the monthly stable supply, based on the rough estimate above, that's roughly 2 million yuan in sales. That's more than enough to support the factory's entire annual expenses. If we develop some new customers or if Mr. Tan gets a few more orders, we can live a very comfortable life.

Another major advantage is that if there are stable orders, then Zhang Haiping's factory will not have a slow season this year!

Without the off-season, employee retention rates are higher, and reputation changes after a year, making recruitment much easier.

“I have no reason to joke about something this important. As long as your offer is right, I can guarantee that amount.”

Yes, how could we joke about something like this? Boss Tan really gave me a huge surprise. What a wonderful day it is today!

"Damn it, why didn't you tell me about this sooner? I'll call you now, I'll cover your plane ticket and arrange everything tonight. I'll call you right now."

"Damn it, you're the one who wanted to go on this trip, aren't you? I'll call you later. The plane ticket thing was a joke too. There's something I want to ask you about."

Zhang Haiping ignored what Tan Jincheng was saying and continued dialing the phone, only casually asking, "What's up? I'll do my best to help, brother."

(End of this chapter)