The final piece of this three-part series discusses how businesses are coping with industry challenges.
Bag suppliers in Fujian province are taking diverse steps to maintain viability amid weak overseas demand. Due to economic woes in the US and Europe, export volume from January to October 2011 decreased 31 percent YoY to 219 million pieces. Companies said that apart from receiving fewer transactions, each order consists of smaller quantities. Many buyers used to ask for more than 10,000 pieces per shipment, but this is down to a few thousand.
Moreover, clients are postponing deliveries. In the past, they often followed up on the status of their cargo. Now, some finished products are stored in warehouses before being sent abroad. Such delays put pressure on manufacturers’ cash flow and can trigger currency losses. In response, businesses are negotiating and fixing conveyance dates so that production can be scheduled appropriately.
These factors are also negatively affecting prices and efficiency. Because suppliers are unable to achieve economies of scale with low output volume, quotes issued are higher. In fact, during the 10-month period indicated, the average unit value rose 75 percent to $7.69.
To reduce costs, materials are purchased on a cash basis, making the contract eligible for a 5 percent discount. Interest on deferred payments is eliminated as well. In addition, some companies farm out the sewing of cut pieces to small workshops. The strategy saves 10 to 20 percent compared with doing the task in-house. As regards productivity, assembly lines are divided into different teams, each working on only one design, to help speed up processing.
Click here to read the complete article on Global Sources.
Note: This article "Fujian bag makers improve efficiency amid smaller orders" was originally published
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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