The optimal allocation of resources is the core competitiveness of the foundry.
Editor’s note: This article comes from the WeChat public account “New Business Essentials” (ID: xinshangye2016) , author : Huang Xiaojun.
Three years ago, the largest customer orders fell by 1%, and the profits of this foundry plummeted by 90%. Three years later, the sales volume of the largest customer fell by 46%, and 250 stores were planned to be closed, but the foundry maintained steady growth. The largest customer is Victoria ’s Secret, and the foundry is the world ’s largest underwear factory, Virginie. In the past three years, what kind of transformation has happened between these two roles? Will such a shift be the key to the growth of all foundries?
The martyrdom of China’s foundry can be started from Foxconn.
In the first half of 2016, Foxconn line employees can only hold a monthly basic salary of 1800-2500 yuan, and they did n’t want to work overtime.
In July, iPhone7 orders arrived as scheduled. Zhengzhou Foxconn has insufficient capacity. The company issued an emergency notice that employees would receive a bonus of 600 yuan for recommending 1 person to enter the factory.
In the same period, Henan Energy and Chemical Group even convened a meeting, asking its coal companies to send workers to support Zhengzhou Foxconn.
If the market demand is too large, the production capacity needs to be expanded; if the market demand is too small, it can only sustain the cost of the machine idling.
The decay of the foundry is not spared in all industries, whether it is mobile phones, clothing, umbrellas, bicycles, charging treasures that are included in the shared list … [1]
Of course, underwear bras are not excluded.
It’s also 2016. L Brands’ well-known underwear brand Victoria’s Secret (Victoria’s Secret, referred to as “Victory”), same-store sales in the first quarter fell 1%.
This caused its foundry in China, Virginie, to lose nearly 90% of its profits in the first half of the year and trigger a large number of layoffs.
According to Frost & Sullivan statistics, Virginie became the number one bra manufacturer in the world as early as 2014.
Unfortunately, BOCI figures show that about 35% of this manufacturer ’s sales come from L Brands, and 80% of Victoria ’s underwear are made by Virginie. [2]
After the orders of L Brands fluctuated slightly, Virginie received orders for sportswear brands such as Anderma and Adidas in the second half of 2016.
This has led the manufacturer to send a letter saying that it needs to build factories in Southeast Asia to expand production capacity, and even recruit more than 6,000 people.
The common problems of the foundries have nothing to do with your scale.
But three years later, all this seems to have changed.
The 2019 financial report released by L Brands shows that the annual sales were US $ 12.9 billion, a decrease of 2.3% year-on-year; the net loss was US $ 366 million, and last year it was US $ 643 million.
▨Vimi show live model, picture / network
Behind the tragic performance decline, what dilemma will Virginie at the end of the supply chain face?
Everything is unexpected.
According to the financial report, Virginie ’s fiscal 2019 revenue increased by 6.7% year-on-year to 6.263 billion Hong Kong dollars, and net profit increased by 17.6% year-on-year to HK $ 282 million.
By the mid-term report of fiscal year 2020, its revenue increased by 2.15% to HK $ 3.129 billion, and its net profit increased by 5.76% year-on-year to HK $ 141 million. (Virginia ’s fiscal year is from April 1 to March 31 of the following year.)
In three years, how did Virginie get rid of the burden of “Vicmi’s largest foundry”?
1 In addition to secrets, Victoria also has a bullwhip
In the lengthy supply chain management, there is an image concept called “bullwhip effect”.
It means that in a supply chain, a little change in consumer market demand will be amplified to manufacturers, primary suppliers, and secondary suppliers.
For example, the underwear market demand forecast is slightly increased by 2%, which may be 5% when enlarged to Victoria Secret and L Brands (manufacturing brand), and 10% when passed to Virginie (first-level supplier), and When it comes to suppliers (sub-suppliers) that manufacture parts for Virginie, it may become 20%.
When consumer demand changes, the orders and inventories of retailers, wholesalers, and distributors fluctuate spontaneously. The more they are at the back end of the supply chain, the greater the change in demand will be.
In terms of shape, this is like the bullwhip of a cowboy in the west. The whip gently shakes, and the whip will shake greatly. This is the “bullwhip effect” in supply chain management. [3]
