Hangsheng: Carry out cost innovation to the end

One day in August 2010, the weather in Shenzhen was a bit gloomy, but in the conference room of Hangsheng Group in Fuyong Town, Bao'an District, the atmosphere was both tense and warm. President Mr. Yang Hong was listening carefully to the various points of the group. In the first half performance report of the company's general manager, he clearly pointed out that the group's long-term development strategy in second-tier cities since 2007 can better respond to the customer's requirement to continuously optimize costs during the life cycle of supporting products. Changes in customer needs.

In 2009, the capacity of China's automotive electronics market reached 210 billion yuan, but local automotive electronics companies were faced with two embarrassments: First, foreign automotive electronics companies controlled 50% of China's automotive electronics market with 40% of their capital. Grabbing 70% of the profits of China's automotive electronics, local enterprises can only struggle in the mid-to-low-end market due to the hollowing out of technology; second, the market competition environment has deteriorated. On the one hand, automobile manufacturers continue to put forward cost reduction requirements for supporting enterprises, and the profit margins of enterprises are greatly compressed.

How to get a company back on the road to growth in a tough market environment? Yang Hong's answer is to maintain the advantages of cost innovation and make breakthroughs in two directions: one is to combine technological innovation and supply chain management to improve core competitiveness, and to reduce costs through technological innovation and optimized management; the second is to manufacture low-end products. Move to second-tier cities to take advantage of local low labor costs and land costs to reduce manufacturing costs.

The execution of Yang Hong's decision received positive feedback in the subsequent market. In 2009, Hangsheng Group achieved an operating income of 2.1 billion yuan. In the first half of 2010, the sales income increased by 30% year-on-year.

The starting point of new layout - cost reduction

As a supporting enterprise of automobile manufacturers, Hangsheng's long-term strategy focuses on following customers, focusing on customer needs, building production capacity, R&D and design capacity, quality assurance and rapid development Response capability. However, in the years of economic crisis and the post-crisis era, the ability to reduce costs has become the primary survival competitiveness.

After the financial crisis in 2009, the purchasing ideas of OEMs have changed. Under the premise of emphasizing quality assurance, they are more and more inclined to let supporting manufacturers reduce costs. Anyone who cannot adapt to this change in demand will be eliminated. Fortunately, Hangsheng started planning for a rainy day two years ago.

In 2007, when most of the manufacturing companies in Shenzhen were living relatively well, Yang Hong was keenly aware of the difficulties in corporate development brought about by rising costs in the future. Therefore, he decided to transfer the manufacturing of some products produced in Shenzhen to second-tier cities with lower land and labor costs, leading competitors to deploy in second-tier cities.

More than two years later, Yang Hong, who was calm in the market, sighed, "Today, it seems that the strategy of planning ahead at that time was effective."

Jin Weihua, general manager of Shanghai Hangsheng who is in close contact with OEMs in the front line I am also deeply touched by this, "In 2009 and 2010, when customers put forward large-scale requirements for cost reduction, Hangsheng can actively respond and continue to develop, thanks to the correct strategic layout of the group. It is because of the effective strategy in the early stage. In terms of layout, Hangsheng has also achieved sustainable development under the circumstance of thin profit."

Before deciding to move to second-tier cities, Hangsheng also had a layout outside its headquarters in Shenzhen, but it was all based on the layout of OEMs. . When cars reach a certain production capacity, OEMs hope to form an effective supporting radius to quickly respond to customer needs. Therefore, the layout of supporting manufacturers must be close to the manufacturing base of OEMs.

In 2003, Hangsheng reorganized Jilin Hongyu and Changchun Huaruan two automotive electronics companies in the Northeast through mergers and acquisitions, established Jilin Hangsheng Hongyu Electronics Co., Ltd., and developed supporting vehicles for Audi, Dongfeng Nissan, Brilliance and other companies Electro-acoustic products, and supply to FAW-Volkswagen. In 2005, Shanghai Hangsheng Industrial Co., Ltd. was established to provide supporting automotive electronic products for commercial vehicles such as Suzhou Jinlong and sedans of SAIC Group. In November 2005, Tianjin Hangsheng Electronic Technology Development Co., Ltd. was established to provide supporting products for FAW Xiali in Tianjin. Now it has gradually shifted its focus to Beijing and formed a strategic partnership with BAIC. In Wuhan, Hubei, where the headquarters of Dongfeng Group is located, Hangsheng has also begun to actively deploy.

When Shenzhen's manufacturing cost began to soar sharply, the starting point of Hangsheng's layout was not only to stay close to the OEM, but to find a low-cost manufacturing base. As a result, Hangsheng Shenzhen's manufacturing plant is gradually moving out, and its headquarters is positioned as a management, R&D and procurement center.

Jian: Low-cost manufacturing center and export base

Hangsheng's relocation plan is formulated according to the different needs of customers for cost: the export volume is not large, the technical requirements are high, and the trial-manufactured automotive electronic products are placed in Made in Shenzhen, reflecting the supporting capabilities; the export of large-scale, cyclical automotive electronic products will be transferred to Jiangxi Ji'an Hangsheng with lower costs.

Jiangxi Ji'an is the seed base that Hangsheng has cultivated for 8 years. In 2002, Yang Hong invested and built a factory in Yongfeng, Jiangxi, targeting the OEM of mid-to-low-end automotive electronic products, and achieved good profits in 8 years. At the same time, he also trained a group of local managers. The current general manager of Ji'an Hangsheng Zou Zhenghua 2003 He was the general manager of Yongfeng Hangsheng.

As for Ji'an's cost advantage, Yang Hong described it as follows: Ji'an's labor cost is 40% lower than Shenzhen's, and the land cost to build a factory is only one-tenth of Shenzhen's; Jiangxi is closer to Guangdong, which is conducive to the overall transfer of the supply chain; The local government has high efficiency. After the establishment of Ji'an Hangsheng, the local government actively cooperated with various services such as fire protection and environmental protection certification. The construction cycle has been greatly accelerated. Suppliers come to Ji'an to support Hangsheng, and the approval procedure takes 2 months. can be completed within. "

From 2007 to 2008, Hangsheng Group set up a long-term development plan for Ji'an Hangsheng, positioned as a low-cost manufacturing base and an export base, as a secondary enterprise (such as Shanghai Hangsheng, Tianjin Hangsheng and other subsidiaries) There are alternative bases for manufacturing to be transferred, and Ji'an Hangsheng is required to make full use of local resources and build a small regional group company.

Jian Hangsheng, which was relocated in November 2009, was officially put into production. In April 2010, the production scale of 100,000 sets of car audio equipment was formed. In May, the GPS car multimedia production line started production. In 2010, Ji'an Hangsheng will form a production scale of 1 million units, and the subsidiary Yongfeng Hangsheng will have a production scale of 1 million units, and the production capacity will reach 2 million.

Zou Zhenghua is very candid about the main difficulties encountered in the process of achieving these achievements. One is the integration of the cadre team; the other is the recruitment of senior technicians. After the establishment of Ji'an Hangsheng, the Shenzhen headquarters dispatched 46 personnel from the Multimedia Business Department to assist the local personnel to quickly establish the main functional departments of the enterprise. At that time, the Shenzhen cadres and the local management personnel in Ji'an had frictions due to their different ways of doing things. After many democratic life meetings, cadres on both sides eliminated misunderstandings and accelerated integration. Finally, everyone worked together to achieve smooth production in 2010.

There is a shortage of senior technicians in Ji'an. Hangsheng has tried to cooperate with surrounding vocational schools in recruiting and training, including recruiting people from surrounding provinces. The goal is to turn half of the current 500-person workforce into skilled technicians. It becomes a professionally qualified person. However, to what level should the talent team be improved? To what level should localized cadres be raised? This is the main issue that Ji'an Hangsheng faces in the next step.

Automotive manufacturers in overseas emerging markets favor low-priced, customized automotive electronic products, and individual consumers in the domestic aftermarket also prefer products with high cost performance. These demands bring opportunities for the development of Ji'an Hangsheng Company. At present, 70% of the company's products are exported to Iran and Russia. Since September, the supporting capacity of Russian car manufacturers to Ji'an Hangsheng has reached 50,000 units per month, and there is huge room for future development. At the same time, taking advantage of low cost, the company began to provide aftermarket audio and GPS navigation products to more than 10 4S stores in the south, striving for greater development space.

The rapid development of Ji'an Hangsheng has also benefited from the gradual promotion of localization of procurement. In the first half of 2010, 42 suppliers have settled in the surrounding area, and 12 have formed a supporting relationship with them. At the same time, Ji'an Hangsheng also launched the ERP system, which has been connected with the headquarters management system in April.

Liuzhou: Low-cost and high-quality mini-car supporting base

In 2009, the state implemented three policies of fuel tax reform, purchase tax reform and the implementation of subsidies for cars to the countryside, which led to the explosive growth of the mini-car market. Hangsheng's main customer, SAIC-GM-Wuling, has become the biggest winner in the market, and Hangsheng's base in Liuzhou has also grown.

The main buyers of mini-cars are township business owners and farmers. They are very price-sensitive and feature-demanding. Therefore, SAIC-GM-Wuling's requirements for Liuzhou Hangsheng are: supporting audio products with full functions, high reliability and low prices. And Liuzhou Hangsheng responded calmly because of its repositioning two years ago.

In 2007, Hangsheng Group repositioned Liuzhou Hangsheng Electronics Company to integrate production, supply and sales. The previous product relied on foreign production and supply, and changed to Liuzhou local production, procurement and sales. In 2008, Hangsheng established an industrial park in Liuzhou and recruited a large number of employees for production.

“Using local labor and purchasing locally in Liuzhou greatly reduces the company’s logistics and warehousing costs, as well as product inventory. Liuzhou Hangsheng also actively cooperates with universities, connects with the headquarters R&D center, and establishes a R&D platform to quickly reduce costs. In 2009, the supporting production scale of Liuzhou Hangsheng reached one million, and the delivery capacity was increased to within 24 hours, which was highly praised by SAIC-GM-Wuling." said Guo Yonggeng, general manager of Liuzhou Hangsheng.

Hangsheng now spends 7% of its sales revenue as R&D investment every year. The improvement of technical strength has led to the improvement of the company's competitiveness. Hangsheng has entered the procurement system of six major international automobile manufacturing companies. 60% comes from the supporting automotive electronic products provided for the joint venture brand car.

Sowing seeds in low-cost second-tier cities and repositioning and intensive cultivation in a certain period of time will allow Hangsheng to handle the rising cost of the entire market. Hangsheng's experience in exploring the layout of second-tier cities and maintaining its cost-innovation advantage is of reference significance to other Chinese manufacturing companies.

Yang Hong: Hangsheng's strategy of deploying second-tier cities three years ago has not only maintained its cost innovation advantage, but also responded well to changes in customer needs.

Maintain cost innovation in two directions: one is to combine technological innovation and supply chain management to improve core competitiveness; the other is to transfer low-end product manufacturing to second-tier cities.