Chapter 106: Being on guard against others is essential

Facing Fan Jinliu's question, Yang Hai was very surprised and asked, "Is our solid wood furniture selling so well in the European and American markets?"

"Yes! Some customers bring their design drawings to us for customized production, while some customers we provide samples for them to choose to place orders. As long as they place an order, the quantity will not be small, the price is not low, and the profit is also high." Fan Jinliu said happily.

"But they all have a stipulated delivery date. Once we sign a contract with them and receive their deposit, if we fail to deliver the goods on time, we will be in breach of contract and the penalty we need to pay will be very heavy."

"According to our factory's current production capacity, the capacity for the first half of the year has been fully utilized, but there are still a steady stream of orders coming in. If we accept them, we may not be able to complete the orders within the specified time, which will result in a breach of contract. At that time, we will not only not make any money, but also have to lose a lot of money."

"But seeing so many orders, I would feel uncomfortable if I didn't accept them. I would be reluctant to do so."

"Yeah!" Yang Hai nodded and said.

"Since there are orders coming in, it makes no sense not to accept them."

"I also want to take it, but the problem is that after I take it, what if I can't produce it when the time comes?" Fan Jinliu said with a wry smile.

"You too, can't you use your brain and think about it, can a living person be suffocated to death by urine?" Yang Hai said speechlessly.

"Our factory is doing well and we are overwhelmed with orders. Are other furniture factories doing so well and overwhelmed with orders?"

"We can find furniture factories that don't have many orders to cooperate with! Can't we just let them produce furniture for us and strictly control the quality according to our requirements?"

"In this case, are you still worried about too many orders? Even if there are more orders, we can digest them. We can find countless factories to produce for us, and then we can put our own brand on them."

"As long as the other party produces according to our requirements and there is no problem with the quality, then it's OK."

Fan Jinliu scratched his head, thought about it, and felt that this method was indeed worth a try.

"You said that we can find someone to do the production for us, which should definitely be possible, but how much should we pay for them to do the production for us?"

"If we pay too much, it won't be cost-effective for us. If we pay too little, people won't want to do it."

"How is it not cost-effective? If you don't take this order, you won't make a penny. If you take this order, find someone to produce it for you, and give part of the profit to the OEM factory, we will definitely still make money, it's just a matter of how much." Yang Hai said with a smile.

"But our sales volume can be significantly increased, and overall we will definitely make much more money than before."

"It's like you can make one dollar by buying a bottle of mineral water. If you sell 10 bottles of mineral water, you can only make 5 dollars. If you sell them one by one, you can sell 100 bottles a day and make 100 dollars. If I sell them 10 by 10, I can sell 500 bottles a day and make 250 dollars. Which one do you think will make more money?"

"Would you make more money if you sold one set of sofas to one person, or 100 sets of sofas to one customer?"

"Can the price you sell to people for 100 sofas be the same as the price you sell to people for one sofa? Of course it's different, right? But if you sell cheaper and have more quantity, you will still make more money."

"We give the orders to other factories for OEM production. Although we make a little less money, it is still cost-effective. Do we stop making money just because we make less money? Do we not want the orders we have already received?"

Fan Jinliu thought that this seemed to be the case, and then he said, "In that case, we don't need to open a factory anymore. When there are orders, we can just find a factory to produce for us. When there are no orders, we don't have to pay workers' wages, factory rent, water and electricity bills, and other expenses. We don't have to worry about inspections by environmental protection, fire protection and other departments."

"We don't have to open our own factory! Isn't that what all the big foreign brands do?" Yang Hai said with a smile.

"Look at Adidas and Nike. They don't produce their own shoes. They use domestic shoe factories to produce for them and then put their brands on them."

"He paid our domestic factory a OEM fee of only 40 yuan for a pair of shoes, and then resold them for several hundred yuan a pair. He didn't have to do anything, but he made much more money than the domestic OEM factory."

"They make money with their own brand. This pair of shoes is originally worth tens of yuan, less than 100 yuan. After putting their brand on it, they can be sold for hundreds of yuan."

"It's the same with our furniture. This is one of the reasons why I always tell you that we must make our own furniture brand a success."

"Many furniture on the market have no brand, especially rosewood furniture. Anyone can produce rosewood furniture, and anyone can produce the same style of rosewood furniture. The design of these rosewood furniture styles has no patents at all."

"We took the lead in establishing our furniture brand to tell consumers that rosewood furniture also has a brand. Recognizing our Huaxing rosewood furniture brand is a guarantee of quality."

"If consumers buy other rosewood furniture, the quality is hard to guarantee, but if they buy our Huaxing rosewood furniture, we will give them quality assurance. If there is any quality problem with the rosewood furniture they buy, we can take full responsibility and send people to repair it on site, or take it back to the factory for repair, so that consumers don't have to worry about it."

"A piece of mahogany furniture can easily cost tens of thousands, or even hundreds of thousands, and some expensive furniture can even cost millions. What if consumers buy it and there are quality problems? So we must provide consumers with after-sales protection."

"As long as we ensure good quality and promote our Huaxing furniture brand, we won't have to worry about sales."

"Why do we have so many orders from Europe and America for the solid wood furniture we produce?"

"In addition to our exquisite designs, our product quality is guaranteed!"

"Do you remember the American customer who took apart our furniture on the spot at the Linhai International Home Furnishing Exhibition?"

"If the quality of our furniture was not up to par, it would have been exposed right away."

"Why other furniture factories don't dare to disassemble their exhibited furniture at exhibitions and let customers take a look? It's because they don't have confidence in the quality of their products."

"Now that we have received so many orders from Europe and the United States, I think that American customer must have played a key role."

Fan Jinliu nodded and said, "It's true. The American is called Brintel. He is the owner of a furniture chain store in the United States. His business is very big. He alone placed an order of 5000 million US dollars with us."

"He didn't even bargain. He just asked us to ensure the quality, and that the product must be the same as the samples displayed at the exhibition. Otherwise, he would sue us for breach of contract and ask us to compensate for his losses." Yang Hai said after hearing this: "In this case, we must be cautious. We don't want to end up not getting a penny back and having to compensate for the losses. That would be too tragic."

"When signing a contract, we must pay attention to the fact that before our goods are shipped out to sea, we must ask the other party to send someone to conduct random inspections. We will ship the goods only if they pass the inspection. If they fail the inspection, we will not ship the goods."

"Otherwise, after the goods arrive in the United States, they will say that the quality is not up to standard and ask us to pay liquidated damages. What should we do then?"

"The larger the order, the more cautious you need to be. Don't let such a large order go to your head."

After hearing what Yang Hai said, Fan Jinliu broke out in a cold sweat and said hurriedly, "Fortunately, I came to see you today and haven't signed a formal contract yet. Otherwise, if it's really like what you said, we'll be in real trouble."

"I originally thought that as long as our quality is up to standard, the other party would not be able to find fault with it. But as you said, if the other party is determined to cheat us, and after the goods arrive in the United States, they deliberately say that the quality is not up to standard, we will have no way to deal with them."

"If they send people to our customs to inspect, and they say the goods are qualified, we will ship them. In this way, they won't be able to cheat us."

"If he doesn't find any quality problems during spot checks and refuses to accept the goods, we have at least received his deposit. We can keep the goods to find another buyer or sell them in domestic specialty stores. At least there won't be any big losses."

Yang Hai nodded and said, "That's right. We should not have the intention to harm others, but we must be on guard against others. Although we don't want such a thing to happen, what if it happens?"

"If we were unprepared and something like that really happened, our losses would be huge."

Fan Jinliu thought for a moment and asked again, "Since solid wood furniture can be produced by other furniture factories, then rosewood furniture should also be produced by other rosewood furniture factories."

Yang Hai smiled and said, "Of course it is possible! There are already quite a few mahogany furniture factories doing this."

"In our Linhai City, the company called Xianglong Redwood, many of their redwood furniture are sent to some small private redwood furniture factories in Dongguan for processing on their behalf."

"They prepare the materials they need in their own factories, and then ship them to these small factories for processing. After these small factories process them, they ship them back to their Xianglong factory. Xianglong factory only needs to pay these small factories some processing fees."

"If we have too many orders for rosewood furniture and our own factory cannot produce them in time, we can also find some small factories to process them on our behalf."

"Although the cost will increase a little, it is insignificant compared to the profit we can make."

"Generally, newly opened small factories do not have sufficient orders, but they have to support the workers in the factory, so the cost of outsourcing to them is not too high. The bosses of these small factories only need to pay the workers' wages, factory rent, and water and electricity bills with the OEM fees, and then make a little more money."

“Even if it doesn’t make money, they will be willing to accept it as long as it can keep the factory running.”

"After all, if they take over the OEM orders, they will not make any money at most. But if they do not take over the OEM orders, they still need to pay the factory rent, water and electricity bills, and employee wages."

"In that case, it's no longer a question of whether you can make money, but a question of how much money you will lose in a month."

"This is also why many small rosewood furniture factories have a hard time surviving. In the end, many people couldn't hold on any longer and had to choose to close the factories."

"There are many small rosewood furniture factories that, when they first opened, actually tried their best to survive. As long as there was money to be made, even if it was just a little bit, they were willing to accept such orders."

Yang Hai talked a lot with Fan Jinliu about how the furniture factory should develop.

"When entrusting other factories to produce products, the most important thing is to supervise the quality issues. It is best to send someone to the factory to supervise the production process of the OEM factory to prevent the OEM factory from cheating. If serious quality problems occur, our brand will be greatly affected and hit. This is crucial."

"If there is no one on-site supervision at the factory for a long time, it will be difficult to find problems if we conduct random inspections after they have finished producing the furniture. We cannot dismantle all the furniture they have produced for inspection."

"If you don't disassemble it for inspection, how do you know how it was processed? That's why we have to have people stationed in the factory to inspect it. Only in this way can the quality be guaranteed."

"Moreover, the on-site inspection personnel must be replaced at any time to prevent the on-site inspection personnel from getting familiar with the OEM factory and causing lax supervision."

Yang Hai and Fan Jinliu had lunch together and drank some beer. In the afternoon, he and Fan Jinliu went to Huaxing Furniture Factory in Nanshan District of Linhai City.

The current Huaxing Furniture Factory has changed a lot from before. The spacious and bright workshop is spotless and very clean although it is a furniture factory.

The shavings, sawdust and dust produced by wood processing will be immediately sucked away by the installed large vacuum cleaner. There is no dust on the ground and the machine is very clean everywhere.

The furniture parts that are being processed and those that have been processed are neatly placed separately, and the workers are processing the wood according to the operating procedures.

From material preparation to fine cutting, milling, drilling, grinding, and assembly, all operations are streamlined and the most advanced wood processing machines are used.

These are solid wood furniture workshops and rosewood furniture production workshops, and there are some differences between them and solid wood furniture production.

There are many styles of rosewood furniture. Due to the relatively high density of rosewood, the processing difficulty is relatively greater, so it is not suitable for assembly line operations like solid wood furniture.

The production here is based on piecework and groups. Each group produces different styles of furniture. The materials are cut by the cutting department, and then each group processes them from start to finish. The leader of each group is the master, and under him are the apprentices. How much money the apprentice earns per month is decided by the master.

How much money can a master make in a month? That depends on how many apprentices he has and how much goods he can produce in a month.
Every team leader is actually a small contractor.

If he makes ten sets of sofas this month, and each set of sofas costs 3 yuan, then that means their entire team will receive a salary of yuan this month.

The three apprentices can earn a maximum of three to four thousand yuan in salary, and the remaining six to seven thousand yuan is all earned by the master.

(End of this chapter)