China's electrical instrument industry is facing unprecedented cost pressure

From 2009 to now, many electric instrument and equipment manufacturers are recruiting “cost supervisors”—setting cost budgets and controlling cost expenditures. Although the behavior of cost control has historically existed in the power equipment manufacturers, there are various indications that companies have now realized the importance of cost control and have taken this approach seriously.

Unprecedented cost pressures began early this year, and the problem of “migrant workers shortage” has become increasingly prominent. This problem that needs to be dealt with by the entire society, if viewed from the perspective of the manufacturing industry, means that the cost of labor for Chinese enterprises (including electric instrument and equipment manufacturers) is rising.

Looking further, today's power meter equipment manufacturers are facing more than just rising labor costs, but the rising costs of raw materials, labor costs, and social costs.

In the power equipment industry, the cost of non-ferrous metals such as steel and copper and aluminum accounts for about 70% to 80% of the cost of raw materials.

According to the data released by the China Iron and Steel Association and the Nonferrous Metals Industry Association, the prices of steel and copper have been rising since 2005. For example, the price of copper rose from RMB 20/kg in mid-2005 to RMB 54 in early April this year. /kilogram. Although the price of copper declined somewhat due to the debt crisis in some countries in the Eurozone, the RMB 43/kg in early June this year was still at a relatively high level compared with historical prices.

In addition to raw material costs, the issue of labor costs and social costs has become increasingly prominent. Labor costs are mainly represented by workers' wages, while social costs include product marketing costs and channel development costs.

From the current situation, the above three types of costs all belong to the “rigid cost”. Raw material price increases and wage increases are inevitable trends, and product marketing costs will inevitably increase with the expansion of business scale. An equipment manufacturer therefore reluctantly stated that they have no more means to this and can only reduce corporate profits.

More and more companies have realized that cost control is the control of the whole process, not only to control the production cost of the product, but also to control the entire content of the life cycle cost of the product. Practice has proved that only when the product life cycle cost is effectively controlled, the cost will be significantly reduced.