The forging industry is an important part of the manufacturing sector, but has encountered difficulties in the modern market economy. Due to changes in domestic and international political and economic situations, forging companies have experienced a sharp decline. Fierce competition in the domestic market, combined with shortcomings in other technical and management aspects, has led to poor production efficiency for many forging companies. Here we take a certain forging company as an example to analyze the reasons for its bankruptcy from actual production data.
I. Decrease in order volume
Forging companies mainly produce various types of forgings such as ship forgings, automotive parts, and engineering machinery, with a broad product coverage. However, as market competition intensifies, order volume gradually decreases. From the company’s total order volume data from January to July 2018, it can be seen that the order quantity began to decline in the first quarter. In April, the order volume was nearly 30% lower than the same period last year. In the following months, orders did not recover to at least the basic level. The decrease in order volume has seriously impacted the company in terms of funds and brand reputation.
II. Low production efficiency
In addition to the decrease in order volume, the forging company also has very low production efficiency. Within the company, there are serious problems such as outdated equipment, outdated technology, and ineffective management. In 2018, the depreciation expense of the company’s fixed assets exceeded RMB 1 billion, while profits were only about RMB 400 million. In addition, employee training and development has not received the attention it deserves. Such backward production methods and management models cannot adapt to modern market competition and development.
III. High Costs
Finally, the operating costs of the forging company are also extremely high. According to data, in the first half of 2018, the company’s taxes and surcharges totaled more than RMB 300 million, while employee salaries, material procurement costs, leasing, and property management expenses were also high. This has forced the company to borrow money to maintain production and operations, further exacerbating financial pressures.
Conclusion
The above is a simple analysis of some of the reasons for the bankruptcy of the forging company. Developing companies should focus on the requirements of modern manufacturing, and improve technology and innovation. In terms of management, attention should be paid to improving the skills and quality of employees, achieving comprehensive optimization in the production and service processes. Only then can companies have better competitiveness and future survival space in the market.
