China Report and Container Pricing - An Update From Steve Houser
To view photos of our China warehouse, check out this post.
Greetings from Liuyang, Hunan, China! I spent the day today visiting our stock warehouses and was pleased to see a lot of factory deliveries already taking place. Although factory pyrotechnic powder and star production lines are closed now, and the resulting final assembly is on hold due to the mandated heat season safety closures, there is still a lot going on in China and at Red Rhino. Production for non-pyrotechnic components such as tubes is moving right along. That was evident from my travels through the smaller cities and towns in the country where the thousands of small family business here manufacture cardboard tubes for the factories to purchase and use in fireworks production. A lot of component parts are manufactured and procured so the components can get to the factories where those parts get their pyrotechnic magic added and are assembled. It is good to see things like this happening, so that when the Chinese Government lifts the heat season closures, powder and star production and the resulting final assembly steps will commence quickly.
This brings me to a second point, something I am working on, price negotiations with the factories. The US Dollar has climbed aggressively against the Chinese RMB over the past few months and the factories are trying to budget that change as well as continued pricing pressure on paper components due to Chinese pollution control regulations. Just yesterday I drove past a large paper factory that I have passed many, many times over the past 10 years. It is usually bustling with activity and its steam stacks are billowing. However, now it is closed and lays dormant until the mill bosses can meet the more stringent pollution standards. This is a factory located in the heart of fireworks country, with one primary customer industry – fireworks. So the supply of paper is still a primary concern for the factories and we are all trying to work the product costs out, continually.
The pricing for many items has been agreed upon but there are still areas of supply where continued negotiations are taking place. Regardless of that, I have already placed orders and have product moving. Pricing will come, but for now there must be strong consideration given to supply. To that end, I want our customers to know that even though container drop ship pricing has not been released yet, production to fill those orders is already underway and has been since May. I am not sitting idly by just waiting. Instead I have production moving so that you know the product will be there. I suppose another strategy would be to wait until all of the pricing is negotiated or guess or cut corners in order to speed up order collection so they could be placed overseas. I am not sure what the impetus for such an action would be nor does it matter. I prefer to keep the production moving, keep the supply line going, and get the pricing in line, correctly. Then I’ll be set to release a container pricelist. So, to all of you waiting – do not worry, I have already ordered, based on last year’s container orders, most of what was ordered then. So it is as if the drop ship orders have already all been submitted – to an extent. Our customers are going to be covered. When the best value price can be negotiated they will then get that as well.
We have already been receiving orders from our long time drop ship customers, they have confidence that the pricing they will get will be as good as it can be. They have a history of experience here at Red Rhino and they have given us something I value enormously, their trust, and that means the world to me. I and my staff do everything we can to continue to earn it as their supply partner, and we will do everything we can to honor and preserve it. We are working hard here at Red Rhino and if you are considering joining our container drop ship or supply family, then I suggest you may want to start compiling those orders now. Pricing will come soon enough, and although there are some companies pressing the need to get orders in right now or quickly, I am saying be calm, production is already underway, supplies are moving as evidenced by what I was seeing in our warehouses. Why do my pricing negotiations take time? Because I want to make sure that we always maintain or improve product quality each year. Striking a quick price can jeopardize this and quality factories don’t want this any more than I would so they are not interested in quick pricing either. They train their workers how to make quality products and they want them to always do that. Because, once they go “cheap and easy” it is hard to get those employees to get back to quality. So we will not go down that road here at Red Rhino. Too much time has been spent on getting our quality and consistency to the top, and I will not jeopardize it but trying to rush or pressure pricing for the sake of “quickly” gathering orders in the U.S.. No one at Red Rhino or among our trusted and valued customer base wants to see our quality and reliability go anywhere but up! If it takes a little more time to make that happen then so be it, for that is the good price of quality and reliability.