The spring breeze of the times had not yet completely blown away the ice of the planned economy when a chilling current from the market suddenly swept through the Red Star Factory.
Initially, the news came from the sales department in scattered bits and pieces. Several regular customers who used to come and pick up goods regularly began to hesitate, make excuses, and even reduce their order quantities when signing the annual purchase contracts.
"Section Chief Wang, it's not that we don't trust Hongxing Factory's products, it's just that... nowadays, the small agricultural machinery made by the township and village enterprises themselves is so cheap!" An old customer from Northeast China rubbed his hands, looking troubled.
"The quality of our CA10b gearbox housing is undeniable, but the price is also much higher than those newly emerging small factories. They can even offer credit over there." The sales manager reported at the factory meeting, beads of sweat glistening on his forehead.
Bad news followed in quick succession. The planned allocation figures for several major products, previously centrally procured and distributed by the provincial machinery bureau, began to shrink significantly. The reason given was "inventory backlog in some areas" and "the need to adjust the plan according to market demand."
Initially, the factory wasn't too worried, since the "plan" was still the core principle. Production continued according to the adjusted, somewhat conservative plan. But soon, harsh reality dealt everyone a heavy blow.
Warehouse keeper Lao Zhou was the first to sound the alarm. He rushed to the production department, his voice trembling: "Section Chief! It's terrible! Warehouses No. 1 and No. 2 are almost full! In previous years, the warehouses would be empty at this time, waiting to be shipped out, but now... now the outflow is not as much as the inflow!"
The deputy factory manager in charge of production led a team to inspect the warehouse. Pushing open the heavy warehouse door, a stench of metal, machine oil, and dust assaulted their nostrils. The scene before them sank everyone's hearts: the once spacious warehouse was now crammed full of gearboxes, transmission housings, and agricultural machinery parts of all types, almost obscuring the walls. A thin layer of dust covered the product boxes, casting a shadow of decay over these once-precious items. Only the narrow passageway indicated the occasional sporadic shipments.
The heavy words "unsold stock" were like invisible shackles, suddenly placed around the neck of the Red Star Factory.
The finance department's reports were even more alarming. With a large amount of products piling up in the warehouse, unable to be converted into sales revenue, while costs such as raw material procurement, worker wages, and equipment depreciation continued to accrue daily, the factory's working capital was dwindling rapidly, the collection cycle was getting longer and longer, and accounts receivable were piling up like mountains.
The number of times bank loan officers came to visit increased significantly, and they smiled less and less. Their tone changed from supportive to a more subtle collection effort and risk warning.
An unprecedented sense of panic began to spread throughout the factory.
"I heard the warehouses are full and they can't sell them!"
Will this month's salary still be paid on time?
"Will our factory... be like some other factories, unable to pay wages and forced to shut down?"
Inside the workshop, the workers toiled while whispering anxiously, the roar of the machines seemingly unable to mask the pervasive anxiety. The production enthusiasm previously ignited by the implementation of the new management methods had been dampened; while output remained, the drive to achieve the goals had noticeably waned. What's the point of producing so much or so well if it can't be converted into money?
The factory leadership held meetings more and more frequently, and the atmosphere became increasingly tense with each meeting. The ashtrays were always quickly filled with cigarette butts.
"We must find a way to expand the market! Send everyone in the sales department out there! We have to sell the products, even if it kills us!" The factory manager slammed his fist on the table, his voice filled with anxiety.
“Relying solely on the sales department won’t work! Our products have been the same for decades, and we don’t have a price advantage. How can we compete with those flexible township enterprises?” someone pessimistically retorted.
"How about...we lower the price too?"
"Lower prices? The costs are there; lowering prices means losing money! How long can a business operate at a loss?"
The debate raged on, yet a quick and effective solution remained elusive. Accustomed to the stable production under planned directives, the Hongxing Factory experienced for the first time the ruthless pressure of the invisible hand of the "market economy." Even the warm factory buildings seemed unable to withstand the chill seeping in from the outside.
Liu Li sat in the conference room, listening to reports and debates from all sides, her brow furrowed. She looked out the window at the mountains of inventory, then at the report in her hand showing the increasingly strained cash flow, and felt a deep sense of urgency. Internal reforms in technology and management had just given the factory a glimmer of hope, only to be met with a drastic change in the external environment. This first shock from the market came so fiercely that this large, long-established state-owned factory was caught somewhat off guard.
She knew that the real test was just beginning. The Red Star Factory, this large ship, had to find a new course as soon as possible; otherwise, it might very well run aground in this very first wave of storms.
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