Zhengyuan Group’s Materials Supply Department: Adopting Multiple Approaches to Ensure Supply Chain Integrity; A Culture of Cost Accounting to Reduce Expenses

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Zhengyuan Group’s Materials Supply Department: Multiple approaches to ensure supply chain stability; a culture of cost control to reduce expenses. Author/Source: Zhengyuan Group. Date: 2021-11-03. Clicks: 7. Since the third quarter of 2021, amid the implementation of domestic policies aimed at controlling energy consumption, the supply and demand situation for industrial chemicals has remained tight； Internationally, countries are accelerating the process of lifting restrictions; extreme weather conditions hinder the development of green energy. With the arrival of the winter peak in energy demand, there is an increase in the need for traditional energy sources such as oil and natural gas, leading to rising prices. Due to the combined impact of these market factors, the prices of chemical raw materials have risen significantly. Since the second quarter, the prices of the chemical raw materials necessary for Zhengyuan Group’s production have risen sharply; in particular, the price of soda ash increased from 1,855 yuan per ton to 3,500 yuan per ton, a rise of 88.7% ； Liquid caustic (32%) rose from 658 yuan/ton to 2070 yuan/ton, an increase of 214.6% ； Methanol’s price rose from 2,488 yuan per ton to 3,400 yuan per ton, an increase of 36.7%. Among them, the price of the hydrogen peroxide additives used by Baipo Zhengyuan has seen a significant increase. The average purchase price of trioctyl phosphate in the second quarter rose from 37,265 yuan per ton to 100,000 yuan per ton, an increase of 168.3% ； In the second quarter, the average purchase price of anthraquinones rose from 148,110 yuan per ton to 168,788 yuan per ton, an increase of 14%, which had a significant impact on the procurement costs of Zhengyuan Group. Faced with the severe situation of significant fluctuations in external market prices, the Materials Supply Department of Zhengyuan Group has taken a series of measures to address this issue. It strives to implement Lu’an Chemical Group’s concept of a \"cost-conscious culture,\" aiming to reduce procurement costs while ensuring that production needs are met, and making sure that every penny is spent where it is most necessary. The Materials Supply Department actively establishes communication channels with the centralized procurement department of the chemical group, to promptly exchange information on market price changes and the inventory levels of its subsidiaries, and to jointly analyze and assess market trends. While ensuring production needs are met, it enables business personnel to better control procurement timing and quantities, thereby reducing overall procurement costs. At the same time, it promptly informs all subsidiaries of the changes in the chemical raw material market, reminding them to submit demand plans in a timely and appropriate manner based on production needs, in order to minimize consumption and reduce production costs. In line with the specific requirements for propylene carbonate at Baipo Zhengyuan, efforts were made to find recycled propylene carbonate raw materials that could meet the production needs. Discussions were held on several occasions with Jinmei Jintai Chemical and Qingdao Hongye Chemical, and ultimately 64.9 tons of propylene carbonate were purchased. The purchase price was 8,350 yuan per ton lower than that of new propylene carbonate available on the market, resulting in total savings of 542,000 yuan in procurement costs. Next, the Materials Supply Department will continue to refine and strengthen Lu’an Chemical Group’s \"culture of cost management.\" In light of changes in market conditions and taking into account the actual situations of each company within the Zhengyuan Group, it will keep working hard to conduct thorough analyses and evaluations, dynamically adjusting and optimizing procurement methods, so as to ensure that all units within the group have access to materials of high quality at favorable prices.