Journey 1995:Non-Stop

Chapter 373 Bidding Price

While handling government tenders, Yan Hui is also continuously seeking new corporate partners.

This year, the government is conducting more than one bidding process, with most of them taking place in March. As a result, many primary agents are raising funds in hopes of gaining an advantage in the upcoming government bidding processes.

Yan Hui's company has over ten million yuan in its accounts, in addition to a loan limit of twenty million yuan and substantial cash flow, making it a company of considerable strength. He needs to secure another supply order so that, after winning the government bid, he can achieve a monthly agency volume of over ten thousand tons.

As a high-tech industry introduced to the High-tech Zone, Heng Hui Chemical received a three-year tax incentive policy from the government at the beginning of its construction. In other words, Heng Hui Chemical could achieve a profit of over 100 million yuan during the three years from 2007 to 2009.

Yan Hui understood that a price war would be inevitable once the tax breaks expired. The reason he hadn't encountered a price war yet was because his competitors were also well aware of his situation; they wouldn't gain any advantage by engaging in a price war at this time.

He needs to establish his other local influence within three years, gain sufficient influence, and achieve new technological breakthroughs within the company in order to enter the next cycle.

Early in the company's operations, Yan Hui had already found a path to grow assets from several million to ten million, while the chemical industry led him to a path from tens of millions to one hundred million. If he wants to further advance and become a company with significant regional influence, he must continue preparing for the next stage.

If all goes well, Yan Hui plans to establish a foothold in foreign trade within two to three years and set up a group before then. In the chemical industry, there is no other way but to move forward or fall behind; at this point, complacency and slackness will only lead to certain death.

At the end of February, Yan Hui went to a construction site bidding event again and successfully won a bid to supply 6000 tons of steel within four months.

After winning the bid, a second-tier agent who knew Yan Hui asked, "Mr. Yan, are you not planning to raise funds to prepare for the government's bidding?"

This man is named Gao Jun. He's a fairly honest boss, polite to everyone, and has a good reputation.

"The government has so many bids, we'll see when the time comes," Yan Hui said, offering no further answer.

At this point, everyone's words were probing; no one would tell the truth in such a setting. Yan Hui was already being quite lenient by not providing false information, especially considering how rampant misinformation has been lately.

Before Yan Hui came here today, he heard that several first-level agents would be coming to participate in the bidding, but when he arrived, he found that he was the only one! The rest were all second-level agents!
"President Yan, please give us some soup in the future too," someone subtly expressed their dissatisfaction.

"Isn't what I'm drinking just soup?" Yan Hui retorted.

This person's words are somewhat naive. In business, everyone relies on their own abilities; saying anything else is meaningless. Yan Hui has money in his account, but he can't invest it in chemical production; putting it into steel trading is the most suitable choice. As for whether others have that much cash, what does that have to do with him?
"Mr. Yan, will you be participating in the bidding for that development in Qiaoxi in a few days?" Gao Jun asked again.

"Mr. Gao, is it convenient to ask about this?" Yan Hui chose to protect himself.

Unlike many other sources of information circulating in the market, Yan Hui would rather remain silent than spread rumors.

"Uh, it's alright, Mr. Yan, you shouldn't have said anything." Mr. Gao said somewhat embarrassedly, as he thought he and Yan Hui were quite familiar with each other.

Yan Hui didn't say much, and left with Wang Yongjun.

After leaving and getting into the car, Wang Yongjun reminded him, "President Yan, aren't we... potentially offending someone?"

Wang Yongjun has been running a plywood business for many years and has become accustomed to being polite, treating everyone with a good attitude.

“How can we say we won’t offend anyone? We’re here to understand that every bid is a competition for business, so no one should criticize anyone else,” Yan Hui explained. “That’s true. That’s the difference between me and Mr. Yan,” Wang Yongjun said sincerely.

Everyone has their own limitations. After knowing Yan Hui for a long time, Wang Yongjun always felt that there was still a lot he needed to learn.

"It's just a difference in position. You're already very capable." Yan Hui looked at Wang Yongjun. "In my position, about two hundred people rely on me for their livelihood. How can they not fight for it?"

In fact, Wang Yongjun was also vying for a share, but this time, he was dealing with bosses he used to look up to and who required him to be polite, which put him under pressure. However, what he didn't know was that in the steel industry, many second- and third-tier agents were only superficially successful.

"I'll sleep for ten minutes." Yan Hui checked the time and closed his eyes.

A few days later, Yan Hui didn't go to the project site in Qiaoxi. He had already secured several orders, with a monthly supply volume of nearly 5000 tons, and his funds were almost exhausted. Next, he would discuss government projects, for which Yan Hui had already applied for a loan.

He initially applied for a 1000 million yuan loan, which was placed in the steel trading company's account. In addition, he transferred another 500 million yuan from the chemical industry, bringing the cash in the account to 1500 million yuan.

Yan Hui prepared meticulously for this government tender. He collected all available government procurement cases and, based on the special "10-working-day payment" system, revised the tender price.

Currently, the steel price quoted by steel mills is still 3800 yuan per ton. After factoring in freight, taxes, and other miscellaneous expenses, the cost per ton that a primary distributor can obtain is around 3640 yuan. This price is roughly the same for everyone.

If you want to maintain a 3% monthly profit, the price needs to be around 3750 yuan.

However, if it can be traded twice a month, and the profit for each transaction is calculated at 1.5%, then the price can be quoted at 3695 yuan.

Yan Hui felt that 1.5% was too low, and 2% was more reasonable. In this way, the profit per transaction would be 2%, and the monthly profit could reach 4%, which was a very good business.

If we calculate based on 2%, the price would be 3712 yuan.

After multiple rounds of evaluation, Yan Hui's price was set at 3712 yuan per ton, with a total supply of 43000 tons and a total price of 15961.6 million yuan.

Only Yan Hui knew this price; even Wang Yongjun was unaware of it.

Yan Hui even printed out this core price himself.

Compared to the normal price of 3750 yuan, the price per ton has been reduced by 38 yuan, saving the bidding party 163.4 million yuan.

Yan Hui's current profit is 72 yuan per ton, and the total profit can reach 309.6 million yuan. If Yan Hui's monthly sales exceed 10,000 tons, the unit price can be reduced by 20 yuan, and the profit can reach close to 4 million yuan.

Regardless of market price fluctuations, the profit is fixed. These contracts are usually recalculated based on the price at the time of delivery, and this is clearly stated in the quotation, so there is basically no risk.

The only problem is how one person can handle this order? You see, the tender documents state that "a maximum of three suppliers" will be selected.

Therefore, Yan Hui had no better options than to submit his bid in accordance with the full bidding requirements.

(End of this chapter)