In order to effectively cope with the market impact, I recommended the "Three Principles" to the industry on behalf of the association at the Hanzhong Conference on August 11. "Production based on sales" is to adhere to the contract organization of production, is not to turn the limited cash into inventory, in fact, this is a production scheduling principle. "Production based on efficiency" is to decide whether to receive production and the priority of receiving and scheduling production based on whether there is benefit or according to the benefit level. The bottom line is to avoid the net outflow of cash and do not produce operational "blood loss". In fact, this is an order receiving principle. The "cash" of "cash" refers to "cash", which is not to turn the limited cash into receivables, which is actually a shipping principle. The three principles together can be called "three fix three don't", is the process of business orders, production scheduling and delivery of specific constraints, in the current market situation is mainly aimed at the safety of operation, many enterprises are to take it as the bottom line in the implementation, although the expression is different, the basic principles are consistent.

The principle of "three decisions and three no" is put forward as the bottom line of operation. In fact, the daily operation of enterprises should also grasp these principles, but the degree of control is different. Under normal market conditions, the principle of "three decisions and three no" is mainly to improve the profit level as much as possible through the best match between orders and production capacity, and it is the profit with cash guarantee, or the profit with high amount of gold. In the face of market impact, enterprises pay more attention to cash flow than to profit. Therefore, some people say that the profit statement is "face", the balance sheet is "foundation", and the cash flow statement is "day". To live the first to protect cash, cash can live. In the current market situation, enterprises must hold this bottom line in the operation, this is the current realistic choice. In the face of the severe market situation, the market judgment should be rational, specific measures should be realistic, and the overall response should be positive, which is the concrete embodiment of the industry response policy of "rational, realistic and positive" that we have repeatedly emphasized.

The first principle of "production based on sales" is to organize production according to the contract. Its basic proposition is not to turn cash into inventory. In fact, this is a production scheduling principle. This is also one of the basic business principles of enterprises, especially in the market conditions of insufficient demand, it is more important to emphasize and adhere to a principle. The challenge is that this may mean voluntarily giving up some capacity, or making price concessions in exchange for contract increments to maximize capacity, subject to second principle. What operators want to balance is that the production schedule is insufficient, the capacity utilization rate is low, the cost will rise, which is a problem of choosing interests. The result of over-order production is a backlog of products sitting in warehouses, which can be a big problem in a downturn. The occurrence of this situation may sometimes be the intentional action of the operator, may also be the operation of the production, marketing and research coordination system is not smooth, different goals, or even the result of their own policies, but usually seems not so serious, so the implementation should be resolute. What about the high inventory that has been built up? This is not a simple "firm" solution to the problem, to set appropriate destocking targets and cycles, but also to take into account the minimization of losses, and dynamic coordination, because the market is always changing, this is the challenge. Operators are going to have to work harder this time. As for the inventory standard set by each enterprise, it is different due to the way of operation and business strategy, as well as the market and users faced. "To sell production" is not no inventory, but do not advocate to increase the inventory at the cost of hard production line at full capacity, will bring more trouble.

The second principle of "production based on efficiency" is to determine whether the contract should be accepted by whether the benefit meets the operating requirements. It is argued that the net outflow of cash should not be generated in order to maintain the scale of production. The bottom line is that the loss of operational blood should not be incurred. The shagang group in the process of dealing with single docking and production scheduling is decorated very specific, reflect is the principle, put forward "to adhere to the cost of production organization and management, one is to optimize production scheduling, the second is to pay special attention to the selective orders, according to the result of cost accounting pays special attention to the production of dynamic balance, refinement of cost accounting, marginal benefit as production baton: Profitable variety production, marginal benefit of the variety control production, no marginal benefit of the firm do not produce ".

Receiving orders is a matter of sales, but because of the first principle, the contract quantity is output, so instead of "sales based on efficiency", we directly say "production based on efficiency". In the MARKET CONDITION of INSUFFICIENT demand, the implementation of "efficiency based production" means that it may be necessary to voluntarily abandon part of the contract, and set a price bottom line for product sales, which should be dynamic bottom line. Match its execution is based on reasonable cost and dynamic cost accounting, product prices and raw material prices are dynamic, and itself has different on financial accounting methods, so the actual execution team is just the production and marketing research is not enough, is often a combination of production and marketing research money, this is a challenge to operators, is also on the cost management of an enterprise strength test. When the market is very bad, some enterprises tend to take the "marginal benefit" as the bottom line, that is, only consider the change of the cost of hedging, regardless of the other, change the money to buy raw materials to make production cycle, as long as I do one ton more without increasing the net cash outflow, so called marginal benefit. Obviously, this is a helpless choice, so it must be a temporary choice, the purpose is to maintain the cash turnover of the enterprise and a certain market share. In fact, companies do not measure all products on the basis of marginal benefit. In addition to raw materials and other production materials, the project can be delayed, but the interest needs to be paid, the salary of the management personnel needs to be paid, and the effort to earn back. The "marginal" alone is not enough. The normal standard should be "effective" rather than "marginal". But it's acceptable as a realistic option for some businesses today, because you have to get through that first, you have to get through that, you have to have cash flow, you have to maintain a certain market share, you have to keep the business running at the level possible, and you have to have other responses in your interactions with the market. Markets change, and so do businesses. In the face of severe challenges in the market, in addition to "three fixed three don't", there are "cost hexahedron", and "enhance added value", we have at least these three swords can be used. "Three RULES and three NO" is aimed at the problem of business safety, "cost hexahedron" is aimed at the problem of business foundation, and "enhance added value" is aimed at the problem of competitiveness.

From the perspective of the industry, the cost level of each enterprise is different. For the same product, firm A has a benefit, firm B is close to the margin, and firm C may have a net cash outflow. To be clear, "in effect DingChan" itself is a basic principle or the general principles of the enterprise management, not only in the market downturn, at any time is the basic principle of operation, just benefit of different criteria, and when the market good sales department to meet the standard of the contract, especially when you have the option to the market, A good combination of contracts can directly create benefits, generally supported by information systems.

The third principle of "to sell", here "now" is cash, its basic idea is not to turn cash into receivables, said the order principle and production arrangement principle, this is a delivery principle. The first task of sales is to recover the money, together with the first principle is commonly referred to as the "two gold" management. The difference is that in current market conditions, to prevent increasing sales at the expense of increasing receivables, its bottom line logic is that inventory is better than receivables, at least I have the product in hand. Of course, if you carry out the first and second principles well, there will be few problems with the third, which is essentially a relief principle, because the "sales" of the first principle, "sales by sales", should be the "sales" with the recovery of the loan guarantee, which is a problem of contract quality. The "effect" of the second "production based on performance" should be the "effect" supported by cash, so order taking, production scheduling and delivery are a whole, to comply with a common standard, maybe some enterprises are clear, maybe some enterprises are not clear. As above, the formation of receivables how to reduce is a strategic problem.

As for the recovery of payment for goods, here I share my views and practices with you based on my work experience. The sales people are the people who sell the goods. The production people make the product. The sales people are responsible for selling it. By now, everyone will probably realize that this definition of salesperson is certainly incomplete and even wrong. How to define the task of the salesperson? In my opinion, the tasks of a salesperson are divided into three levels. The first level of the task: the collection of money is the basic task of sales personnel. Directly define the sales task as the collection of money, the entire value creation of the manufacturing process you are responsible for recovering it, not halfway, otherwise it is not called sales. The task of the second level: providing service is the essential task of sales personnel. Moreover, "service creates value" is not only an idea, but can be reflected in direct financial results. The "value added" of value-added services is measurable and an important component of added value. Therefore, the action direction of providing value-added services is determined: facing users, approaching users and entering users. Facing the user to solve the problem of understanding, attitude, the status of the user. Close to the user to solve the problem of service system layout, such as the nationwide processing and distribution system is out of this. Baosteel is near you. Now Baowu is not only the service close to the user, the group production layout has been able to maximize the near production, closer to the user. Into users found that users demand, refers to the depth and the depth of user interests binding, including mentioned in the "cost of hexahedron" to the user use cost, cost management is intended to cover only really enter user, a user's position, can be realized, or even difficult to understand this sentence meaning, this part also involves the task of the third level. The task of the third level: finding requirements is the strategic task of the salesperson. From the basic task to the essential task to the strategic task, this is a complete performance of the responsibilities of sales personnel. Of course, it depends on the system to coordinate, but the salesperson must be aware that this is his responsibility. The collection of payment seems to be the end of the business process, but the demand is found back to the front end of the business process. The process of production, sales and research is circular in this way, and it is back to the front end of product development. As a salesperson, you work every day, and the user, and you usually also is mastering the technical engineers, do you know how to use your product, the user do you know why the user use your product, you should also know how we can provide users with better products and even substitute, moreover, it is often the user does not know, it's found that demand. In other words, simply offering the product as the user asks is a very basic and simple behavioral requirement, and certainly not standard practice for leading companies. The principle of "three decisions and three NO" refers to the complete function of sales staff, which is only my understanding and understanding, not necessarily correct, but it is instructive in practice at that time. Now the idea may be more advanced, I can only talk about the history here.

The above three principles, related to the daily operation of capacity, cost, cash three relations, and through which is cash, especially in how to grasp the "margin", the implementation is really not easy. For the "two gold", it is usually the increment to be determined, the stock of strategy. There are at least two bases for implementation: One is to have a perfect cost management foundation support, if the cost of normal, there is no tube to the sake, now try so hard, I'm afraid it is no use, of course you can also simple, the effect has made when the BieLun, you may be faced with the problem of executor from a lot of sense, because there is no data to support decision making is no sure answer. Another is to have a fast and unimpeded market information feedback system. Changing costs, changing prices, and market information related to upstream and downstream can hardly be quickly translated into decisions. General decision-making systems can only capture the main information, which I think is enough. During the 2008 financial crisis, in order to implement the management reform policy of "simplicity, speed and cost", I implemented the zero-level response mechanism of market information at Baosteel for a while. The so-called "zero-level response" is that the important information of the market terminal is uploaded synchronously to decision-makers at all levels. If there are three levels, the three levels will be obtained at the same time rather than uploaded step by step. This would be a sudden increase in workload for policymakers, so it would be wartime rather than normalcy. Of course, this also has a premise, your market terminal must be the real terminal, is the terminal who really grasp the information, otherwise even "zero-pole sharing" is still equal to zero. The market terminal of Baosteel is a regional company system whose main function is to serve direct customers. Also, temporarily define what information is important to share at zero level. In fact, there is no certain way to deal with a crisis, but it depends on the enterprise environment and even personal habits. This is different from the routine management, because you often make decisions on the margin.

You have to have a wartime system to deal with a crisis, and we know that some companies including international companies have already activated emergency or wartime mechanisms. The main difference between wartime mechanism and normal mechanism is the behavior of decision-makers and operators at all levels: the decision-making chain should be short, the center of gravity should be moved down, the sound of guns should be heard, and the users should be seen.

There is also an important point to be discussed here, whether the operation principle of "three determinations and three rejects" matches the overall requirement of stable growth. Implementing this set of principles is a necessary measure for some enterprises to respond in an orderly manner, reduce losses and ensure the quality of operation, while for others it may be a matter of ensuring operation safety and survival. If so, to protect enterprises is to protect employment, and to protect employment is to protect people's livelihood. It is also important for financial stability that companies are able to continue to operate.

During the face-to-face survey of member enterprises, the association also learned a disturbing situation that some local leaders, in order to achieve local targets, first required the enterprises to produce at full capacity, regardless of the economic benefits of the enterprises, even if the electricity consumption was low. The decision makers of the enterprises are in a dilemma, because the support and care of the local leaders for the enterprises is omnidirectional and inseparable, so it is not easy to make the right decision in such an environment, but I think there is no choice. It's not a lot, but it's a warning. In fact, where such a requirement can be put forward to the enterprise, it will also switch off and limit electricity regardless of how the enterprise implements dual control of energy indicators, because he is responsible for the indicators. The development we want at any time should be productive and of good quality, and therefore contribute to the national economy and social development. If we abandon our basic value proposition because of changes in the market, we will surely pay a price. In fact, how to grasp business principles and respect market rules is a test for both enterprises and local governments.

Due to the downturn in steel demand and some exceeded expectations, the steel market appeared supply and demand imbalance, all enterprises are facing serious challenges, monthly industry-wide losses have become a reality. It is the consensus of the whole industry to strengthen the self-discipline of the industry, organize production according to the market demand, adjust the production intensity reasonably, and ease the market impact with the efforts of the supply side. Under the condition of market economy, it is not necessarily a priority to solve problems by issuing an index. However, it is not only necessary to form consensus in the industry, but also necessary to take action to understand the market situation, respect the market rules and advocate healthy and rational business operation behavior. The principle of "three armed don't" if accepted for the industry and become the common abide by the code of conduct, I believe it will be change, because the conscious action of enterprise and the power of self-discipline than from external constraints, consistent with corporate interests behavior orientation than simply advocate to protect the interests of the industry may be more effective and more durable.

Of course, it has to be faced that if this market challenge is long-term, not all enterprises can return to the origin or obtain new development through efforts, this is the market. However, there will be some enterprises that will lead China's steel industry to continue to move forward in the wind and waves, and there will be some enterprises that will gain new life in the wind and waves and step into a new future with a renewed attitude. First of all, I saw that the chairman units face up to the reality, take active actions and show their strengths: Baowu gave full play to the synergistic advantages of the group production line and vigorously promoted "three reductions and two increases"; Anshan Iron and Steel Company has promoted reform and restructuring in a substantive way, focusing on creating a development pattern of "dual core and third pole". Shougang continues to adhere to stable scale, focus on high added value and high standards of environmental protection investment to build a new foundation for development; Hegang is striving to optimize the "two structures" to explore and show the advantages after location adjustment. Shagang is rational and pragmatic, rapid response, comprehensive deployment and implementation of the "four advances"; Citic Pacific Special Steel focuses on innovation, strengthens user technology research, promotes the "Little Giant" project, and expands new areas with high added value. Association will be item by item, to carry out the July 29 general assembly and President of resolutions and task, on the basis of thorough member enterprise, actively found, summarize and spread the member enterprises in the management and management excellence, technology and market practice, in the very period, do your best to do a good job of Bridges, build platform, guide and coordinate the iron and steel industry meet the challenge, overcome difficulties.