Chapter 89: The Mountain Man Has His Own Clever Plans

Li Xian's appetite is certainly not small. 

With the Xinao Premium having made headway in the market around Bangye, and with the implementation of the regional sales manager system for the sales department, the production capacity of Xinao Paper Mill has become a limiting factor in the paper industry's development.

And naturally, the larger and now idle Beilin Paper Mill caught his attention.

Whether Beilin could do the subcontracting was unclear to Zhao Dongliang. However, from casual conversations with him, Li Xian learned that Beilin Paper Mill had previously collaborated with the Ma Shengli Group to produce toilet paper, but the operation had not been successful.

Zhao Dongliang and others blamed the previous factory director, Zhong Damin, for the failure. But Li Xian knew that even without Zhong Damin's interference, their collaboration would not have succeeded.

What made Ma Shengli a prominent figure in the domestic paper industry in a short time?

It was his reform of the rigid state-owned enterprise operating system, specifically the factory director contracting system. In the late 1980s, with state-owned enterprises generally losing money and being inefficient, the country urgently needed a reform model that could bring success with minimal change.

Ma Shengli, with his bold approach and willingness to take risks, happened to be in the right place at the right time. In hindsight, after taking over the SJZ Paper Mill, Ma Shengli neither made significant technical improvements to existing products nor created revolutionary marketing methods. He merely clarified the corporate responsibility system, distributed some shares to employees to boost morale, and expanded market channels to increase sales.

Such methods could revitalize one or two factories. But with the media hype and the lure of various local governments, Ma Shengli ended up acquiring hundreds of loss-making factories into his so-called group.

Afterwards, instead of using modern organizational structures to manage them, or improving their technology and products, he tried to apply his previous successful factory director contracting system to stimulate enterprise vitality.

This plunged already struggling enterprises into deeper chaos.

So in Li Xian's view, this was the real reason behind the downfall of Beilin Paper Mill.

However, this didn't concern him. He only knew that at a time when he needed production capacity the most, there was a large-scale paper enterprise with the conditions for producing toilet paper right next to him.

That was enough.

After gathering information about Beilin Paper Mill through discussions with Zhao Dongliang, he immediately called Zhang Dagong, Chen Shulin, and Xu Dequan to his office. He proposed contacting Beilin Paper Mill to discuss subcontracting cooperation to expand Xinao Paper's market.

Unexpectedly, Zhang Dagong and Chen Shulin strongly opposed this idea.

"Director, isn't it good for us to hold onto our existing market? The selling point of our premium toilet paper is its new formula and high paper quality. You need to think carefully. If Beilin does the subcontracting, our formula will be exposed! Beilin Paper Mill is much larger than us—four or five times our size! If they decide to use our formula to make similar paper and sell it on the market, wouldn't we be making clothes for others?"

Chen Shulin slammed the table, unwilling to let the fruits of their hard work be stolen so soon after their recent successes.

With Chen Shulin's stance, others quickly agreed.

Faced with such dissent, Li Xian remained calm. "Everyone, let me ask you something. Before I arrived, did you know that adding wood pulp and cotton pulp to paper makes it better?"

"Yes!" Xu Dequan answered immediately.

"So why didn't you do it?" Li Xian asked again.

"Isn't it obvious? Adding more cotton pulp and wood pulp increases the cost of production! Who would think that something as simple as toilet paper could be sold at such a high price?" Chen Shulin looked a bit embarrassed.

Li Xian smiled at this answer. He shrugged and said, "Exactly! The reason our factory has succeeded is not just because of production. More importantly, we found a different path from other companies and took the lead, which is why we succeeded.

Now, with the market economy reform starting, this is a rare opportunity for us, possibly our only chance. The market is opening up, and not only state-owned and private enterprises are fighting for market share, even foreign companies are sharpening their knives. So, how do our current technologies compare to those abroad?"

This question left everyone in the office stunned.

It was like hearing about a beautiful foreign woman whom you've only heard of but never seen or touched. How would you know if she's really as good as they say?

Seeing the confused expressions, Li Xian let out a sigh of relief.

It was the end of 1992. If nothing unexpected happened, by the end of 1993 or early 1994, Japanese companies such as Unicharm and Kao, and American companies like Procter & Gamble and Kimberly-Clark would begin arriving in China. They would quickly seize the high-end toilet paper market with their international operations and advanced technology.

By then, his technological advantage would be gone. Facing the management and marketing advantages of these multinational companies, even his advantage of being close to timber resources would be lost.

If he clung to the existing market, it was very likely that within a year or two, Xinao Paper would end up like Beilin Paper Mill or the Ma Shengli Group, becoming a thing of the past.

Therefore, before that, he had to seize every opportunity to establish the Xinao Paper brand and at least become the top toilet paper brand in the Northeast region!

In this way, he would have a ticket to the market and the chance to compete fiercely using his knowledge of the future.

Compared to this ticket, a toilet paper formula was insignificant. Moreover, the formula for Xinao Premium Toilet Paper had already been patented and approved by the provincial business bureau.

So, despite the objections from the factory's key personnel, Li Xian exercised his authority and made a unilateral decision. The meeting was hastily concluded amid the unease of the key personnel, and the decision to contact Beilin Paper Mill was approved.

Once the decision was made, Li Xian acted immediately. He took Chen Shulin and a few of the debt collectors from Beilin Paper Mill to Bangye County, then took the newly available passenger bus to Beilin City. The next day, he met with Beilin Paper Mill's factory director, Yuan Daqing, to discuss the subcontracting.

Yuan Daqing had just taken office and was struggling with the issues of idle workers and unpaid wages. Initially, when he heard that Li Xian was a factory director from a bureau-level enterprise seeking subcontracting, he was somewhat displeased and considered it an insult.

As the largest paper mill in Beilin City, Yuan Daqing was unaware of Xinao Premium Toilet Paper's market performance.

Li Xian shook his head inwardly—Xinao Premium had been sold in Beilin City for nearly half a month, close to fifty tons. The slow reaction of the market was surprising. How could it not be a failure?

Currently, Beilin Paper Mill was in a dire situation with idle workers and unpaid wages. Although he initially looked down on Li Xian, he agreed to the subcontracting proposal after some negotiation, accepting a payment of 55 yuan per ton of paper produced.

On the same day, Li Xian hired a lawyer to draft a subcontracting contract. As per Li Xian's requirements, the contract adopted the more common OEM model.

Specifically, Beilin Paper Mill would be commissioned by Xinao Paper to produce Xinao Premium products. The brand ownership would remain with Xinao, and sales would also be managed by Xinao. Beilin would only process according to Xinao Paper's design and technical requirements, and Xinao Paper would pay a processing fee per ton.

According to the contract, Xinao would pay Beilin Paper Mill 65 yuan per ton of paper, while Beilin required each order to be no less than 50 tons.

This requirement seemed to Li Xian more like a way for them to avoid setting up production lines for small orders.

He could only smile and remain silent.

After staying in Beilin for two days and finalizing everything, Li Xian returned to the forestry bureau.

On the way back, Chen Shulin was still in a bad mood. Once they were back at the factory, he finally voiced his frustrations.

"Director, fifty tons per batch—do we really need such a large volume? Where will we sell all that paper?"

Facing this question, Li Xian smiled mysteriously.

"The mountain man has his own clever plans!"

With that, he ignored Chen Shulin's wide-eyed stare and went straight back to his office.