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Distributor cancelled an order and we need to move 30k bags of coffee [updated]

modest.coffee

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Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#71

Post by treis »

davidmurdoch wrote: post #19
treis wrote: post #5

This doesn't really make a lot of sense. How can bags be mistaken for cases when negotiating a deal? The price would be different by an order of magnitude. Why would orders trickle in like this if the product isn't getting shipped from the distributor and sold? Maybe I'm overly cynical and wary of things on the internet but somethings not adding up here.

It probably went something like "we can do $5.00 per unit, sold in cases of 6" "Ok, we'll order 6000 at that price"

Sure, but when the order comes written down something would be wrong. Either you would have:

6,000 units @ $30 per unit

Or

36,000 units @ $5 per unit

You can't have:

6,000 units @ $5 per unit with the expectation that you're going to get 6,000 cases

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#72

Post by detritus »

georgeburdell wrote: post #3

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive beh…

In my experience, the larger the organisation, the longer the presumed payment terms. I've learnt to demand payment in advance, otherwise I'll get caught up pos-hoc in the labyrinthine and entirely cloistered whims of accounts departments who seem to think they're morally-placed to dictate whatever terms they wish.

Worst in my experience was Unilever, who simply assumed they could pay in 90 days, which ..er.. rankled. Thankfully the job I did was directly for someone quite high up, so a week's worth of pointed emails and calls somewhat hastened payment.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#73

Post by joegahona »

People are getting hung up on the "cases vs bags" error, but it sounds like the small-coffee people overcame that.

Selfish observation: this coffee has to be close to its shelf life, despite being roasted in Jun/Jul and despite being sealed. A "one year best buy date" is unreasonably generous.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#74

Post by cameronh90 »

georgeburdell wrote: post #3

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive beh…

One thing about credit accounts is that it allows the people placing the order to be different to the ones involved in settling the account, and for the latter to be handled asynchronously rather than holding up the order.

Imagine I need some stuff now (or on the next truck), I can place the order and it will be immediately loaded on the truck. Then separately, they'll send an invoice to the accounting department who will settle it over a week or two, which may involve moving money around, foreign exchange, etc.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#75

Post by JimtheCoder »

AlbertCory wrote: post #47
JimtheCoder wrote: post #45

Earlier quoted context omitted.

"One of those hard calls that nothing in business school can prepare you for." Do you really need a business school education to see that this was a mess right from the beginning, though? It sucks for the small business owner, but at the same time...if you sign one of the largest contracts of your businesses life and are not even sure that you are selling individual bags of coffee or cases of bags of coffee... No bus…

did I not say that?

[flagged]

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#76

Post by WastingMyTime89 »

jjeaff wrote: post #24
georgeburdell wrote: post #3

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive beh…

I remember in a corporate finance class in college, we did a lot of calculations comparing prepayment to net 30, net 90 terms, etc. The game is to maximize cash flow, though in the end, it doesn't make a lot of difference except in very thin margin businesses. But the general wisdom is to always try to take maximum advantage. I always felt that it is a silly strategy considering that it strains your suppliers, provid…

It’s basically a free short term loan from your suppliers who are eating the inflation instead of you. It does strain your suppliers but if your business doesn’t really need them and you can force them to accept it, why not?

As a supplier, payment delay is basically a cost you have to bear to deal with large distributors. It’s a trade off between somewhat predictable volumes and cash flow availability.

I would never do a one off with a large distributor however. You are going to get swindled as this article nicely illustrates. Large distributors buyers have years of training exploiting people in your situation.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#77

Post by 300bps »

anon223345 wrote: post #69

My friends company (software consulting) got a contract with Amex, super excited Took months for them to even respond to emails about their invoices, they never ever paid on time or even a month a late Dealing with giant firms is the worst and there’s nothing you can do as a small vendor besides having your game tight upfront and if you do have your game tight upfront they won’t hire you in most cases

I was buying a house many many years ago at a time I was self employed. I owned a computer company and my largest client put in an order for 20 computers.

They had Net 30 terms with me so I said to them, "I'm very sorry, I am buying a house and can't float the money for 30 days. I can refer you to someone else to buy them from."

The general manager of the company told me it was no problem, send the invoice directly to him and he would pay me the day he gets the invoice.

I sent AP and the general manager the invoice and they didn't pay me for about 45 days after they received the invoice.

As a result, I barely made settlement on my house - I was literally cashing in change at the bank. I had no furniture, not even a bed and slept on the floor for the first month I lived there.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#78

Post by seneca »

joegahona wrote: post #73

People are getting hung up on the "cases vs bags" error, but it sounds like the small-coffee people overcame that. Selfish observation: this coffee has to be close to its shelf life, despite being roasted in Jun/Jul and despite being sealed. A "one year best buy date" is unreasonably generous.

> Selfish observation: this coffee has to be close to its shelf life, despite being roasted in Jun/Jul and despite being sealed. A "one year best buy date" is unreasonably generous.

Certainly. Then consider the fact that this small business is now claiming they're going to ship thousands of individual cases, all sold with free shipping. That's going to take quite a while.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#79

Post by danhodgins »

jjeaff wrote: post #24
georgeburdell wrote: post #3

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive beh…

I remember in a corporate finance class in college, we did a lot of calculations comparing prepayment to net 30, net 90 terms, etc. The game is to maximize cash flow, though in the end, it doesn't make a lot of difference except in very thin margin businesses. But the general wisdom is to always try to take maximum advantage. I always felt that it is a silly strategy considering that it strains your suppliers, provid…

jjeaff - BNPL (buy now pay later) by companies such as Affirm may help level the playing field in applicable industries/cases as a 3rd party can shoulder the risk.

With BNPL, small companies are paid right away (within 1-2 business days), and the BNPL provider is responsible for collecting payment from the other party.

I don't think BNPL it would apply in this case specifically as the grocery industrial complex seems stuck in the last century, but in other cases it is an innovation in payment terms that could help.

Full disclosure - I have no affiliation with Affirm or any other BNPL provider.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#80

Post by lotsofpulp »

viburnum wrote: post #16

I can't put my finger on it exactly but there's something about this story that isn't making sense.

For me, the first thing that does not make sense is investing all of the below into a venture has a 99% track record of being low profit margin and low ROI (prepared food business, especially something as fungible, nonessential, and low barrier to entry as coffee):

> Mid July, after 6 weeks of roasting 21 hours a day on the roaster in 3 shifts, working 12-16 hour days, regularly working until 11 pm to finish bagging and boxing, bringing in every friend, young and old, to help get this order done, we sent off the last pallet. In the end we produced 34,000 bags of coffee, an insurmountable feat. We were exhausted, mentally, physically, and emotionally, but we did it. We figured it would take a couple of weeks to move to the retailer’s warehouses and then the payments should be released. To make this order happen, we had to take $45,000 in personal loans from friends and family, $65,000 in business credit card debt, $35,000 from a business loan, $60,000 in personal credit card debt, $20,000 in outstanding invoice debt, and $11,000 in loans from us personally to the business, for a total of $216,000 in debt. We maxed out every credit card and depleted our personal and business savings. We had no other choice but we reassured ourselves that the $250,000 that this opening order would pay us and continued future orders from this retailer would be worth it in the end.

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