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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]

#121

Post by theptip »

nerdawson wrote: post #82
sva_ wrote: post #62

Earlier quoted context omitted.

Hint: At the point at which they agreed to sell 6000 units, they must've agreed to a price for those units. Then later they figured out that the trader meant cases and upped the number. I'm thinking they expected to get paid about 6 times more (6 packs per case) ...

That's not the way I read it. Like you said, they must have agreed a per unit price. The mistake had to have been purely in volume. When they recognised the mixup with cases / bags, they wouldn't have pushed to deliver the actual expected volume had the unit pricing been a problem.

They agreed a per-unit price. But they thought a unit was a bag, when it was actually a case of 6. So they thought they were getting 6x per bag.

As someone that has gone through the process of trying go to build a business that sells to distributors, I cannot understand how you’d miss a 6x discrepancy in your price model. Your margins are slim, a 6x markup means you’re seeing more than 500% profit margin. (Probably by not having a price model, if I had to guess…)

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

#122

Post by asah »

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 the food business net-terms pain starts from the retailer and work backwards towards the manufacturer.

OTOH, it's very difficult to raise money as a retailer or distributor but 1000x easier (still hard) as a brand.

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

#124

Post by kortilla »

p_j_w wrote: post #104
imroot wrote: post #13

Earlier quoted context omitted.

I know of a few retailers that operate on Net 270 terms for their smaller vendors (Looking at you, Home Depot) and Walmart would tell us that they would reset the 'calendar' if we would call and ask for the status of a payment. This was 2003-2006ish, for the record.

>Walmart would tell us that they would reset the 'calendar' if we would call and ask for the status of a payment. How the hell is this even legal?

By agreeing to it when you go into contract with them.

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

#125

Post by reillyse »

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…

Yea but as a food producer (also a coffee roaster) I also get payment terms from my suppliers. And it all kind of makes sense when you think we are all adding value and margin. The “loan” everyone is giving to the people later in the chain is the cost of production rather than the final sale price. So for a 100k order it might cost 50k to produce in cost of goods. That 50k to the suppliers is probably 35k etc.

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

#126

Post by jt2190 »

WastingMyTime89 wrote: post #76
jjeaff wrote: post #24

Earlier quoted context omitted.

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…

> It’s basically a free short term loan from your suppliers...

Honest question: Is this really a free loan, or is it the cost of the load hidden (i.e. the interest charges are not broken out explicitly)?

For example, if a supplier has shipped goods with a wholesale prices of USD 100 to a retailer with a net 30 day payment term, I would assume that the USD 100 includes all of the costs associated with that USD 100, including the costs of "financing" that USD 100 for 30 days.

Edit: I've known many people who started freelancing and who forgot to include all of their costs when calculating their rates, especially costs for things like repayment terms. This seems like a very easily overlooked problem for most new businesses.

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

#127

Post by [deleted] »

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…

[deleted]

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

#128

Post by timerol »

JimtheCoder wrote: post #113
timerol wrote: post #36

Great to see that all of these got sold! The numbers in this story don't exactly line up, in a way that tells a fun and clearly stressful story: (The cases have 6 bags each.) The intro to the blog post mentions 34k bags of coffee actually made. The initial order was thought to be 6k bags of coffee, but was actually 6k cases = 36k bags of coffee. So it looks like some got sold off between the delivery fiasco and the b…

"I wouldn't be surprised if they look back on this fiasco as their biggest success in a few years." Wouldn't that imply that they would be doing even worse in the future?

I didn't mean it as the biggest success in terms of revenue or profit. I meant that this fiasco would set them up for such natural and smooth future growth that in a few years, when looking back, they would tell the story of Modest Coffee with "our current success started because of a fiasco from a misunderstood contract".

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

#129

Post by chasd00 »

detritus wrote: post #72
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…

i've read comments like this before on hackernews. Are the payment terms not on the contract signed? It seems like something you'd really want to understand before starting a project...

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

#130

Post by iamacyborg »

brookst wrote: post #97
lesuorac wrote: post #38

Earlier quoted context omitted.

Where have you been renting that didn't insist on payment up front? Everywhere I've seen you've payed that months rent by the ~5th of that month or they come after you for interest.

Almost like I acknowledged the specific analogy wasn’t great because rent is typically pre-paid. Fine, let’s talk post paid. Electric bills. How you would you feel about an electric company that sent you an invoice and wanted to be paid daily? Yes, yes, the analogy is also imperfect because consumer electric companies can do auto-pay and walmart generally does not for small vendors. But please try to see the point ev…

> How you would you feel about an electric company that sent you an invoice and wanted to be paid daily

This would be trivial via Direct Debit.

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