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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]

#161

Post by manv1 »

Inventory financing is a severe pain in the ass for small businesses. It makes moving up to the next level incredibly difficult.

Math example:

You sell something for $20, and it costs you $5. You have free shipping, which costs you $3. Shop and CC fees are maybe $2, so you're netting $10. Then taxes means you net $6.

So if you sell 10,000 units you've netted $60k. But to make that $60k you need to spend $50k up front to buy the inventory, and maybe $2k more to ship the inventory to you. Then you need a place to put it, so maybe $1k/month.

So when you need to order your next batch of inventory you need, say, $52k. You haven't made that much yet, because your inventory has a 2 month lead time. So you use money from the 60k in "profit" to buy inventory, leaving you no profit.

At that point you haven't made anything. It looks like you're making money, but you aren't. Maybe you dip into your tax reserve fund to buy that inventory, but the fact is that you probably haven't paid yourself much, if anything.

This is the brutal reality of small business math.

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

#162

Post by Dylan16807 »

reillyse wrote: post #135
interactivecode wrote: post #84

Earlier quoted context omitted.

I would love it if the EU or government would enforce equal payment terms for whole company. Lets say a shop wants to have a net 30 terms with their suppliers, then they should also offer net 30 terms for their customers. This would equalize power dynamics. The large corp shouldn’t be allowed to demand immediate payment on one side and then just significantly delay payments on the other side.

So I’d sell products to my customers (say bags of coffee) and then 30 days later come by their house (charge their credit card) to collect? This is a terrible idea. Half of the people wouldn’t have the money and your company would become a debt collection agency. You’d be forced to charge at least 3X for the product.

That's the point. If you don't want that, then don't do it to your suppliers.

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

#164

Post by jacquesm »

manv1 wrote: post #161

Inventory financing is a severe pain in the ass for small businesses. It makes moving up to the next level incredibly difficult. Math example: You sell something for $20, and it costs you $5. You have free shipping, which costs you $3. Shop and CC fees are maybe $2, so you're netting $10. Then taxes means you net $6. So if you sell 10,000 units you've netted $60k. But to make that $60k you need to spend $50k up front…

Depending on the industry 30 or 60 days net may help or hinder you even further.

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

#165

Post by nebulous1 »

theptip wrote: post #121
nerdawson wrote: post #82

Earlier quoted context omitted.

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 b…

> 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.

The problem with this interpretation is that it would mean that the entire second half of the story would realistically have to be a lie. Once they realized that they were getting 1/6th of what they thought, they would have to find a way to get out of the contract or go bust, which is the opposite of what they say happened. As such, it's too much of an accusation to make with essentially no evidence.

There's definitely something odd about the unit pricing and unit ordering though.

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

#166

Post by interactivecode »

caseysoftware wrote: post #147
interactivecode wrote: post #84

Earlier quoted context omitted.

I would love it if the EU or government would enforce equal payment terms for whole company. Lets say a shop wants to have a net 30 terms with their suppliers, then they should also offer net 30 terms for their customers. This would equalize power dynamics. The large corp shouldn’t be allowed to demand immediate payment on one side and then just significantly delay payments on the other side.

> they should also offer net 30 terms for their customers. Consumers already have Net 30 terms via credit cards. The difference is that the shop isn't waiting for you to pay and the credit card company takes on the risk.

quite a significant difference for the complete population of Europe where basically no everyday purchases are made by credit card

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

#167

Post by odysseus »

sva_ wrote: post #6
Eleison23 wrote: post #2

When I was homeless, I found a job with a "call center". Our training consisted of teaching us the cover story and how to handle reactions to it. We began with a joke involving alcohol. Then if they didn't hang up we launched into the pitch: "We just lost our lease on our warehouse, and we've got to move all these pens. You can get them imprinted with your name and phone number for a bargain. What do you say?" I quit…

I am curious about the joke involving alcohol.

If alcohol can damage your short term memory imagine the damage alcohol can do

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

#168

Post by interactivecode »

Dylan16807 wrote: post #162
reillyse wrote: post #135

Earlier quoted context omitted.

So I’d sell products to my customers (say bags of coffee) and then 30 days later come by their house (charge their credit card) to collect? This is a terrible idea. Half of the people wouldn’t have the money and your company would become a debt collection agency. You’d be forced to charge at least 3X for the product.

That's the point. If you don't want that, then don't do it to your suppliers.

indeed. They should realize how ridiculous the whole net 30 days is .

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

#169

Post by chadash »

merb wrote: post #154

who even thinks that 6000 units will be bags. I mean considering that we are talking about food distribution it can't be bags. now consider aldi in the us or in germany, it has over 2k stores, consider it will send 50 bags per store (which is not a lot, but that would probably be around 2 cartons, which is fine for a start or special) it would only be possible to send it to around 120 stores, so why should they even…

When you sell to a big chain, they don't necessarily put the products in every store. I have a friend in the food business and when he was getting started, the big chains would put his product in a small number of stores to see how they sold before putting in larger orders.

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

#170

Post by paxys »

How on earth do you accept an order for X “units” without ever double checking what a unit means? Even if it was really individual bags, wouldn’t you at least want to know what weight the distributor expects?

They use the word “grift” so many times, but really it was just stupidity on their part. It’s your job to understand how the industry you are entering works.

The only grift is this fake sob story to get sympathy and get rid of excess inventory (and of course the internet ate it up).

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