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

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

#291

Post by Dylan16807 » Fri, Dec 30, 2022, 9:10 PM UTC

brookst wrote: post #261

Dylan16807 wrote: post #190

Earlier quoted context omitted.

By my reading of the story, upfront payment wouldn't have changed the number of payments. And forget about daily. It's very reasonable to want monthly pay, and should not be a burden at all. And monthly pay would need at most a month of float, on average probably less. That's not where the real payment issues are.

Yeah frequency of payments was an example, but kind of a red herring. Consider it as “running AP differently for a small subset of vendors” as an abstract concept. It’s expensive to do 5% of your business differently than 95%.

I believe the idea is that no vendors should get treated that way.

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

#292

Post by chucksmash » Fri, Dec 30, 2022, 9:10 PM UTC

dtnewman wrote: post #237

lisper wrote: post #174

Others have pointed this out, but no one has actually done the math yet, so... 6000 "units" for $250,000 is $41/unit. At wholesale. For a product that retails for $16/bag. It is just inconceivable that no one noticed this discrepancy. This is not a "grift" by the distributor, this is an elementary and obvious fuckup by the producer. In fact, it's so elementary and obvious that it would not surprise me a bit if this w…

From the article: > June 2022 comes, and the orders for this retailer start coming in from the distributor. This coffee was shipping to five distribution centers so we were receiving multiple orders. The orders were large but we thought we could handle it. Then the orders kept coming, spread apart by days. So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in pi…

> Reminds me of my friend who got a lucrative job offer from a large investment bank out of college, but wanted to adjust the terms in the non-compete section of their contract [...]

Maybe such requests wouldn't work in consulting/IB/law where it seems like starting comp is very regimented ("our first year asssociates all get $X unless our competitor across town raises their offer to all their first years") or in the case of juniors, where firms aren't expecting much from a 22 year old fresh college grad beyond learn to do things the way we want and grind, but I think there's still value in bringing up such matters even if they are non-negotiable.

"We can't change the contract? Darn, I really care about IP assignment clauses!" gives you some plausible ammo for asking for higher comp without just transparently saying "give me more money because you have it and I want it," plus you're subtly implying you are someone who produces IP that has value, not like all those other programmers who didn't ask.

I've never gotten a company to change their IP assignment clause for me, FWIW, but I have had success getting other exceptions.

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

#293

Post by Espressosaurus » Fri, Dec 30, 2022, 9:12 PM UTC

halkony wrote: post #137

seneca wrote: post #66

Earlier quoted context omitted.

Those options were explicitly laid out in the contract they signed, they even say that in the blog post. It's not a grift if they tell you up front exactly what will happen.

I'm happy they were able to move their stock, but yeah. Something got signed with these terms in it. So you need to account for the possibility or have it renegotiated. This sounds like the business equivalent of college advisors. They had an advisor who was probably well meaning but couldn't fully accommodate the young company because of ignorance/inability/whatever and now they're deep in a decision they never woul…

I'm not convinced of well-meaning. I've seen this same scam happen with a different distributor in a different domain.

This is the classic "if you owe the bank $1000 you have a problem, if you owe the bank $1 billion the bank has a problem". And thanks to the net N terms + control of the end client, you're the bank.

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

#294

Post by lisper » Fri, Dec 30, 2022, 9:15 PM UTC

Retric wrote: post #265

lisper wrote: post #258

Earlier quoted context omitted.

The only circumstance in which "how it was written down" might matter is if what was written down is different from what they said in the blog post. Which doesn't really help. There are only three possibilities: 1. The deal was written down, and it was, as they report, for 6000 units and $250,000 (modulo phraseology) 2. The deal was written down and it was not for 6000 units and $250,000 3. The deal was not written d…

My guess was one of these being far more likely: 1a) the deal was written down for ~6000 units and X$/bag. 2a) A price per bag was been negotiated and the deal was only estimated at 6000 units, but a total was never explicitly stated as it would depend on actual order. Each actual order is unambiguous and the numbers add up correctly. Remember negotiation, order size, and billing are three different steps. Miscommuni…

Re-reading the blog it appears that the initial deal was just verbal, and the contractual element was individual purchase orders coming in. Everything seemed OK until they realized that they were getting POs for more product than they expected.

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

#295

Post by indymike » Fri, Dec 30, 2022, 9:16 PM UTC

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 mid 00's I had a digital agency and we hosted sites for a few fairly large hotel chains. One day, I got an email from procurement at one of them that said, "we're holding payment on all outstanding payables until next month." The hosting billing system shut their site down at 12:00pm the day after payment was due and dutifully redirected to the "pay your bill online page".

Ten minutes later I get a frantic call from procurement, begging me to put the site up. I fumbled with the billing system, and finally told her, I think the only way to fix it is make a payment... which she did. $6,200 on credit card. The customer never missed a payment after that.

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

#296

Post by phphphphp » Fri, Dec 30, 2022, 9:17 PM UTC

lisper wrote: post #287

phphphphp wrote: post #283

Earlier quoted context omitted.

it’s absolutely their fault in many ways, I don’t dispute that, but I absolutely dispute the idea that this must be a grand conspiracy to trick people into buying coffee with an impossible story. They were dealing with a broker who is responsible for getting a deal done, the broker has no investment in the intricacies of the deal, so it’s totally plausible that the broker was saying whatever was necessary to get the…

> this must be a grand conspiracy I didn't say it had to be a conspiracy, only that I find this hypothesis plausible in today's world. > the broker has no investment in the intricacies of the deal He certainly does. Brokers don't get paid unless their deals close. > it’s totally plausible that the broker was saying whatever was necessary to get the deal done Of course. It's still their responsibility to achieve clari…

The specifics of the arrangement with the broker are not disclosed but a reasonable guess is that the broker is taking a percentage. A percentage of anything is better than a percentage of nothing. Much like a realtor, the incentives of the broker and supplier are not aligned. If the broker cared about the outcome then the broker would have behaved very differently throughout the entire process.

Saying the broker would behave in the suppliers best interests is like saying a sales person in a software business will behave in the best interests of the companies developers.

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

#297

Post by ChuckMcM » Fri, Dec 30, 2022, 9:18 PM UTC

Ouch. As others have pointed out, there were a number of missteps that compounded the problem but it is a nice after action report and ideally these guys have learned three things:

1) There is no such thing as asking too many questions.

2) Legal advice is expensive, getting into a bad contract more so, as a result make sure that you understand exactly what the contract says, and what "bad things" it is protecting you and them from.

3) Distributors don't make "big orders", their customers do. If a distributor tells you they have a big order then talk directly to the customer making the order about it. If the distributor won't tell you the customer then don't do the deal.

It looks like they survived this semester in "advanced logistics" and that will make them a much better company overall by incorporating that learning into their processes.

One of the interesting things about being at Sun from "startup" to "enterprise company" was seeing first hand the stupid mistakes that didn't kill them but they successfully learned from. I am convinced this is part of the "business experience" for everyone but couldn't prove that from my own experience (I might just pick companies to join that learn things by pain :-)

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

#298

Post by cortesoft » Fri, Dec 30, 2022, 9:20 PM UTC

lisper wrote: post #284

dtnewman wrote: post #280

Earlier quoted context omitted.

You are making the assumption that there's some formal deal for $250k total. I don't think that was ever the case. My guess is that in these negotiations, you tell the buyer that you sell in packs of 6 for say $41/case. They run their numbers and come back to you saying "okay, we have all the info we need and we are going to take 6000 units and the formal POs will come over the next few weeks."

> You are making the assumption that there's some formal deal for $250k total. No, I'm not. I'm not assuming anything. Here is what they wrote: "In April 2022, a representative from this distributor reached out to us to see if we would be interested in participating in an online specialty coffee program for a major nationwide retailer. The opening order would be approximately 6,000 “units”." At this point there are o…

You are assuming they knew the $250k amount at that point. When they made the deal for 6000 units, they didn't know the total was going to be $250k. They didn't know the total was $250k until they learned it was for 6000 cases later.

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

#299

Post by cortesoft » Fri, Dec 30, 2022, 9:21 PM UTC

deathanatos wrote: post #255

dtnewman wrote: post #237

Earlier quoted context omitted.

From the article: > June 2022 comes, and the orders for this retailer start coming in from the distributor. This coffee was shipping to five distribution centers so we were receiving multiple orders. The orders were large but we thought we could handle it. Then the orders kept coming, spread apart by days. So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in pi…

The person's point, I think, is that even if you incorrectly believe a "unit" to be a bag of coffee, and you're purchasing 6k units (bags) for $250k, you're then, in your mind, being charged $41/bag of coffee. That price is far too high, higher than retail: i.e., you'd be selling at a loss, or at a price point that the market wouldn't take. So if you believe a "unit" is a bag of coffee, you're not making that purchas…

Because they didn't know the total was going to be $250k until they learned it was for 6000 cases.

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

#300

Post by grumple » Fri, Dec 30, 2022, 9:24 PM UTC

analog31 wrote: post #89

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…

It's worse than that because they will drag out payment after the term has passed. My first job out of school was for a mom-and-pop manufacturing company. I got an inquiry one day from a very well known company, and mentioned it to the boss. He gave me a long lecture about why we didn't work with that industry. They were notorious for stringing their suppliers along and holding them in a sort of debt bondage. I remem…

I think this is needed tbh.

My fortune 10 company regularly pays our bills after the pay period - like 60 days late on a net 30. And then I, a technical person that just wants the damn AWS bill paid so I stop getting emailed about it, have to chase down the people responsible internally, even though they get the same billing emails. Because for some reason they didn't like the old way of setting up auto pay. Oh. And they will send literal paper checks to pay some bills... to closed offices since everybody works from home now.

The accounts payable department wastes more time than they save.