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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]

#151

Post by phphphphp »

lotsofpulp wrote: post #80
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…

There's important context: they had a signed contract that they were half way through executing on and they had been told to realise the full value of the contract they had to deliver the coffee.

The natural conclusion in that situation is "we must do anything and everything to get across the finish line so all of our effort is not for nothing" and if the contract is due to pay out $250k in a few weeks, then taking on $200k of debt is plausible. Sure, an expert in the field wouldn't make these mistakes and wouldn't take on the risk however these aren't experts and so they did not understand the risk, they thought the $250k was guaranteed if they could just get to the finish line.

The debt did not exist prior to execution of the contract, the debt and contract are linked. Your comment supposes that they started out by borrowing $216k.

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

#152

Post by JackFr »

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…

Am I missing something? I don’t seem to understand how this is a swindle.

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

#153

Post by whoopdeepoo »

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 am guessing the reason this coffee went fast is because it was a good price and the good sob story. Hard to imagine they can continue to pull that off. Fool me once yada yada

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

#154

Post by merb »

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 bother? now the other way round a simple person who operates like 2 aldi stores wants to order the coffee, he would probably only need around 200 bags, so why did they even think that 6000 units are bags.

its so stupid. (especially since they bothered in writing how much hours of coffee that would be...)

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

#155

Post by nebulous1 »

mschuster91 wrote: post #30
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.

> How can bags be mistaken for cases when negotiating a deal? The price would be different by an order of magnitude. These kinds of confusions happen regularly, lol. Back a decade ago when I was working in pubs, colleague ordered what he thought would be one pack of paper towels - in the order form, he chose the wrong column to place the "1" in. Next day a shipping company showed up with a pallet of paper towels. Bos…

This isn't some random small deal. It's hard to see how nobody noticed that the total dollar value of these orders was either six times higher or six times lower than expected on a invoice that represents the bulk of your entire business.

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

#158

Post by AlbertCory »

cjbgkagh wrote: post #85
AlbertCory wrote: post #17

Sigh. Big business vs. the little guy. I recall when I took basic accounting, we learned that common payment terms were "2/10, net/30" meaning "2% off if you pay within 10 days, and it's all due within 30 days." So it was common practice to wait 30 days (or more) and still take the 2% off. This is in no way blaming the victim, but "for a total of $216,000 in debt" I would hope I'd just say, "no, we're not doing that.…

Many people don’t have great options and see such opportunities as possibly their only chance for a big break. They’re playing in the big-leagues and needed the kindness of strangers to bail them out of what appears to be their mistake as going by other comments units as cases are industry standard. That the distributor couldn’t move the product compounded the issue. Supplier/distributor shenanigans are common and so…

It IS a tough call.

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

#159

Post by irjustin »

The coffee producer was expecting a retail chain to pay $41/bag ($250k/6000)

I'm glad that they were able to move the bags and save their business and themselves from all this debt, but this red flag needs to be addressed and owned up.

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

#160

Post by JackFr »

okr wrote: post #55
brookst wrote: post #10

Earlier quoted context omitted.

And yet, if you’re a big company, transactions are expensive. If small companies need frequent payments and won’t float AP, why would you buy from them? Would you rent an apartment that insisted on daily payments? (Ok, bad analogy, but you get the idea). I don’t have a good answer, but this isn’t a one-sided thing where the big guys are taking advantage of small companies. This is also small companies agreeing to ope…

I liked the example, it illustrates it from a different perspective. However, why not paying daily? Hourly? Minutely? In the age of computers...

In the repo market (overnight inter-bank lending) Fedwire daylight overdraft interest accrues every 15 minutes.
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