Choosing a supplier on the basis of only rate might have been a successful mantra of the past but today, only this criterion is extremely insufficient for creating sustainable business model. A company offering good quality, genuine specifications, having long term vision, have plans for expanding market, marketing strategies in plan and awareness support to markets, with around 30 days credit period is the way forward. And soon, the entrepreneurs dealing with such companies will find themselves in better situation than others.
As a business journalist, my work involves around 20 days of traveling per month, participating in various conferences, meets; involvement in trade association policies, speaking sessions and discussions on topics including products, new market, news analysis and more.
The burning issue dominating these days is about Capital & Payment shortage. Established brands are getting their payments much easier than others. I’m hearing much about delayed payments, disputes & worries. The heaviness is doubled by the ongoing slow demand and oversupply at large.
In general, the wood panel players of India are putting the blame on ‘Slow market demand, very slow real estate, the missing banking support, taxation, government policies etc. Panic is across 90% of the market both manufacturing and trading, all fearing for the unknown and uncertainty.
The small and mid-sized firms are continuing with their old fashioned work culture of ‘first take order, payments will come automatically if the party is good’. The large firms are of view that ‘first talk about payment, order will automatically come if the party is good’.
I have a different opinion about how things should work in both the cases, however it is better leave it to entrepreneurs, manufacturers and traders. They all consider it as part of ‘Evolution, Process & Journey’. But when taxes are same for all the companies, rules are same for all businesses, the big worry is how will a Rs 75-100 cr annual turnover company survive if they don’t stick to payments terms of around 30 days with trade?
With nearly two third (70%) of working capital above 100+ days, how will a company and its related vendors sustain. In wood, plywood, panels and decorative laminate industry & trade, 50% of the business volume is coming from companies with annual revenue between Rs 50 to 100 crore, the SMEs. If businesses are changing from unorganised to formal ways, the only way left is opting for tight working, making quality product, strengthening your local and regional presence. If you are a trader, you must choose your brand carefully which is not just offering cheap! Look at how the company is offering other support to create and expand market.
Choosing a supplier on the basis of only rate might have been a successful mantra of the past but today, only this criterion is extremely insufficient for creating sustainable business model. A company offering good quality, genuine specifications, having long term vision, have plans for expanding market, marketing strategies in plan and awareness support to markets, with around 30 days credit period is the way forward. And soon, the entrepreneurs dealing with such companies will find themselves in better situation than others. This is why in present scenario “failing in payment commitment is leading to a “Direct Retail” (own warehousing in HPL & plywood) work culture in the industry.
Last but not the least, my work is to remind the traders that whatever you do, will cause a ripple effect in the industry. Choose your collective actions with care!