A Canadian Lumber supplier normally only sells to Canadian Pulp & Paper plants. They just received an unsolicited order from a plant in Venezuela. They have been asked to ship $1,000,000 CAD of goods to Venezuela. The buyer is unwilling to pay in advance and can only post an LC for $400,000. They intend to sell the lumber to the Federal Government for the construction of a new hospital in the capital city.
Will you accept the order? What are you worried about (aka: What risks are there?) and how will you mitigate this risk?
Case Study: Canadian Lumber
It first must be stated, the Canadian Lumber supplier already has a reliable business association with Canadian Pulp and Paper plants, but in the interest of growth, they do not, and should not close the door to new opportunities for growth. However, in this situation, several red flags must be addressed as Canadian Lumber considers this move.
First, the only guarantee that Canadian Lumber has for payment is a Letter of Credit for $400,000. The amount that the Venezuelan Company needs is one million. The letter of credit is not even half of what the total price will be. A letter of credit does require the requesting company to establish a trust fund, and guarantees the money up to the amount of the letter for a certain period (Letter of credit, 2013).
Secondly, can Canadian Lumber supply the amount of product it needs to supply to other the primary companies that it serves? It is important that Canadian Lumber keep their obligations at home running smoothly, if they do not, they ...
This is a 689 word solution with two references. It considers the case of a Canadian Lumber supplier and their fulfillment of an international order that they received without solicitation. This case analyzes the positive and negative effects prevalent within the proposition.