Material and Pioneer Trading Company Essay Example

towards this venture.

Harimann International stands to make a substantial profit if their products are delivered on time, but they will experience significant losses due to delayed shipment. In order to ensure timely delivery, Dhawan thoroughly analyzed all aspects of the production process and determined an appropriate timeframe for the embroiderer to complete their work. This allowed for eight days of washing and packing, two days of cutting, eight days of sewing, eight days of further washing and packing, and one day for final shipping activities. Although Dhawan hoped to allow for extra time in case of unforeseen issues, he remained confident that the order would ship by April 6th.

Mr. Dhanwan estimated a 20% chance of encountering problems and missing the deadline, while there was an 80% chance to ship the goods on time for a profit of 315,238 INR. Delivering on time would establish a good relationship with Pioneer Trading, potentially leading to more orders in the future. Analysis of a decision tree and expected payoff calculation suggest that it was better for Dhanwan to accept this order despite the expected loss of 180,530 INR, as maintaining the relationship with Pioneer Trading would be beneficial in the long run. However, the probability of delivering on time was low and would only occur if unexpected events disrupted operations.

It would benefit Dhawan to accept the order and focus on delivering it within the given timeframe. Harimann International was an Indian textile manufacturer and exporter that initially specialized in brokering linen household goods. The company would purchase completed linens from a supplier, customize them according to customer preferences, package the goods, and deliver them to clients.

As

the business expanded rapidly and began exporting overseas, it began producing an average of 1000 garments daily. Within a year of establishment, the company acquired a second manufacturing facility and hired over 100 individuals. The textile manufacturing and export industry is considered a high-growth sector in India, with the government offering various incentives and tax benefits to reduce the country's international trade deficit.

The Indian textile industry receives support from the government through various benefits, including tax-exempt status on any profits from sales to certain countries, partial rebate on duties paid for imported raw materials used in exported goods, cash incentives to improve competitiveness in the world market, and replenishment licenses for domestic raw materials used in export production. Despite these incentives, the industry faces operational limitations due to the high influence of fashion trends on customer demands and the severe consequences of delayed deliveries. Failure to meet delivery times may result in the manufacturing company receiving only 30-50% of the contract price. Raw materials can only be sold at 65-90% of their costs depending on embroidery status. Additionally, storage and production process limitations also affect the industry.

Anticipating product demand, manufacturers have to purchase raw materials in advance, which increases production costs and sales risks. Due to seasonally supplied raw materials and highly fashion-sensitive customers, production time also fluctuates based on employee skills. Additionally, various unforeseen issues frequently arise in this industry.

Harimann International Company was faced with a decision problem when Pioneer requested samples of six garment styles and a preliminary order in January 1992. While the deal was profitable, there was a time limitation to meet a shipping date of April 6. Dhawan, wanting to

deliver within the deadline, invested 188,440 INR on raw materials to make the garments and made minor changes to three samples. The production process required all products to be completed within 27 days, but Dhawan still had 35 days until the deadline.

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The problem was that certain embroiderers working for Dhawan might not finish the order on time, which could result in a delay in the schedule. Since the order was considered lucrative, not meeting the deadline would result in a significant loss for the company. Harimann International attempted to prolong the shipment's deadline and sought assistance from Pioneer Trading Company. However, Pioneer Trading Company declined to grant the extension.

Although Dhawan anticipated completing and shipping the order by the end of March with personal attention, failure to meet the deadline would result in significant losses. Pioneer Trading Company might refuse to accept the goods if not delivered on time and according to industry norms, it might only pay 20-50% of the contract price after the deadline. Therefore, there were both challenges and benefits associated with the order. [pic] Dhawan had several options to consider at various stages of the deal, including accepting or rejecting Pioneer Trading Company's order.

If Dhawan agrees to the order, he will produce the item and aim to deliver it on March 6th. Dhawan desires a positive business rapport with Pioneer Trading Company if he can meet the delivery deadline. He also assessed the deal and discovered that the advantages considerably outweighed the shipping risk connected with adhering to the deadline. Nevertheless, if he cannot meet the shipping deadline, he still intends to provide the goods to

Pioneer Trading Company to maintain their relationship for future business.

According to industry norms, if a shipment is delayed, the buyer may pay 30 to 50 percent of the contract price, although sometimes the payment could be as low as 20 percent. In this scenario, Dhawan estimates that Pioneer has a 40 percent chance of paying 50 percent of the contracted price and a 40 percent chance of paying only 30 percent. This poses a risk for Dhawan if he ships late to Pioneer. Moreover, if he declines the order at the outset, he can sell the raw materials to another party for 65 to 90 percent of the costs of embroidered and unembroidered materials or save them for future orders from other clients. However, he may have to shoulder substantial expenses and wait time to store these materials until he receives an order to use them.