ForeBall Ltd.. is a North American manufacturer and retailer of premium, innovative golf equipment. ForeBall has two mai

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ForeBall Ltd.. is a North American manufacturer and retailer of
premium, innovative golf
equipment. ForeBall has two main divisions, product development,
and manufacturing (PDM)
and product inventory, distribution, and retail (PIDR).
In December, Edward Walters was promoted to the position of
Chief Procurement Officer
(CIO) at ForeBall Ltd.. Edward was formerly a Supply Chain
Management Category Specialist
supporting the product development and manufacturing
division.
Edward has been invited to an urgent meeting tomorrow with
Katrina Missant, the Chief
Financial Officer.
The agenda concerns the fiscal year-end close for December 31
st. Katrina asked Edward to
attend and speak about his Supply management plan and strategies
to reduce operating,
inventory and purchasing costs by 30% for Q4 2022 to help meet
the projected budget and
income statement improvements mandated by the corporate Board of
Directors.
Katrina sent Edward a copy of the Income Statement:
INCOME STATEMENT
Q4 2021
Sales
$ 280 million
Cost of Goods Sold
$ 100 million
Gross Profit
$ 90 million
Operating Expenses
$ 35 million
Operating Income
$ 25 million
After receiving the Income Statement from Katrina, Edward
received another one from the
corporate Controller Adam Scott for Q4 in which the numbers
varied considerably. This
perplexed Edward because the numbers were doubled from the one
presented by Katrina.
Adam explained to Edward that the income statements varied
considerably from Quarter to
Quarter and further explained that this has been a recent
problem due to recent system issues
and recommended Edward consult the Sales Department to validate
the real numbers
because they had the accurate ones from a recent audit and
corporate report.
Edward asked Adam to explain the variations and Adam noted that
due to the company being
focused exclusively on golf that this is a seasonal activity so
the sales and profits typically are
highest from April to December and then they incur very sharp
declines from January to March
which makes cash flow very challenging. Adam commented that he
never understood why the
company never took advantage of those months to focus more on
sales and product
development and procurement. He indicated to Edward that his job
as Controller has been
very challenging during the peak season months from April to
December because he is always
pressed to ensure cash flow is very flush and readily available.
He said it has placed great
strain on the Accounts receivable department to press their
customers to pay quickly. Adam also indicated to Edward that in the
past Procurement was at odds with him and his team in
Finance because they felt disadvantaged in procurement deals by
Finance. Adam told to
Edward that he hoped they could foster a most positive
relationship together and would be
open to Edward’s new ideas.
Just before attending the meeting with Katrina, Edward received
a call from John Joseph,
Vice President Sales. John informed Edward that the Sales Team
was pursuing a deal with
ActiRFIDx International, a large innovative technology
corporation specializing in RFID and
GPS technologies for the sports industry, located in Saint John,
NB. and throughout adjacent
states of Maine and New Hampshire in the United States, to the
unit in a joint venture whereby
ForeBall golf balls would be affixed with ActiRFIDx chips and
sold to luxury golf clubs across
North America. John informed Edward that this collaboration
would mean a sale of 1 million of
their new prototype EcoFore golf balls. This deal represents $
125 million in sales for ForeBall
Ltd in North America.
John explained to Edward that the terms of the proposed sale
require ForeBall Ltd.. to
manufacturer and supply 1 million to their prototype golf ball
units to ActiRFIDx by June 30th
John pressed Edward to have all suppliers and contracts for the
goods and materials secured
as soon as possible so the sales team can land the deal.
As soon as Edward met with John his phone rang and it was Jerry
Porter from Stores and
Materials Management. Jerry heard about the potential Sales deal
with ActiRFIDx and
explained to Edward that they were sitting on $ 250K of
inventory of the prototype balls and
750K of their regular premium balls. Edward thanked Jerry for
providing these details since
they were important for Return on Asset computations.
What should Edward do? What should his priority be?