I know I’ve discussed the precarious flow of cash in manufacturing here before, but it’s feeling even more tight here lately because of the interest from so many larger retailers. I am currently waiting for promised purchase orders that would clear out all our existing inventory of every game. And then some.
So we have to do some assembly, especially for games like Zombie Attack, which had been selling slowly, and now with zombies being so hot, one retail chain wants 400 copies immediately. Maybe. We still don’t have the purchase order, but it is due this week. They may want the inventory in 10 days. They may not want it for 5 or 6 weeks. I just don’t know yet, but I have to prepare for the worst, so I’ve scheduled help to assemble about 50 games a day until we get 400 produced.
And we have to schedule factory time elsewhere, especially for 4th Corner and The Climbers. This morning, we’re negotiating with a factory in Shanghai to drop their unit cost to meet our margins for The Climbers. At their current offer, we don’t make enough profit to sustain ourselves and still meet the maximum prices wholesalers and most consumers seem to be willing to pay. We are also negotiating with another factory in Ningbo to produce more of 4th Corner. Their prices are good, but we aren’t sure how quickly they can deliver. In two weeks, we could have orders close to 1000 copies of each of the two games. Maybe. We still don’t have the purchase orders.
But no one else believes we have the demand for games until we have the purchase orders in hand that specify the quantity and the delivery date. We know the approximate demands from experience and feel confident that they are coming, because we have become new registered vendors for these retailers, and they wouldn’t have gone to the trouble of doing that unless they were poised to place an order. And this is the time that the bigger chains start writing their orders for the rest of this year.
So in the next two weeks, if you notice me a nervous wreck, you will know why. As soon as the purchase orders come in, I have to forward copies to potential investors. As soon as they agree to fund the expansion of our business, it may take two weeks or more to get the funds. Our factories, hopefully, will still be able to book production time when that happens, and will probably expect no less than half the agreed rate on order, and the other half a month later when the shipment is ready to get on a boat. A month later, the games arrive in our fulfillment center, and it may take up to two weeks to get them entered into their systems and ready to ship to retailers. Once the games ship, many of the retailers demand to have sixty days to pay for the inventory. That means we have to hold onto the cost of the inventory for four months.
In case you were wondering, we don’t have the tens of thousands of dollars needed lying around. We need financing from banks and investors who will trust that we can almost double their money in four months.
Mark Salzwedel