Interview (Case Study): Strategic Commodity Manager

Example Case Studies

Case 2: What the hell, Nannoka (current active Casting supplier) does not exist in 4 weeks!

5 months ago you and your team have again to accept a price increase from NANNOKA (after a previous
one the year before), Again this negotiation was “take it or leave it”. Enough is Enough! You’re aligned
with your team and decided to completely resource NANNOKA. You have full support from your GCD
and Plant purchasing management (LIN/SUO). You have a clear plan, by November this year, every parts
would be moved out and Nannoka will be only a bad souvenir….

This morning, Juha (your buyer in LIN) received a call from Nannoka Sales Director to announce that
Nannoka is in Bankruptcy, so the production will stop in 4-6 weeks if no new owner is found.

You know that the supply from Nannoka have been very tight since months and LIN (6 parts) and SUO
(13 parts) do not have so much inventory (1 or 2 weeks of production)

The memo of the call is in the attached email (email: bankruptcy…..). The conditions requested by
Nannoka are difficult to be accepted.

In 6 weeks your commodity will stop LIN production and SUO production for weeks. What’s a disaster!

How do you react? and why?

************************************************************************************

[Exam Exchange] Bankruptcy

From: Joost
Sent: Friday, February 22, 2019 2:17 AM
To: Juha
Cc: Sales Nannoka Vulcanus; Mose
Subject: [External] Bankrupcy production unit Nannoka Vulcanus Industries

Dear Juha,

As explained by phone I shortly summarize the situation:

The Foundry, Nannoka Vulcanus Industries B.V. is per 19-02-2019 bankrupt.

The Sales company Nannoka Vulcanus Doetinchem and the estate company Nannoka Vastgoed are not
touched by the bankruptcy and continue their activities.

The bankruptcy trustees from Nannoka Vulcanus Industries requested Nannoka Vulcanus Doetinchem to
handle all customer related business.

The bankruptcy trustees confirmed to be able to continue production for a period of 4-6 weeks.

They have no money so Nannoka Vulcanus Doetinchem has to provide:

 the cash and materials to start production.

 the full payment of the products at the moment of delivery by Nannoka Vulcanus Industries.
We are confident to fulfil his demands provided we are able to generate sufficient cash. (Suppliers have
to be paid in advance)

This leads to the following temporarily conditions for production and delivery the next 4-6 weeks:

 All current outstanding invoices before the bankruptcy must be paid asap to usual / current bank
account number.
 Payment of a supporting lump sum to be discussed and agreed upon for the coverage of starting up
costs.
 All deliveries have a 10% price increase to current sales price incl. material surcharge.
 Before starting production 80% payment in advance.
 Remaining 20% payment at moment of delivery (COD Doetinchem).

Further details for the actual transactions after the bankruptcy will be discussed and agreed upon as
soon as information is available.

Our current order book for the next 4-6 weeks including backlog is bigger as our possibilities during
these 4-6 weeks. We therefore kindly request you to inform us on part number level with volumes of
your priorities.

Before all items are agreed we cannot do anything as we are bound by the bankruptcy trustee.

Today we have a meeting with Mosé Tosin to discuss our situation and possibilities.

Kind regards,

Joost

Nannoka Vulcanus Doetinchem B.V.

 Press release
Nannoka Vulcanus Industries B.V.

Bankruptcy Nannoka Vulcanus Industries B.V.

The metal foundry Nannoka Vulcanus Industries B.V. has been struggling with financing,
profitability and therefore liquidity tensions for some years now.

Sustained environmental procedures, the uncertainty of future environmental investments and a

competitive global fragmented market were an obstacle to efficient and profitable business
operations.

At the moment, market conditions have improved, and the foundry is in itself viable.
The slow recovery period after the banking crisis and the specific branch conditions in combination
with cost-increasing local environmental issues ultimately generated too much ballast for the
continuity of the foundry.

In order to promote a continuity perspective, the foundry therefore worked on refinancing with
private parties. An institutional creditor did not want to wait for that and has filed for bankruptcy
today.

With 125 employees, the metal foundry produces serial machine parts for the high-tech (high tech)
industry: global manufacturers of industrial vehicles, transmission builders and high vacuum
pumps.

The level of knowledge in the organization is high, the employees are very involved and there are
some 'Unique Achterhoekers' working. The metal foundry is a recognized training company.

The relationships with its customers are consistent and sustainable. More than 95% is foreign
turnover. The metal foundry therefore has no sales problem, but it does have accumulated debt
positions from the past.

We are very sorry to have to do this message.

Doetinchem, 19 February 2019.

The management:

G.R.L.Kamps