Roger, you are asking way too much from your suppliers, you need to stop beating us up here. Said a flustered Anthony Logan, Sales Manager at Supreme Canoes Ltd. Your quality and cost expectations are really unreasonable. We want to work with you and retain the relationship but we cant improve on quality more than what we have done to date and also reduce our prices. We do need to make a profit margin to remain in business at all to even supply you with our world renowned canoes. We cant go out of business in order to meet your continued demands. We conduct internal inspections and they are very costly. Anthony, I appreciate your points however, our customers are complaining that your products we are selling to them are falling apart, wearing out, breaking and are not working well as advertised or your world renowned reputation states. We are getting frequent product returns. Said Roger Lee, Owner and Supply Manager at Outdoor Adventures, a franchised athletic and outfitting retailer located in 3 of the Maritimes Provinces. We have calculated significant costs and lost profits to our business for your canoe issues. We are even losing our regular business because customers are going to our competitor, The Great Beyond, they buy their canoes, kayaks and gear at lower prices and higher quality. Our staff and business are intended to sell products and not intended to be your return clerks. This has been very hard on our business and reputation. It is hard when at the end of some days upon close off sales reconciliations our sales numbers are in the negative because we are returning funds back to customers instead of receiving monies from them in purchases. Somedays we cant refund the cash so we are giving customers credits and this wreaks havoc on our financials. We cant float your business and failures. Besides added to this we cant store your defective canoes here and lose our valuable retail floor space. You ask us to ship back to you on our dime and it takes over 60 to 90 days for us to get a refund back from your company. Often you just tell us to dispose of the canoes so we have to take the time and spend money trying to coordinate transport to dispose of them. Something has to be done by months end or we will have to terminate our agreement and find another canoe brand to carry here. We cant have our outdoors folks coming back telling us that their canoe leaked on their first fishing trips any longer. We also need you to do something about your minimum orders because they are huge. Ok, Roger, I have always wanted to work with you and always have. We have both grown our businesses together and mutually benefited from one another. We go back a long ways and have always helped one another in good times and bad. I do not want to see our relationship dissolve. What do you propose as a solution? said Anthony We looked at our manufacturing model factoring in the purchase prices of the canoe resin and out annual holding costs. Currently we are manufacturing 1,200 canoes per day, each are requiring resin. The resin we use is premium quality but it does have petroleum based products in it and that commodity market fluctuates greatly these days. Just look at your price for vehicle fuel, when that goes up due to the NY market then so does the resin. We are paying $ 3.20 a litre for resin. My finance guy, our accountant Jimmy, has estimate that we have an annual holding cost at 25% per year, but our costs for placing orders are $ 55.00. We operate our plant 45 weeks a year and we end up with variable inventory from 3000 to 1200 units. It has been a challenge for us and I know it is impacting quality and our bottom line. Our transportation costs are crazy. Canoes are large and they weigh a ton. We pay through the nose with the courier company, they have small vans. We need to ask for high minimum orders to make any profit. What would you do Roger? Anthony, it looks like you have some soul searching to do about your manufacturing. When we started with you guys there was so much more quality of workmanship and personalization. People were happy to pay for that but now they are still paying a premium with the same expectation for a premium product which they really are no longer getting. I also looked at things from our side and really our annual requirement for canoes is generally 100 units which we want spread evenly throughout the year. We have no room to store or merchandise too many canoes. I would rather just order on demand for customers since I know you can ship in a week. I appreciate your offer to sell us 100 units at a price of $ 100 each or to let us buy 10 units at a time for $ 130 each. Here is where we are at on this and what I wanted to negotiate with you. We have an inventory carrying cost of 20% per year and really would like to have no ordering costs. We want to land a deal which can help us best determine the proper ordering quantities and inventory levels which will work best and help us to save money. Lets both think about all of this and meet next week on September 14th for coffee or a round of golf and sort it out. I expect there is a solution here. I sure hope so because the Bank of Canada keeps hiking the interest rate and inflation is rising, I am not sure if we will still be in business.

QUESTIONS.

1.WHAT IS THE FINANCIAL ANALYSIS OF THIS CASR