Johann thought that he was near the source of his problems, and might ask for
the purchasing policies to be reviewed. Then he talked to the transport manager who
was not so sure. ‘It is much more efficient for me to bring larger quantities into the
company’, he said. ‘If you reduce the average order size, the transport costs will rise.
Our budget is already being squeezed, as we have to pay for expensive express deliv-
eries of materials that production classify as urgent. If you lower the order size,
there will be more shortages, more express deliveries and even higher costs.’
Johann talked to some major suppliers to see if they could somehow improve the
flow of materials into the company. Unhappily, while he was talking to one
company, they raised the question of late payments. This was contrary to Fried-
land’s stated policy of immediate payment of invoices, so he asked the accounting
section for an explanation. He was given the unwelcome news that ‘The company’s
inventory and transport costs are so high that we are short of cash. We are delaying
payments to improve our cash flow. As it is, we had to use a bank overdraft to pay
suppliers for last month.’