FormerXBC Inc XEBEQ

A few thoughts on materials and costs

[catchascatchcan]

I would keep a few things in mind -

While it is a positive that they have 'secured' the materials for 30 units, a statement such as that is not nearly as clear cut as some might think

1 - When something is referenced as secured, it typically means that a Purchase Order has been issued to a supplier.  A PO does not cost you any money to issue, and costs are only incurred upon delivery.  It's very possible that there is an upfront payment required to secure the manufacturing 'space' in a suppliers queue, but that would max out at 50% and typically be anywhere from 0%-25%.  As a buyer you want to minimize this cost obviously and the rate depends on many variables I won't waste your time with.  

2 - A PO is not a guarantee from the supplier side of anything other than cost.  In this market, schedule is paramout, and no suppliers, not even the biggest in the world, are able to commit.  Yes there will be estimated delivery dates, but there is no stick behind them to drive compliance.  As an owner, you have two options, put up with the delays, or cancel the PO.  And no owner in their right mind has any real option, as the challenges are pervasive, and the best course is to hold your spot in the queue and hope for the best.

3 - There will not a massive outlay of capital for the materials for 30 units.  There is a 0.1% chance that the materials were sitting in inventory and we bought out the store and will have to expense the lot in one go.  But they weren't and we won't.  The BGX units aren't using parts from Rona - many/most will be custom manufactured to our spec.  In addition, in an effort to balance cashflows, management would ideally purchse an initial order, and then time material purchases to align with manufacturing.  We're not Dell for certain, but no business front end loads costs that won't be recovered for long periods, or they would be out of business.

Just a few things to chew on, to help balance what it sounds like was said at the Webinar.  I'll be accused of chest-puffing, but in life I spend $150M annually on services and materials to execute my scope of work, and am very aware of the buinesses practices of procurement, supplier agreements, contract negotiations, etc.

As always keep or flush.  GLTA

[Gann999]

I think xebec prefers home depot to Rona.