Chris 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 McDonald Timbers 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.' Later that day, Chris found that the late customer deliveries which had started his investigation were actually caused by poor sales forecasts by the marketing department. They had seriously underestimated demand, and planned production was too low.

Questions

● Why do all the logistics costs seem to be rising at the same time when the quantity of the

order is reduced?

● What do you think are the basic problems in McDonald Timbers?

● What would you recommend Chris to do?