Jones Electrical Distribution Case Summary

Jones Electrical Distribution Case Summary

Case Background

Jones Electrical Distribution (Jones Electric) was founded in 1999. The company sells electrical components and tools to electricians and general contractors. Products include controllers, breakers, signal devices and fuses, etc. that are purchased from 100 different suppliers. Customers of Jones Electric primarily use these products in construction and repairs of commercial and residential buildings. Thus, Jones Electric has higher seasonal sales during summer and spring. In the spring of 2007, Jones Electric is anticipating a continued substantial increase in sales. The market for competition is large, fragmented, and competitive. To successfully compete, Jones Electric keeps a competitive price, tightly manages operating expenses, reduces overhead, forecasts demands, minimizes inventory, and pays his salesforce primarily through commission. To reduce expenses, Jones Electric tries to pay its suppliers within 10 days of the invoice date to receive a 2% discount offered for quick payments.

Primary Problem and Precipitating Issue(s):

Jones Electric is currently experiencing a shortage of cash. This is due to cost of additional working capital investments associated with the company’s increased sales volume. Jones Electric has missed its usual purchase discounts, since the company was unable to pay its suppliers within 10 days. The company’s relationships with its suppliers has gotten increasingly tense due to delayed payments. To increase funding and promptly pay suppliers, Jones Electric is trying to get a loan larger than the $250,000 limit set by Metropolitan Bank, the company’s current local bank. A larger regional bank called Southern Bank & Trust might extend the line of credit to $350,000 for Jones Electric. Jones Electric is trying to secure this new deal. Once the new deal is secured, management plans to develop a long-term growth plan for the company.