Exotic Extracts
Exotic Extracts, Inc.
Manufacturing and Logistics Simulation Game* You and your management team have just acquired Exotic Extracts, a maker of chemical extracts that are used as coloring additives in consumer products (i.e., food coloring and cosmetic products). Your company competes with several other firms that supply these additives. At the present time, each competing firm in this market has identical assets, sources of financing, market potential and production capability. In accord with contract terms, your management team has raised the funds necessary to purchase full equity in Exotic Extracts at book value ($5,544,198), and to assume the outstanding debt ($1,450,802). Because bank officials (that provide the open credit line for this debt) are not as optimistic as you about the firm’s prospects, you and your management team have been required to commit personal collateral to cover a substantially larger loan amount than Exotic currently owes. You are keenly aware of the personal and professional risks that you and your management team have assumed in the recent acquisition of Exotic. Despite the risks, however, you decided to proceed with the acquisition because of significant positive attributes about the markets and business. The market has steady, if not growing, product demands and stable product prices. The business has an experienced labor force, ample supply of labor, stable wage rates, stable raw material prices and sufficient raw material availability. In addition, Exotic has a comprehensive manufacturing planning and control (MPC) information system. Prior management was in the process of implementing a financial module that, in conjunction with the MPC system, will comprise much of what is commonly known as an enterprise resource planning (ERP) system. This state-of-the-art ERP system should offer your new management team significant competitive advantages; the information you need to make profitable manufacturing decisions.
Manufacturing and Logistics Simulation Game* You and your management team have just acquired Exotic Extracts, a maker of chemical extracts that are used as coloring additives in consumer products (i.e., food coloring and cosmetic products). Your company competes with several other firms that supply these additives. At the present time, each competing firm in this market has identical assets, sources of financing, market potential and production capability. In accord with contract terms, your management team has raised the funds necessary to purchase full equity in Exotic Extracts at book value ($5,544,198), and to assume the outstanding debt ($1,450,802). Because bank officials (that provide the open credit line for this debt) are not as optimistic as you about the firm’s prospects, you and your management team have been required to commit personal collateral to cover a substantially larger loan amount than Exotic currently owes. You are keenly aware of the personal and professional risks that you and your management team have assumed in the recent acquisition of Exotic. Despite the risks, however, you decided to proceed with the acquisition because of significant positive attributes about the markets and business. The market has steady, if not growing, product demands and stable product prices. The business has an experienced labor force, ample supply of labor, stable wage rates, stable raw material prices and sufficient raw material availability. In addition, Exotic has a comprehensive manufacturing planning and control (MPC) information system. Prior management was in the process of implementing a financial module that, in conjunction with the MPC system, will comprise much of what is commonly known as an enterprise resource planning (ERP) system. This state-of-the-art ERP system should offer your new management team significant competitive advantages; the information you need to make profitable manufacturing decisions.