Harimann International Company was established in Delhi by Vikram Dhawan in May 1990. It worked as manufacturer and exporter of finished textiles, which were primarily table lines and woman clothes. Indian government offered variety of incentives to the company for its effort to export the goods in different countries. Whenever goods were exported to one of the several-targeted countries, any profits from the sales were accorded tax-exempt status. In addition, the company got the facilities like duty drawback, cash compensatory support and replenishment licenses.
During the first year of operation, the company had limited its business to brokering linen household goods. The nine months were slow because customers were few and orders were small. However, toward the end of the year, a particular style of hand-embroidered table linen became very popular, sales were excellent, and goal of the first year was achieved. In May 1991, Dhawan, company President, added women’s blouses and skirts to his product line in response to requests by satisfied customers. Thereafter the business grew quickly.
The Pioneer Trading Company, a larger importer, was one of the Dhawan’s first customers and had been a regular customer ever since. At the end of January Pioneer had requested to Harimann for the samples of six styles of garments along with a preliminary order should the samples and prices prove satisfactory. Harimann had prepared the samples within a week and sent through courier, with their respective prices. Several weeks later Dhawan received the order from Pioneer for all six styles, conditional on Harimann’s ability to make minor changes to three of the styles and to meet a shipping date of April 6. This order was attractive opportunity for Dhawan because Indian government was encouraging exports to Japan, and, as a result, the profits from the Pioneer contract would be tax-free. Moreover, if receipt would exceed the qualifying minimum of 150,000 INR, the contract would also qualify for the other government incentives. Thus, Dhawan would be able to claim 10% of actual receipts in duty draw back and 15% in cash compensatory support. Each of these incentives would pay in cash by the Indian government. He also would qualify for a replenishment license with a face value of 40 percent of actual receipts. Dhawan had estimated a schedule of production and shipment. According to his schedule, the order could be finished and shipped within 27 days (by the end of the day March 29). He was nervous about the production schedule because his first step of the process –embroidery-would be contracted out to a third party vendor. The embroider had changed the Harimann’s early schedule of March 10 and put the order behind the other company’s order and would only commit to completing the order by March 27. Dhawan had argued to complete in the original date. After the discussion, it would be possible to embroider to complete the Harimann’s job on March 20. When Dhawan raised this possibility, the vendor agreed that this was possible and that it would try to make it happen, but he did not commit. Now Dhawan has problem either he will be succeed to ship the order on time or not. Therefore, he needs to make decision over the order.
Pioneer order to Harimann Company is very attractive and beneficial too but April 6 deadline to ship the goods seems terrible close. The main problem is to decide either accept the order or reject it.
FACTS AND ANALYSIS:
The garments industry in India is one of the best in the world. An extremely well organized sector, garment manufacturers, exporters, suppliers, stockiest and wholesalers are the gateway to an extremely enterprising clothing and apparel industry in India. There are numerous garments exporters, garments manufacturers; readymade garments exporters etc. both in the small scale as well as in large scale....