Lawrence Sports is the world’s leading retailer with revenue in excess of $20 million. The company manufactures and distributes equipment and protective gear for volleyball, football, basketball and baseball. One of Lawrence Sports principal customers is Mayo Stores. The material received by Lawrence Sports is provided by Murray Leather and Gartner Products. Central Bank extends to Lawrence Sports a line of credit of $1.2 million. In order to maintain a minimum positive cash balance $50,000 and not allow a cash deficit, Lawrence Sports will borrow money from Central Bank. However, this money is not repaid until Lawrence sports have retained a minimum of $50,000. The repayment is made the last week in the month. This paper will propose a solution to how Lawrence Sports can identify viable methods to prevent the company’s necessity of stretching its payables. Issues, opportunities, and stakeholders will be identified. This paper will also include the problem statement, end-state vision, analyze alternative solutions and perform a risk assessment. An optimal solution will be discussed; the results will be evaluated and concluded with recommendations.
As Lawrence relied heavily upon the use of cash during the low peak times of cash conversion which usually occurred in late March and as a result of unforeseen circumstances, Lawrence Sports had to utilize the event of "stretching its payables" to its vendors during the last two weekly periods of March in order to meet other corporate expense obligations. At times when issues arrived with the vendors, the manufacturing company was forced to adjust during the difficult time period. Lawrence Sports found itself further implementing the concept of stretching its payables when the company exhausted its line of credit with the bank. (Simulation: Working Capital Management). Lawrence Sports having to stretch it payable, resulted in them not being able... [continues]
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