Consumer durable firms tighten credit
Some consumer durable companies have discontinued credit availability for popular durable models, while for others, the credit period has been reduced considerably, report Saurabh Turakhia & Ruchi Hajela.business Updated: Feb 08, 2009 20:26 IST
The people who sell you refrigerators, washing machines, television sets and other consumer durables are feeling the pinch of a severe slowdown these days.
Some consumer durable companies have discontinued credit availability for popular durable models, while for others, the credit period has been reduced considerably. With interest costs going up, credit is tough for distributors as well as consumers.
“Earlier, a lot of inventory pile-up would escalate the costs for durable manufacturers, but our practices (in curtailing credit) have helped 'crunch the total supply chain inventory' by around 30 days and down by 35 per cent, between manufacturers and their various trade partners at the supply and the demand end,” said George Menezes-chief operating officer, Godrej Appliances.
He estimates that the industry has cut inventory costs by about Rs. 500 crore in the past four months as a result.
“We are very vigilant about not having extra raw material and we review our inventory every 45 days now as against 75 days earlier. Also, we now review our receivables every 30 days while earlier we used to review it every 60 days,” said P.K. Gupta, chief financial officer at Videocon Industries.
Discounts are another way out.“In these tough times our working capital cycle is tighter than before but we are moving away from giving discounts,” V Ramachandran, director, sales and marketing at LG Electronics India.
Korean giants LG Electronics India and Samsung Electronics say that they did not face problems such as inventory pile-up as such but are monitoring their production cycles closely.
“Our production cycle is monitored weekly and inventory is not issue at all,” said Ravinder Zutshi, managing director at Samsung Electronics India.