Ferrara Food is the Italian leader in processing and preparation of tomato sauces for industrial use (mainly hotels and restaurants). Ferrara Food buys raw tomatoes from traders, which in turn collect them directly from farmers. Tomato harvest occurs in July and August, while Ferrara Food sells its products to hotels and restaurants constantly during the year. Consequently, Ferrara Food stocks an entire year worth of production of tomato sauce in its warehouse by September, in order to sell it in the following months, until the next harvest begins. However, Italian regulations require Ferrara Food to pay traders within 60 days from harvest, i.e. a year’s worth amount of tomatoes by the end of October. On the other side, customers pay Ferrara Food on standard payment terms, i.e. 60 to 90 days after each delivery during the year.
1. On the basis of the case, provide your perspective on the risks and challenges of the supply chain of Ferrara Food
2. Discuss what could be done by Ferrara Food to better manage its cash cycle
Writing at least 3 pages to answer the questions. Please directly answer the questions with thoughtful opinions and detailed evidence.
The second one should provide at least three methods with supportive reasons and examples.