Word: barter
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...simple kind of barter deal is one arranged recently by a Midwestern container manufacturer. He had a batch of beer and soda cans ready to market, but no paint for them. He called a paint maker who had no drums in which to ship. The can maker also manufactured drums, so in effect he delivered drums in part payment for paint...
...Other barter deals involve a kind of commission paid in goods rather than cash. Dow Chemical Co., for example, currently ships ethylene to other chemical processors who cannot get the substance elsewhere. The processors convert the ethylene to polyethylene, then ship a percentage of the polyethylene to Dow and keep the rest as payment. Dow can in turn continue to supply polyethylene to its customers...
From there, the complexities mount. Purchasing agents barter not only for goods that their own companies need, but also for materials that their suppliers need, or they sometimes buy for cash merchandise that they then barter with suppliers. For instance, Monogram Industries is buying steel pipe that it does not use itself but trades for phenol, which it badly needs in order to make insulating materials...
...Complications. Sometimes the problem to be overcome by barter is not simply shortages, but time. Recently Jim Caulfield, purchaser for an Illinois division of Wheaton Industries, needed a petrochemical-based plastic resin that is in short supply because of the energy crisis. His normal supplier could not deliver in less than four months, and waiting that long would cost Wheaton a potential contract. Caulfield knew someone who had a silo full of the resin, and made a deal to borrow 40,000 Ibs. -which he will repay by turning over the resin that his normal supplier eventually delivers...
...Internal Revenue Service is taking a hard look at many of the barter deals, contending that part of the value of merchandise received through barter constitutes taxable income. Even if the barter arrangements are reported to the IRS, it is difficult to assign monetary values to them. But the tax complications are only one reason why many businessmen hope that bartering will turn out to be a passing phenomenon-which it indeed may, if shortages ease as expected because of the gathering slowdown in the economy. Barter may be indispensable to companies caught by shortages but, just as the textbooks...