17 Trade Barter, The Rimzi
ChamberofCommerce
and the Rimzi University
of Economics
Abstract
1
In times of recession, buyers may need to make difficult decisions and to prioritize
purchases. One of the more appealing strategies taken is trade barter, which enables the
exchange of goods or services with a minimum need for cash. The case presented in this
paper describes the challenges faced by a Turkish Chamber of Commerce and Rimzi
University when trying to maintain funding levels during lean economic times.
Introduction
It is February of 2009 in the president’s office on the beautiful southwest coast of
Turkey at the Rimzi Chamber of Commerce. The Chamber president, Aysha Marmaris,
is reviewing the cash flow report of the Rimzi University of Economics (RUE), a private
university funded by the Chamber and its members. She grimaces when she
notices the monthly shortfall of operating funds—this could only mean the need for
more cash infusion from the Chamber’s membership rolls—an unpopular move for
her office. Her organization had totally funded the founding and the new building construction
as well as the ongoing support and sponsorship of this private educational
facility. The reasoning for this was to have a ready source of highly qualified technical
student applicants for internships and subsequent employment opportunities upon
graduation with the Chamber’s 2,200 member companies. While this seemed to be
working fairly well over the past three years since the university opened its doors, the
cash flow requirements were over the current period’s budget expectations, and something
needed to be done.
This was also coming at a time when the Chamber was entering several foreign student
exchange programs, and the support costs for these special-needs students were
beginning to present some operating challenges to the university. These challenges
1. Eyal Eckhaus, Department of Logistics Management, Bar Ilan University, Ramat-Gan 52900, Israel
(eckhaue@mail.biu.ac.il); Frank Bates, Department of Logistics Management, Bar Ilan University, Ramat-Gan
52900, Israel and Izmir University of Economics, Turkey (batesf@mail.biu.ac.il and frank.bates@ieu.edu.tr).
Copyright © 2009 by Operations and Supply Chain Management: An International Journal and the authors.
This case was prepared solely to provide material for classroom discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors have disguised some
names and other identifying information to protect confidentiality. The views presented here are those of
the case authors only.
113
114 Part 3 Operations Issues
included the provision of additional boarding facilities, larger classrooms or additional
smaller classes, special tutoring services, specially trained educators experienced in
hi-tech disciplines and increasing the extracurricular activities.
Another consideration was the growth of advancing new technology. More hi-tech
equipment was needed to meet new and growing technical frontiers. This equipment
would be installed in the university’s work laboratories to support computer graphics,
virtual reality, artificial intelligence, intelligent fault locators and algorithm-based technologies.
Ms. Marmaris also knew that she had to consider Turkey’s current economic
turmoil and recession; the Chamber members would not easily provide new funding,
and even if some additional funds were granted, they would require very solid reasoning
and rationale, accompanied by creative alternatives for the equipment needed.
Ms. Marmaris recalled reading about a corporate trade barter agency and wondered if
joining their membership might help alleviate the cash crunch from the university’s
operations. There seemed to be advantages in becoming a member at the corporate
trade barter agency (in effect, a brokerage exchange), which had actually saved some
local businesses in the area—providing them a safe haven within the stormy global economy.
She thought that the university might likewise benefit. She had read that other universities
were offering their fellow trade barter exchange members tuition discounts for
placement into degree programs (to help fill up almost empty classrooms) in exchange
for supplying the university with such necessary items as insurance coverage, cleaning
supply products, advertising media, air travel and car rental services. These purchases
of and payments for operating items were collectively known as the “spend” of the
university.
Ms. Marmaris had also spoken with J.D. Office Supplies, a local office supplies
retailer. The company began to experience difficulties due to the recent economic events,
which caused their customers to cut orders, leaving the store with excess inventory on
hand. Joining the trade barter agency system enabled the store to offer some of the
unsold surplus goods in exchange for a new telephone system from one of the members,
thus performing an exchange without the need for money. As Ms. Marmaris reviewed
these activities, she envisioned possible changes to the supply chain as the spend levels
of the organization were achieved with the utilization of the trade barter agency. She
thought that the effect might be to compliment and to partially offset the traditional purchasing
and payment of products and contract services with the inclusion of this trade
barter agency to their supply network.
Corporate Trade Barter
Enterprises must closely examine their operating costs, when there is the relative
scarcity of operating funds owing to a continuing sluggishness in revenue levels. It is
at this point that these businesses may be interested in studying the rationale for the
use of barter and the trade barter agency system being offered by the international network
of barter agency companies, as a possible alternative to traditional procurement.
The prospect of trading goods and services in exchange for other goods and services is
viewed as a worthwhile strategy within the field of procurement; it creates value along
the supply chain. Managers tasked with a proactive posture to maximize  spend” while
optimizing available resources might consider a corporate trade barter agency to
achieve a competitive advantage within their industry.
Case 17 Trade Barter, The Rimzi Chamber of Commerce and the Rimzi University of Economics 115
Bartering Surplus Materials and Excess Capability
Academic education and training services might consider barter as a means to dispose
of surplus materials and to utilize excess capacity in exchange for other materials and
contract services such as media advertising time or long-distance telephone services. As
illustrated in the figure below, the benefits of barter would include:
•
Reduced cash expenditures for advertising, business travel expenses or other
traditional services
•
Development of new markets for services and surplus assets
•
Better capacity and excess space utilization
•
Avoidance of loss or the need to incur costly write-downs of assets
•
Removal of excess inventories
In Turkey, using the barter system is possible only when a firm becomes a member of
a trade barter agency. The professional trade brokers offer support to members in evaluating
their sales alternatives and options, such as the creation of brands and actively publicizing
the member’s facilities and determining the needs of the customer; the trade
barter agency allows each member to get the full advantage of the system.
All of the conditions for trading goods for things like media time are determined by
the buyer and seller. The trade barter agent may, for instance, charge premium prices for
the media time when exchanged for surplus goods. Alternatively, even if the media rates
are competitive, the time slots offered may not coincide with the times required by the
media buyer. Organizations must carefully evaluate all available alternatives, including
the option of selling surplus goods at a loss and then buying the media time through
regular channels. The savings in the purchase of media time (or other contract services)
might, however, offset losses in the sale of the surplus assets. Surplus material and excess
capacity might be used to compete with material sold through the regular distribution
Excess
inventory
Vacant
space 
Office
supplies 
Insurance
Computer
Limited
Education
Education
• Limited use of cash
• Cost reductions
• Remove excess inventory
…
distribution 
Hard to sell
commodities
116 Part 3 Operations Issues
channels of the company. Care must also be taken in drafting the contract to ensure that
the trade barter agent represents the organization.
RUE’s surplus capacity was an ongoing problem situation. The problem was that the
university had many of its classrooms equipped to seat and teach 40 to 50 students, but
often had classes with students numbering in the 5 to 15 range. Recently having
learned of other universities’ benefits with the use of barter, such as Bond University
in Australia and Stanford University in the U.S., Ms. Marmaris and other professional
educators in Turkey were realizing that while there were advantages in keeping student
counts per class low, there was also a legitimate rationale for exploring ways to optimize
headcount levels, considering the university’s operating costs. As members of
the trade barter agency, universities might schedule small enrollment classes in smaller
classrooms, while offering the larger classrooms for other purposes, such as degree or
certificate programs for employees of organizations that were also listed with the barter
exchange system, in exchange for various kinds of goods such as office machines, computers
and office equipment. Supplemental services from RUE’s professors might
include lectures and seminars away from the university that are given to the barter
membership’s professional association affiliates on the topics of work efficiencies, community,
cultural, environmental and social programs—in exchange for discounted
travel charges or other services for the university.
The university could take advantage of accommodations, organizational and seminar
options in selected hotels and resorts throughout Turkey and all over the world in general
to offset business travel costs. The university might also trade, for insurance, security,
health and catering services and cleaning materials such as disinfectants, or catering
equipment such as conventional ovens. RUE might also benefit from trading its excess
classroom capacity for some of its required monthly advertising and sponsorships. RUE
could also generate barter dollar credits within the system, whereby they could use these
credits, for example, to buy construction goods and services for its new building project
plans, as well as other periodically needed operational products, such as supplies and
janitorial services.
Ms. Marmaris was thinking that certainly such foresight and management practices
could lead to greater utilization of its underutilized assets and excess capacity, as in the
case of RUE, allowing the university to better manage cash flow in order to meet operating
costs.
Conclusion
It is estimated that various industries have large sums of money tied up in nonworking
assets and in excess services capacity, but few businesses handle these materials
and services in the most optimal way. The disposal of surplus assets and the utilization
of excess capacities are key elements of a successful barter process. The need for and
identification of asset recovery procedures and utilization of excess services capacity at
universities is evolving and must address a variety of issues and challenges. In the case
of the RUE, there is the challenge for the Rimzi Chamber of Commerce to exercise a
more effective utilization of excess classroom and services capacity—something that all
enterprises must address. With less than a month until the next membership review
committee meeting, the president works at her desk to decide how to handle this problem
at RUE.
Case 17 Trade Barter, The Rimzi Chamber of Commerce and the Rimzi University of Economics 117
Discussion Questions
1. What are all the issues here that should be considered by the Chamber’s president,
Ms. Marmaris?
2. What kind of studies should the Chamber perform to assess the likelihood that RUE
could benefit from use of the trade barter system?
3. Should the Chamber of Commerce president issue an invitation to a trade barter
agency for a meeting to review the advantages of belonging to the membership?
What specifically could the university offer in terms of excess classroom and service
capacity?
4. Do you think there is a way to successfully trade classroom seats and professor
services in exchange for discounted travel charges, media expenses, contract services
and the like to the university?
5. Do you think Ms. Marmaris should use the barter system to eliminate the necessity
of additional university funding? Why or why not?
6. Consider the case where a company has U.S. $100,000 worth of excess material for
exchange, and explain the technicalities of the procedure.
7. Identify and describe a trade barter agency in your metropolitan area.