3. Overview
ATW is established company in the hand tools and high volume
power tool manufacturer.
ATW has Vendor Management Inventory System with large
scale distributers. However there is no VMI agreement signed
with small scale industries due to lack of capabilities to
participate in VMI relationship.
As per the data available, 60% of total sales are pre-specified
by the buyers and remaining 40% are steered by the
distributor’s sales force.
ATW is doing well with large distributers in terms of profit,
delivery as shipments are getting received on time at their
facilities.
We need to address the issue that how we can do well with
small and mid-size dealers in order to increase inventory of
ATW products.
As our eclectic competitors are attracting distributors with
various offers to stock their products.
4. Problem Statements
First Statement Second Statement
To Increase inventory at
small and mid-size dealers
by taking necessary steps
To Increase sales at small and
mid-size dealers by offering
attractive offers
5. Solutions Proposed
Steps to increase inventory at small and mid-size dealers:
Introducing essential contract methods which can help in increase
inventory-
1.) Buy Back Contract:
Buy back offers allow distributors to return unsold inventory up to
specific amount at an agreed upon price.
This will increase the product availability and reduces the stock out
probability.
2.) Revenue Sharing Contract:
This contract allows dealers to share fraction of their revenue for
each unit they sell of our company’s product.
ATW offers discount on bulk orders.
6. Buy Back Contract Revenue Sharing Contract
Increases Demand
between small & mid-size
dealers
Decreases Stock out
probability
Reduces risk of managing
unsold product inventory
More Sell of ATW
Products
Profit increases because
of revenue sharing
Increases Demand
between small & mid-size
dealers
Benefits
7. Action Plan
Call a meeting of managers, marketing and sales department to
discuss about contract and how to offer it to various distributors.
Arrange a meeting with suppliers for discussion.
Study competitor's contracts and techniques to set our action which
increases our chances of success.
Convince dealers the sign buy-back contract with installment payment
options by assuring them better services .
Offer them enough time to study various prospects of our contract.
Develop an effective reverse logistics supply chain system for better
quick and effective response.
The process can take up to 2 months to be implemented.
8. 2. Steps to increase sales at small and mid-size
dealers
Large dealers have stability of business because of Vendor
managed inventory agreement.
The focus is to increase sales at small and mid-size dealers of
ATW.
According to data, dealers’ sales force can steer around 40% of
sales based on on-site inventory and not by brand preferences.
To increase our product’s sales, incentives needs to be offered
to dealers in order to direct demand or promote to ATW’s
products.
Threshold contract can be applied in this situation, where
dealers receive an amount of commission up to certain level of
sales (i.e. up to 80%, they receive normal profit; above 80% and
below 100%, dealers receive $5 per item(Depends upon
product selling cost sold, and so forth).
Extra contracts like sales rebate contract can also be signed
and incentive can be introduced for the sales person of the
distributor because according to reports, 40% sales are driven
by the sales persons.
9. Benefits
Long term contract is beneficial for retention of dealers and
distributors.
Sales Rebate Contract:
Encourages them to focus more on ATW products.
Dealers prefers ATW products over others to be eligible for the rebate which
increases sales of our company.
Threshold contract offers commission to dealers on certain amount
of sales.
Sales Incentive Program:
This program will encourage sales person to suggest ATW products. As per the
data 40% of sales are driven by sales person in small organizations.
Launch sales incentive program together with small and midsize dealers as an effort
to expand market share and to convince them to sell our product more.
Reward program benefits our product’s sale.
10. Action Plan
Discuss pros and cons of all contracts with experts of various
departments like sales, marketing.
Frame rebate contract for discussion.
Inform suppliers about incentive programs and arrange a body
meeting between ATW and Suppliers as soon as possible.
Continuous monitoring of sales.
Arrange meetings frequently to review the process and to
introduce necessary changes if required.
Process can take up to 3 months to get implemented.
11. Conclusion
Increase inventory by introducing buy-back and revenue sharing
contract.
According to data, 40% of sales depends on the sales force of the
small and midsize distributors hence the key to increase the sales
is to increase the incentives of the sales person of the distributors
to sell more ATW’s products.
Fusion of buy-back and incentive contract will offers better
flexibility to dealers to deal with ATW which will lead to better
inventory level and increased sales.
