American Tool Works

Prateek MishraA20381901

PlanOverviewProblem StatementsSolution

BenefitsAction Plan

Conclusion

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.

Problem StatementsFirst 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

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.

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

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.

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.

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.

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.

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.

Thank You