American Tool Works Case

879 words 4 pages
10/24/2014

American Tool Works Case

American Tool Works Case
GOAL: Increase ATW’s sales in small and midsize dealers
BACKGROUND:
American Tool Works want to compete with other competitors in small and midsize dealers in order to increase their sales and market share.
CURRENT CONDITION:
* Large distributors have a vendor-managed inventory (VMI) agreement with ATW, not with midsize and small distributors
* Distributors not only sales ATW products but also ATW’s competitor product
* Space is limited in ATW
* Many distributor and dealers choose ATW’s product because of good name recognition, quality and sales support
* 60% of sales pre-specified by the buyer and 40% steered by the distributor’s sales force
* Competitors use several contract
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ATW should adopt the approaches but with different type of contracts which have lower risk exposure to the ATW as a supplier. They also have to apply careful selection on the dealers and clauses included in the contract. Below approaches can be adopted:
* This situation is suited with “make-to-order” approach
* Buy back contract can be used to encourage the dealers to increase inventory level.
* Incentive for sales person can encourage sales person to offer the specified products to customers
5. Should ATW try different approaches? What are the possible approaches they should consider?
With the given facts that there’s huge opportunity (40% of sales) to increase revenue in small and midsize dealers by inventory driven, while at the same time encouraging the dealer’s sales person to proactively influence the ATW branding to the buyers/customers (shifting brand image that has occupied
60% of sales), ATW can try the following approaches to reach them:
• Increase inventory
Realizing that dealers’ sales force direct customers to buy certain type of products based on the on-site inventory level, there has to be adequate ATW’s products available in the outlets. To reach this, dealers have to be encouraged to stock/buy more from ATW. There’re the buy-back and revenue-sharing contracts. ATW should opt for revenue-sharing as it exposes lower risk for the supplier than buy-back options. ATW can push dealers to buy more by lowering wholesale price and still have a

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