Reference no: EM132163421

Suppose you are a salesperson and your company's CRM forecasts that your quarterly sales will be substantially under quota. You call your best customers to increase sales, but no one is willing to buy more.

Your boss says that it has been a bad quarter for all the salespeople. It's so bad, in fact, that the vice president of sales has authorized a 20 percent discount on new orders. The only stipulation is that customers must take delivery prior to the end of the quarter so that accounting can book the order. "Start dialing for dollars," she says, "and get what you can. Be creative!"

Using your CRM information system, you identify your top customers and present the discount offer to them. The first customer balks at increasing her inventory: "I just don't think we can sell that much."

"Well," you respond, "how about if we agree to take back any inventory you don't sell next quarter?" (By doing this, you increase your current sales and commission in this quarter, and you also help your company make its quarterly sales projections . The additional product is likely to be returned next quarter, but you think "Hey, that's then and this is now.")

"OK," she says, "but I want you to stipulate the return option on the purchase order."

You know that you cannot write that on the purchase order because accounting won't book all of the order if you do. So you tell her that you'll send her an email with that stipulation. She increases her order, and accounting books the full amount.

With another customer, you try a second strategy. Instead of offering the discount, you offer the product at full price but agree to pay a 20 percent credit in the next quarter. That way you can book the full price now. You pitch this offer as follows: "Our marketing department analyzed past sales using our new information system, and we know that increasing advertising will cause additional sales. So, if you order more product now, next quarter we'll give you 20 percent of the order back to pay for the advertising."

In truth, you doubt the customer will spend the money on advertising. Instead, it will just take the credit and sit on a bigger inventory . That will kill your sales to the company next quarter, but you'll solve the problem when you get to it next quarter.

Even with these additional orders, you're still under quota. In desperation, you decide to sell product to a fictitious company that you say is owned by your brother-in-law. You set up a new account, and when accounting calls your brother-in-law for a credit check, he cooperates with your scheme. You then sell $40,000 of product to the fictitious company and ship the product to your brother-in-law's garage. Accounting books the revenue in the quarter, and you have finally made quota. A week into the next quarter, your brother-in-law returns the merchandise.

Meanwhile, unknown to you, your company's ERP system is scheduling production. The program that creates the production schedule reads the sales from your activities (and those of other salespeople) and finds a sharp increase in product demand (imagine that!). Accordingly, it generates a schedule that calls for substantial production increases and schedules worker for the production runs. The production system, in turn, schedules the material requirements with the inventory application, which increases raw materials purchases to meet the increased production schedule

Question

1. Describe the effect of your activities on next quarter's inventories.

2. Setting aside ethical and legal issues, would you say the enterprise system is more of a help or a hindrance in this example?