AMERICAN TOOL

WORKS
SYNDICATE 3
NISA SEPTIANITA
ZAENAL
DIAN
HARRY

AMERICAN TOOL WORKS

a leading U.S. manufacturer of highquality power and hand tools, such as
electric drills, hammers, and so forth.
The company has manufacturing
facilities all over the world, and its
main markets are in Europe and North
America.

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 ATWs
competitor product
* Space is limited in ATW
* Many distributor and dealers choose ATWs product
because of good name recognition, quality and sales support
* 60% of sales pre-specified by the buyer and 40% steered
by the distributors sales force
* Competitors use several contract approaches to the
distributors and dealers to increase their profit and market
share

GOAL
American Tool Works want to compete with other
competitors in small and midsize dealers in order to
increase their sales and market share.

Question and Answer

What can ATW do to increase inventory at

small and midsize dealers?
From many risk-sharing options available, the
ones that result in inventory increase is buyback/returns and revenue sharing contracts. ATW
should launch Buy Back Contract or Sharing
Revenue Contract with small and midsize dealers
as an effort to attract dealer to take more product
from ATW.
Buy back contract
Buying the unsold tools back from the dealers,
this will encouraged the dealers increase their
inventory. This will increase their product
availability and reduce the stock out probability.

What can ATW do to increase inventory at

small and midsize dealers?
Revenue sharing contract
Dealers share some of its revenue with the ATW.
Dealers transfer a portion of the revenue from each
ATW product sold back to the ATW. ATW will provide
a discount on the wholesale price to the dealers.
(This option will be difficult to be implemented as it
is not easy for ATW to monitor revenue from many
small and mid-size dealers)

What can ATW do to increase sales

at small and midsize dealers?

In the existing process, dealers sales force

can steer 40% of sales based on...

Why are ATWs competitors using the

two approaches describe in the case
when they deal with small and midsize
dealers?

Should ATW adopt these

approaches?

Should ATW try different

approaches? What are the possible
approaches they should consider?

THANK YOU