Abstract:

sales-force pay by taking into account how sales-force conduct affects a company's inventory and production system. Salespeople's level of effort is influenced by their compensation package, which in turn influences the company's product sales pattern and, ultimately, the efficiency of its production and inventory system. Generally speaking, efficient demand management makes inventory and production planning easier. As a result, a company can benefit from motivating its salespeople to work hard in a way that genuinely streamlines the demand process. The article suggests a compensation plan to encourage this kind of behaviour. The sales force is evaluated and paid according to a moving-time-window basis, with the production lead time dictating the duration of the time window. Numerical examples demonstrate that, in comparison to a popular compensation plan based on annual quotas, the suggested package benefits the company.

Description:

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