1. What is the likely reason Xtrac persistently underforecast sales? * I personally think that the main reason why Xtrac is persistently underforecast it’s because the sales offices set their own goals without an opinion of the manufacturing department and also they don’t take into account the growth from one year to year. * Sales representatives income is based 30% on a small wage and 70% on commissions, so whenever they do the forecast, they tend to under forecast the sales so that way they can exceed the goals and get more money.
2. What are some likely explanations for the reason in question#1? * They are evaluated on a revenue center
* The sales representative are incentivized to under forecast to make them look good with the numbers and also to get a better commission.
3. Propose three likely solutions and critically evaluate each of them? * Manufacturing Department has to be part of the budget: sales are the motor of the company but if production does not have an accurate information they will struggle in making the product on time, with the right price and in the right place (product mix) * Sales Representative should adjust the forecast at least every other QRT so manufacturing will have a better idea about it so the price for the product should not suffer any drastic changes on the cost.(frequent evaluation) * Hire Supervisors that help to keep every sales representative aware of the market demands and preferences, so that way the sales will start setting more challenging goals.