Flash Newton is national sales director at Bright & Shiny Toothpaste Company. The firm manufactures and distributes a full line of premium-priced personal care products sold through a carefully selected set of distributors nationwide. The popularity and profit margins of the Bright & Shiny product line make distributorships very profitable and there is intense competition when one becomes available. Flash, and the regional sales directors working for him, are compensated by a base salary and a significant bonus tied to percentage increases in yearly sales. Because of an impending recession, sales have been mostly flat during the first three quarters of the year. On October 3, Flash convened a national sales meeting with representatives of all distributors. At that meeting, he presented the distributors with Bright & Shiny’s newest sales plan. All distributors would be required to buy, during the 4th quarter, up to 2 years’ worth of inventory of the firm’s products. Further, the prices charged on these special purchases would be 10% greater than usual. Any distributors not agreeing to the proposal would automatically lose their distributorship. Because most distributors are not expected to have cash readily available to pay for these additional purchases under the usual 30-day credit terms, Bright & Shiny will allow up to 12 months to pay. The new policy has been a huge success and by year end, total orders and shipments to distributors are up by 12% over the previous year. Bright & Shiny recorded all shipments as revenue even though some distributors were told by lower-level managers that they could return unsold products. Because many distributors could not handle the large shipments in their usual storage facilities, many orders have been shipped to third-party warehouses for storage at Bright & Shiny’s expense. At Flash’s suggestion, and to obtain maximum benefit of this new sales program, the company held the books open for a few days after December 31 to obtain and ship additional orders.

Required
Identify and explain any problems you see with the sales plan. If you were Bright & Shiny’s CEO, which aspects of the sales plan would you have approved and which would you have denied? Why?