CHAPTER 14 SALES VOLUME ANALYSIS

SEAL RITE ENVELOPE COMPANY Analysis of Sales Volume

Overview:

Rose Douglas, a stereotypical "Type A" sales manager, has just had her data fortress rocked during her initial meeting with Max Chernak, Seal Rite's new president. Rose's sales data analysis system is comprehensive and provides much useful information. She uses the data to keep on top of things as well as help her catch changes and trends early on. Chernak believes she is micromanaging: too involved in unimportant details to be able to capture the big picture and important items. Nonetheless, from a profitability and sales standpoint, Rose's work seems to be paying off.

Rose's textbook approach to using sales data analysis provides an interesting scenario. She has developed a good tool and is able to generate a great deal of useful information. Most companies must work in the dark where Rose is seeing clearly. Using the iceberg principle as an analogy, Rose can see under the surface very clearly.

On the other hand, Chernak is correct in suggesting that she is looking at the iceberg in too great detail. If she can see the basic size and shape, to what extent does it pay off for her to further analyze each little piece? Furthermore, what might she be missing? For example, if total industry sales are rising a more rapid rate than Seal Rite's sales, her current analysis system has no way of measuring Seal Rite's effectiveness. Chernak senses that Rose's system suffers from the same 80-20 principle that describes most companies' sales: 80 percent of the profits comes from 20 percent of the customers. Perhaps most of the effectiveness of her system can be found in a small portion of the data she is examining.

Question 1 (25 points): How could Rose Douglas evaluate the effectiveness of her sales analysis system?

Question 2 (25 points): What would you recommend she do in response to the situation in which her boss obviously disagrees with her attitudes toward information systems?