Question 3.2 Elaborate on the Baker Criterion guideline for formulating conceptual models. Explain why the equation at the top (for calculating Customer Orders) fails the Baker Criterion

Policy Structure and Formulations for Limits to Sales Growth Although the sales force is vital for generating orders, we also know that product availability is a very important consideration for buyers. Even the most successful sales force cannot sell a product that is not available. Intuitively, we might expect customer orders to be limited by production capacity and therefore write the following equation to capture the supply constraint (where MIN is a logical tunction that selects the minimum value of the two expressions in parentheses). Customer Corlers = MIN LSales Force * Normal Sales Force Produrtiviry, Production Capactiy) However, a moment's reflection reveals this is not a good formulation. It fails the Baker criterion betause it inplies that custoners know the factory's production eapacity and ignore the efforts of the sales force the moment the linat of production capactiy is reached. Figure 7.15 shows a much mure realistic and subtle tormulation in which customers respond to delivery delay and where delivery delay depends indirectly on both production capacity and the urilisarion of capaciry The heaury of this formalarion is that casomers lonow delivery delay (from experience or rumour) and regard it as very important in their ordering dectoton, consistent with vur tarlier discussiton of the customer ordering policy. Moreover, the formulation is dynamically interesting. In the short to medium term, it allows the freedom for customers to omler more than the tactory can provice rather than arhitrarily imposing a rigid balance of supply and demand. Figure 7.15 Policy structure and formulations for limits to sales growth