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Case Study--American Tool Works

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Case Study--American Tool Works
American Tool Works (ATW) is a leading U.S. manufacturer of high-quality power and hand tools, such as electric drills, hammers, and so forth. The company has manufacturing facilities all over the world, and its main markets are in Europe and North America.
Products are sold through distributors and dealers or directly to home owners and tradesmen.
ATW enjoys a very successful partnership with its distributors and dealers. This channel provides about 80 percent of its revenue, and, as a result, is the focus of the new management team that took over in 2004. The relationship between ATW and its distributors and dealers may take two forms:
Large distributors tend to have a vendor-managed inventory
(VMI) agreement with ATW. In this situation, ATW monitors the inventory levels of various products at the distributors' facilities, and makes additional shipments as necessary. Midsize and small distributors do not have the technical capability to participate in the VMI relationship, since they don't have the technology to automatically transfer the necessary sales and inventory information to ATW.
Many of these distributors sell not only ATW products, but many products from firms that compete with ATW. The large distributors are typically pleased by the performance of the VMI agreement. ATW Supply Chain VP Dave Morrison recently instituted a series of meetings with ATW's key large dealers. In these conversations, the dealers emphasized the following:
• T heir salespeople can direct demand to either ATW products or competitors' products. That is, buyers typically ask the distributors' sales team for advice on product/brand combination.
• Currently, distributors' sales team make decisions based on
• Comfort level with different products/brand.
• Promotional items.
• Profit margin.
• ATW products' stock levels at the distributor do

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