Gone Today, Here Tomorrow: Behavioral Causes of Product Returns in the Agribusiness Industry
Last modified: September 22, 2007
Hybrid seed suppliers experience excessive and costly rates of seed returns from dealers, who order in advance of grower demand realization and may return unsold seeds at the end of the season. Here we develop a formal dynamic model of the interaction of sales effort allocation and dealer hoarding behavior to understand the dynamics of corn seed returns through a model-based field study. Sales representatives know they should carefully gather information on grower demand for seed types and quantities to improve their demand forecast (positioning effort). However, they abandon time-consuming seed positioning late in the sales cycle to push out dealers’ inflated orders and quickly meet revenue quotas. Such push effort leads to excessive returns in the next period, generating more inflated orders by dealers and increasing the total sales that agents must achieve to meet their quota, requiring them to push still more seed. Depending on the availability of sales resources, this biased sales effort allocation can generate a self-perpetuating stream of returns. Our analysis highlights the importance of adequately managing sales resources to ensure desired system performance while maintaining system robustness.