Koehring Case

Koehring Machine Company was founded by Philip Koehring in Milwaukee, Wisconsin in 1907. It was in 1920 when it changed its name to Koehring Company. The company offers construction machinery, other heavy equipment like industrial machinery and specialty oil well hardware items. To be able to efficiently manufacture and sell its products, the company has acquired 11 domestic operating divisions. Thus, the company was able to increase their distributors, annual sales and divisions.

Koehring has been using a “subjective, irregular and fragmentary” distributor evaluation system that makes the result inefficient. Therefore, the company decided to adapt new evaluation systems namely the Koehring Company Dealer Rating Form and Koehring Company Construction Equipment Dealer’s Performance Ratings to address their problems.

Koehring Company Dealer Rating Form

In the Koehring Company Dealer Rating form, the “Penetration Index” serves as the key to further improve the Koehring Company’s evaluation system for its channel members. This index is computed by dividing the annual dollar value of the dealer equipment sales by the annual equipment sales quota that was assigned that year. For example, channel member A was given a sales quota of $250,000, but he was only able to have sales that amount to $200,000, the Penetration Index is computed as:

Penetration Index= (Annual Equipment Dealer Sales)/(Annual Equipment Sales Quota)= $200,000/$250,000=0.8

The resulting number in this index is used to refer to the instruction sheet for the Koehring Annual Dealer Rating:

Penetration Index Range Dealer Rating Code Description

1.5 and above 1 Excellent

1.2 to 1.4 2 Good

0.9 to 1.1 3 Average

0.6 to 0.8 4 Fair

0.5 or less 5 Poor

At the stated example above, the channel member gained a penetration index of 0.8, which is under the Dealer Rating Code 4 that means “Fair”.

A supplementary check on this evaluation system is also made by comparing the dealer’s rating that of...