The project team forecasted that th

The project team forecasted that their plan would reduce the return rate to 3.5% and the NFF rate to 20% within two months, but their projection did not materialize. In fact, the NFF return rate went up to 40% after two months. Upon further investigation, the general manager and the production manager of the TV division discovered two reasons for the rising rate of NFF returns, despite their efforts. First, the sales team was under enormous pressure to meet their sales targets, which was set at 132% of the sales of the previous year, a rate that exceeded actual market growth. In order to reach their targets, they put pressure on the dealers to increase their purchase volumes, leading to higher inventory levels and tighter cash flow. To counter these problems, dealers negotiated with salespeople to accept returns and to allow exchanges of demo sets and slow-moving goods for new models. The second reason was that the after-sales service team had failed to take punitive action against the ASCs for fake inspection records. There was little incentive for the service team to respond to the ASCs' transgressions, as it did not report to the TV division and its performance indicators were not linked to the amount of goods returned.