The sales force has a vested interest in seeing that

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Unformatted text preview: sales force has a vested interest in seeing that customers pay their bills and in keeping inventory low: 20 to 30 percent of the sales teams’ bonus payments are based on A/R and inventory levels. Because Medtronic generates about 35 percent of total revenue overseas, it also has to contend with international receivables, which can take almost twice as long to collect as domestic receivables. Most of its hospital customers outside the United States are government-run, so the receivables quality and payment period vary from country to country. “In those countries where they have longer average collection periods, we tend to have higher prices,” says Ellis. Controlling inventory has been more difficult. Hospitals keep a large supply of different Medtronic products on hand, holding them on consignment and paying as items are used. The company’s goal is to get inventory turnover from the current 1.3 to at least 2.0 by changing customer attitudes. “We have to gain their [salespersons’ and hospital staff’s] confidence that they will get the product on a timely b...
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