Problem Description

The problem we are tackling here is “Design Compensation Incentives Based on performance of the Store Managers”. We can take the store sales as a proxy to indicate the performance of the manager. The model can be used to set sales target to their respective store managers. The variable payout is dependent on the manager’s ability to exceed the target.

In the retail business, it is crucial for the firms to accurately forecast sales in the future to
prepare themselves and optimize costs. Over-estimating sales can lead to a significant cost of inventory holding and even losses due to expiry in case of perishable items. There could also be a scenario of underutilized resources in manufacturing be it machinery or labour.
Underestimation of sales in forecasts can lead to loss of business opportunity.

VIDEO

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