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panics, and sells a large amount of the product under more favorable terms than they would under ordinary circumstances. At the beginning of the next period, no new orders are placed, and, barring any action, the cycle is then repeated. That affects customers, creating gluts and shortages as buyers turn to competing products.
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than the channel is capable of selling. This can be the result of a company attempting to inflate its sales figures. Alternatively, it can be a consequence of a poorly-managed sales force attempting to meet short-term objectives and quotas in a way that is detrimental to a company in the long term.
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Channel stuffing has a number of long-term consequences for a company. Firstly, distributors will often return any unsold goods to the company, incurring a carrying cost and also developing a backlog of product inventory. Wildly fluctuating demand, combined with the excess inventory, leads to costly
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Occasionally, distribution channels such as large retailers have been known to identify the practice of channel stuffing by their suppliers, and use the phenomenon to their advantage. That is done by holding back on orders until the end of a supplier's quota period. The supplier's sales force then
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Bristol-Myers inflated its results primarily by: (1) stuffing its distribution channels with excess inventory near the end of every quarter in amounts sufficient to meet sales and earnings targets set by officers
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26:, is a business practice in which a company, or a sales force within a company, inflates its sales figures by forcing more products through a
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overtime and factory shutdowns. Even mild channel stuffing can spiral out of control as the sales department works to make up for prior
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Corporations have been known to engage in channel stuffing and hide the activity from their investors. In the United States, the
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While engaging in this "channel stuffing," McAfee improperly recorded the sales to distributors as revenue.
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have been filed. Channel stuffing might also be part of a broader pattern of financial impropriety.
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39:. Discounts used to drive trade loading can greatly affect profits, and even help establish
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106:"Bristol-Myers Squibb Company Agrees to Pay $ 150 Million to Settle Fraud Charges"
108:(Press release). US Securities and Exchange Commission. August 4, 2004. 2004-105
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channels, because salespeople no longer adequately qualify their prospects.
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A Financial
History of Modern U.S. Corporate Scandals: From Enron to Reform
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130:(Press release). US Securities and Exchange Commission. January 4, 2006.
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147:(Press release). US Securities and Exchange Commission. August 6, 2004
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has in some cases litigated against such corporations, and private
145:"Bristol-Myers Squibb Company : Lit. Rel. No. 18822"
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171:"Glancy Binkow & Goldberg LLP – Attorneys at Law"
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52:U.S. Securities and Exchange Commission
16:Business practice used to inflate sales
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128:"McAfee, Inc.: Lit. Rel. No. 19520"
249:. You can help Knowledge (XXG) by
177:. January 21, 2004. Archived from
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84:. M.E. Sharpe. pp. 218–20.
200:O'Sullivan, Kate (2005-06-01).
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296:Economics and finance stubs
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245:-related article is a
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221:– via CFO.com.
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56:class-action suits
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41:gray market
37:overselling
290:Categories
218:2012-08-09
185:January 5,
62:References
243:economics
202:"Kremed!"
207:CFO Mag.
78:(2006).
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241:This
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