For standard model the given information is

1.      Draw the order fulfillment process starting from when a customer places an order at a licensed retailer until the delivery of the compactor is finished at the customer’s premises. For each step of the process indicate which player in the supply chain is executing that step. Also indicate where inventories are kept, and how information flows.

Distribution Company is involved in first step in receiving order then manufacturing company i.e. Handy Andy, Inc. is informed to about the order. Pick, pack, and delivery is done by either the retailer or distributor. Delivery confirmation is done by manufacturer, distributor, and retailer. Inventories are kept in the warehouse and information flows through different marketing channels including newspaper, and other advertising channels. Distribution Company is directly linked to retailer outlet as well as the customer place. Customers can visit the licensed retailer or the distributer directly to place the order.
2. Calculate how much money each player in the supply chain makes for each compactor sold.

For standard model the given information is:

Retail Price                              $662.50

Wholesale Price                      $496.88

Manufacturing Cost                 $331.25

Retailer's Profit/Loss              $143.27

Handy Andy's Profit/Loss      $143.27

Distributor's Profit/Loss          $210.34

Handy Andy Delivery Cost      $22.36

Retailer Delivery Cost            $22.36

From above:

Money made by Retailer = $143.27

Money made by manufacturer/Handy Andy = $143.27

Money made by Distributor = $210.34

3. Using your answers to questions 1 and 2, explain if the returns in the supply chain are proportional to the work done. Are the incentives correctly structured in the supply chain?

Based on answers to questions 1 and 2, the returns in the supply chain are not proportional to the work done. The incentives are nor structured correctly in the supply chain. In the case of Handy Andy that is manufacturing company as well, the company is just making $143.27 profit against $331.25 cost. On the other hand, distributor is making $210.34 profit that is much higher than Handy Andy while the cost of distributor is always much lower than the manufacturer money. Now, if we compare retailer with distributor then incentives are correctly structured in the supply chain because profit of retailer is less than the profit of distributor. On the other hand, if we compare retailer with Handy Andy then profit is same for both while the cost of retailer is much lower than Manufacturer Company which means that incentives are not correctly structured in the supply chain.
4. Why is the distributor trying to bypass the retailer?

The distributor is trying to bypass the retailer because Handy Andy has allowed the distributors to directly sell their product to the customers as well as retailers. Hence the distributors directly sell the product through advertisement or word of mouth. Distributors, sometimes, try to bypass the retailer by stealing their sales and directly calling end customers; this is how they increase their profit.
5. What changes would you make if any to resolve the issues? Justify your answer. You must consider if the process requires any changes or not, and if the incentives require any changes or not. 

In order to resolve the issue of incorrect structure of incentives and distributors bypassing the retailer, I would make the changes in authority of the distributor. I would not authorize distributors to sell products directly to end customers, they would be allowed to sell on the behalf of retailer or the manufacturer.