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Is Revenue Sharing Right for Your Supply Chain?
Many firms have enjoyed remarkable success using revenue sharing contracts to improve supply chain performance. Video rental industry and its pioneering deal with movie studios is one such example. At the same time, other firms have struggled to make it work. What accounts for this difference? When can revenue sharing create significant value and what are implementation costs? By comparing and contrasting several case examples-including our own experience working with a major semi-conductor manufacturer-we develop a general framework that helps answer these questions, which is based on the fundamental sources of added value and added costs.