Is Revenue Sharing Right for Your Supply Chain?

Abstract

Many firms have enjoyed remarkable success using revenue-sharing contracts to improve supply chain performance. The 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 the implementation costs? By comparing and contrasting several case examples, this article develops a general framework that helps answer these questions, which is based on the fundamental sources of added value and added costs.