Capacity allocation using past sales: when to turn-and-earn

Gérard P. Cachon; Martin A. Lariviere

doi:10.1287/mnsc.45.5.685

Capacity allocation using past sales: when to turn-and-earn

Gérard P. Cachon, Martin A. Lariviere

Managerial Economics, Decision Sciences and Operations

Research output: Contribution to journal › Article › peer-review

112 Scopus citations

Abstract

The turn-and-earn allocation method which is commonly used in the automobile industry is analyzed. It is demonstrated that turn-and-earn induces the retailers to increase their sales when demand is low and the supplier's capacity is otherwise underutilized. This in turn increases supplier profits. The method is best characterized as a means for the supplier to increase profits at the expense of the retailers and potentially even the supply chain.

Original language	English (US)
Pages (from-to)	685-703
Number of pages	19
Journal	Management Science
Volume	45
Issue number	5
DOIs	https://doi.org/10.1287/mnsc.45.5.685
State	Published - May 1999

ASJC Scopus subject areas

Strategy and Management
Management Science and Operations Research

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Capacity allocation using past sales: when to turn-and-earn

Abstract

ASJC Scopus subject areas

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