Gain Sharing

Gain sharing is a method of incentive compensation where supply chain partners share collectively in savings from productivity improvements. The concept provides an incentive to both the buying and supplier organizations to focus on continually reevaluating, energizing, and enhancing their business relationship. All aspects of value delivery are scrutinized, including specification design, order processing, inbound transportation, inventory management, obsolescence programs, material yield, forecasting and inventory planning, product performance, and reverse logistics.

The focus is on driving limits to profitability and creating a win-win scenario for all involved. While the details of gain sharing arrangements can vary greatly, the general idea is to reward everyone who contributes to improved performance. This can be a very effective way to motivate partners to work together to achieve common goals.

By sharing the savings that are generated, all members of the supply chain can benefit from improved performance. This can lead to increased efficiency and profitability for everyone involved.

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