Gérard Cachon

Gérard Cachon
  • Fred R. Sullivan Professor
  • Professor of Operations, Information and Decisions
  • Professor of Marketing
  • Vice Dean of Strategic Initiatives

Contact Information

  • office Address:

    3730 Walnut Street
    543 Jon M. Huntsman Hall
    Philadelphia, PA 19104

Research Interests: operations strategy, pricing, supply chain management, sustainability

Links: CV, Personal Website

Overview

Professor Cachon studies supply chain management, operation strategy and pricing with a focus on how technology transforms competitive dynamics and enables novel operational strategies.

He is an INFORMS Fellow, a Fellow and former President of the Manufacturing and Service Operations Management Society, and the former Editor-in-Chief of  Management Science as well as Manufacturing & Service Operations Management.

He has authored two textbooks (along with Christian Terwiesch): Operations Management (1e) and Matching Supply with Demand: An Introduction to Operations Management (3rd ed.). These books have been used in undergraduate, MBA and executive MBA courses at Wharton as well as at numerous other business schools throughout the world.

His articles have appeared in Management Science, Manufacturing & Service Operations Management, Marketing ScienceOperations Research, the Quarterly Journal of Economics, and Harvard Business Review, among otherse

As Vice Dean of Strategic Initiatives he is responsible for developing and leading new initiatives for enhancing Wharton’s excellence in teaching and research.

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Research

  • Gérard Cachon, Santiago Gallino, Jiaqi (Joseph) Xu, Free Shipping Is Not Free: A Data-Driven Model to Design Free-Shipping Threshold Policies.

    Abstract: Online retailers often offer free shipping threshold policies: customers who purchase more than a threshold amount are not charged an additional fee for shipping. This paper provides a data-driven analytical model to (i) assess the profitability of a retailer’s current shipping threshold policy and (ii) identify the best freeshipping threshold policy for a retailer. The model is estimated from actual transaction and product return data. The model explicitly accounts for changes in customer shopping behavior due to a free shipping threshold, including strategically adding items to a shopping basket to receive free shipping, which we call orderpadding, and the subsequent adjustment in product return decisions. Roughly speaking, according to our model, a retailer that offers a free shipping threshold policy should set the threshold slightly abovethe average shopping basket amount. We calibrate our model to data from an online apparel retailer and determine that its decision to offer a lower free shipping threshold reduced its profitability considerably.This result is robust to a number of assumptions regarding the impact on long-run sales and possible price adjustments. We conclude that free shipping threshold policies are profitable only under a limited set of restrictive conditions.

  • Gérard Cachon, Santiago Gallino, Marcelo Olivares (2018), Does Adding Inventory Increase Sales? Evidence of a Scarcity Effect in U.S. Automobile Dealerships, Management Science.

    Abstract: What is the relationship between inventory and sales? Clearly, inventory could increase sales: expanding inventory creates more choice (options, colors, etc.) and might signal a popular/desirable product. Or, inventory might encourage a consumer to continue her search (e.g., on the theory that she can return if nothing better is found), thereby decreasing sales (a scarcity effect). We seek to identify these effects in U.S. automobile sales. Our primary research challenge is the endogenous relationship between inventory and sales — e.g., dealers influence their inventory in anticipation of demand. Hence, our estimation strategy relies on weather shocks at upstream production facilities to create exogenous variation in downstream dealership inventory. We find that the impact of adding a vehicle of a particular model to a dealer’s lot depends on which cars the dealer already has. If the added vehicle expands the available set of sub-models (e.g., adding a four-door among a set that is exclusively two-door), then sales increase. But if the added vehicle is of the same sub-model as an existing vehicle, then sales actually decrease. Hence, expanding variety across sub-models should be the first priority when adding inventory—adding inventory within a sub-model is actually detrimental. In fact, given how vehicles were allocated to dealerships in practice, we find that adding inventory actually lowered sales. However, our data indicate that there could be a substantial benefit from the implementation of a “maximizes variety, minimize duplication” allocation strategy: sales increase by 4.4 percent without changing the number of vehicles at each dealership, and a 5.2 percent is possible if inventory is allowed to decrease by 2.8 percent (and no more than 10 percent at any one dealer).

  • Gérard Cachon See my personal website (link above) for research papers (https://www.gerard-cachon.com).

Teaching

Current Courses

  • OIDD615 - Operations Strategy

    Operations strategy is about organizing people and resources to gain a competitive advantage in the delivery of products (both goods and services) to customers. This course approaches this challenge primarily from two perspectives: 1) how should a firm design their products so that they can be profitably offered; 2) how can a firm best organize and acquire resources to deliver its portfolio of products to customers. To be able to make intelligent decisions regarding these high-level choices, this course also provides a foundation of analytical methods. These methods give students a conceptual framekwork for understanding the linkage between how a firm manages its supply and how well that supply matches the firm's resulting demand. Specific course topics include designing service systems, managing inventory and product variety, capacity planning, approaches to sourcing and supplier management, constructing global supply chains, managing sustainability initiatives, and revenue management. This course emphasizes both quantitative tools and qualitative frameworks. Neither is more important than the other.

    OIDD615001 ( Syllabus )

    OIDD615005 ( Syllabus )

Past Courses

  • OIDD101 - An Introduction to Operations, Information and Decisions

    OIDD 101 explores a variety of common quantitative modeling problems that arise frequently in business settings, and discusses how they can be formally modeled and solved with a combination of business insight and computer-based tools. The key topics covered include capacity management, service operations, inventory control, structured decision making, constrained optimization and simulation. This course teaches how to model complex business situations and how to master tools to improve business performance. The goal is to provide a set of foundational skills useful for future coursework atWharton as well as providing an overview of problems and techniques that characterize disciplines that comprise Operations and Information Management.

  • OIDD615 - Operations Strategy

    Operations strategy is about organizing people and resources to gain a competitive advantage in the delivery of products (both goods and services) to customers. This course approaches this challenge primarily from two perspectives: 1) how should a firm design their products so that they can be profitably offered; 2) how can a firm best organize and acquire resources to deliver its portfolio of products to customers. To be able to make intelligent decisions regarding these high-level choices, this course also provides a foundation of analytical methods. These methods give students a conceptual framekwork for understanding the linkage between how a firm manages its supply and how well that supply matches the firm's resulting demand. Specific course topics include designing service systems, managing inventory and product variety, capacity planning, approaches to sourcing and supplier management, constructing global supply chains, managing sustainability initiatives, and revenue management. This course emphasizes both quantitative tools and qualitative frameworks. Neither is more important than the other.

Awards and Honors

  • INFORMS Fellow, 2015
  • Rapaport Award for Excellence in Teaching the Undergraduate Core, 2013
  • “Tough, but I’ll thank you in 5 years”, 2012
  • Manufacturing and Service Operations Management Society Fellow, 2011
  • Penn Fellow: One of six mid-career Penn faculty chosen for this leadership development program, 2011
  • M&SOM Best Paper Award Finalist 2010 for “In Search of the Bullwhip Effect”, 2010
  • “Tough, But I’ll Thank You in 5 Years Award”, 2009
  • MSOM Society Service award, 2008
  • Miller-Sherrerd teaching award: Awarded to the 8 professors with the highest core teaching evaluations, 2004
  • MSOM Meritorious Service award, 2004
  • Tough, But I’ll Thank You in 5 Years” Award, given by the Wharton Graduate Students Association, 2002
  • ‘Fuqua School of Business’ Daimler-Chrysler Teaching Award for Innovation and Excellence in an Elective Course, 1999

In the News

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Activity

In the News

Amazon Under Fire: Is Antitrust Action Likely?

Although Amazon has faced a series of accusations by President Trump about its business practices recently, the company would likely survive any attempts to bring antitrust action against it, experts say.

Knowledge @ Wharton - 2018/04/9
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Awards and Honors

INFORMS Fellow 2015
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