I was reading through that issue of Pinball Magazine #5 that has the big interview with Wayne Neyens. Found a couple of references to the gauged production idea:
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PM: Once the decision was made to use the roto-target, would parts for that unit be ordered per game, or like per 50,000 at a time since they were going to be used anyway?
WN: No, no. We only ordered parts per game. If we knew we were going to build 2,000 games, we would order parts for 2,000 games. Where would we put them? We didn't have room to stock material. We never ordered material ahead of time. We would order it and build it, order it and build it. Our stockroom held nothing but nuts, bolts, rivets, the basics. As far as ordering ahead goes, it would just fill up the room. (pg. 150)
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PM: The phrase "Gauged production, controlled distribution" appears for the first time on the flyer for Alice in Wonderland, from August 1948. What did that phrase mean?
WN: At the time, all manufacturers were shipping games like crazy. When they had a new game coming out, they would ship 50, 100, 200 games to each of their distributors. These poor distributors had to take them, and if they couldn't sell them, they started eating them. What that does to a distributor is he'll go broke. Dave (Gottlieb) then came up with the idea of Gauged Production and Controlled Distribution.
Dave was head of the Coin Machine Industry Association for many, many years. One time at a CMI banquet, he got up, gave a little speech, and coined the phrase "gauged production and controlled distribution". He thought it would be good for the industry to follow this outline. From then on, Dave followed this religiously. I don't know about the other companies, but from that time on, we never produced a game that he didn't have an order for. He controlled distribution so that if you were a distributor and had an area, you had an exclusive. No one else could get in there and sell a game.
So when he started a new game, Nate (Gottlieb - Dave's older brother), being in charge of selling, would call up each distributor and ask them how many games they wanted to buy, and they would place an order. If they wanted 50, that's what they got. If you wanted 30, you got 30. You just never overloaded them. Then Nate would add up all those orders and tell Dave we're going to build 500 games or 1,500 or whatever the number was going to be. And that's what we ordered parts for. As we got into building the game, Nate would call them again and ask them, "How are you doing? Do you want some more games? Or do you want to get rid of some games?" If they had too many games, he would trans-ship to somebody who needed games. This made the distributors wealthy. They became very good distributors, they had money, and it was a wonderful thing.
Other companies would often have games sitting on their floor that were not sold, and would call up their distributors and offer them a discount. Sometimes they'd even send out the games without an order. But Gottlieb never pressured anyone. We didn't have to. We never had a game left over that was unsold. We made exactly what was ordered. That's why sometimes you'll see production numbers with an odd number, like 865 games, or 1,515, or some such number. That's because that was how many orders we had. So that's how many games we made. We never pushed a game on to an operator after the late '40s. These odd production numbers have always confused and amazed the collectors of today. The collectors study and keep track of the serial numbers trying to figure out how many games are out there. The number of games made helps to influence the price of used games, as well as their popularity. (p. 82)
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That's a fantastic magazine to have if you're a fan of Gottlieb and Wayne Neyens, by the way. Alllll kinds of stuff in there!