The Supply Chain Game Solution

Beer Distribution Game
Players	Multiple teams with a minimum of 4 players
Setup time	10-20 minutes
Playing time	60-90 minutes plus another 60-90 minutes for debriefing
Random chance	None

Dec 01, 2015 This video is for my supply chain management class. Its basically a comprehensive review of my experience with the supply chain simulation that is.
May 03, 2012 A company is a system. A supply chain, which the Beer Game mimics, is a system of smaller businesses. A factory is a system of machines and routines. And when one small part goes awry, a whole system can fail.

The Beer Game is a role-play simulation game that lets participants experience typical coordination problems of (traditional) supply chains, in which information sharing and collaboration does not exist.

The beer distribution game (also known as the beer game) is a type of gamification that is used to experience typical coordination problems of a supply chain process. It reflects a role-play simulation where several participants play with each other. The game represents a supply chain with a non-coordinated process where problems arise due to lack of information sharing.^[1]This game outlines the importance of information sharing, supply chain management and collaboration throughout a supply chain process. Due to lack of information, suppliers, manufacturers, sales people and customers often have an incomplete understanding of what the real demand of an order is. The most interesting part of the game is that each group has no control over another part of the supply chain. Therefore, each group has only significant control over their own part of the supply chain. Each group can highly influence the entire supply chain by ordering too much or too little which can lead to a bullwhip effect (described in 4.). Therefore, the order taking of a group also highly depends on decisions of the other groups.^[2]

History[edit]

The Beer Game was invented by Jay Wright Forrester at the MIT Sloan School of Management in 1960. The beer game was a result of his work on system dynamics.^[3]

Supply Chain[edit]

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer. Supply chains are developed by companies so they can reduce their costs and remain competitive in the business landscape. It´s important to understand how to manage the supply chain in the right way.Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production to product development to the information systems needed to direct these undertakings.^[4]

Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies are able to cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors. SCM is based on the idea that nearly every product that comes to market results from the efforts of various organizations that make up a supply chain. Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operation.^[5]

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Bullwhip Effect[edit]

In the Beer Game participants enact a four-stage supply chain. The task is to produce and deliver units of beer: the factory produces, and the other three stages deliver the beer units until it reaches the customer at the downstream end of the chain.

The bullwhip effect is a well-known symptom of coordination problems in (traditional) supply chains. It refers to the role played by periodical order amounts as one moves upstream in the supply chain toward the production end.Even when demand is stable, small variations in that demand, at the retail-end, tend to dramatically amplify themselves upstream through the supply chain. The resulting effect is that order amounts become very erratic. Very high one week, and then zero the next.The term was first coined around 1990 when Procter & Gamble perceived erratic and amplified order patterns in its supply chain for baby diapers. The effect is also known by the names whiplash or whipsaw effect.As a consequence of the bullwhip effect a range of inefficiencies occur throughout the supply chain:^[6]

- high (safety) stock levels

- poor customer service levels

- poor capacity utilization

- aggravated problems with demand forecasting

- ultimately high cost and low levels of inter-firm trust

While the effect is not new, it is still a timely and pressing problem in contemporary supply chains.In a general way, the reasons for the bullwhip effect are:^[7]

Supply Chain Management Game

• “Rewards” system– local optimization– employees’ rewards!

• Information processing– lack of information– planning on the base of the orders not final customer demand

• Barriers– lot sizing– long lead-times

• Pricing policy– price fluctuation– quantity discounts

• The 3 P: people, people, people…and the lack of trust…

Types of Beer Games[edit]

There are several options how to play the beer game. The various approaches are explained in more detail below.

Supply Chain Games For Kids

a. Traditional Board Game

The traditional version of the beer game is a physical board game where people have to move actual objects. The tokens on the board game represent orders and stocks of a supply chain process. The main disadvantage is that this type of beer game takes much more time than the software version. Moreover, it´s quite complex to play it since people need physical objects that represent the inventory on the board. Additionally, inventory levels of other supply chain stages are transparent and are therefore quite hard to estimate.^[8]

b. Table Version

This version of the beer game was introduced by the University of Klagenfurt. The game can be played with the usage of paper slips where the players have to write numbers on top. This type of game is a more pragmatic approach to moving orders and stock in the supply chain. Additionally, there is one person with the role of a bookkeeping person that keeps track of all things happening.^[9]

c. Adapted Table Version

The adapted table version is an expanded version of the table version where the bookkeeper is eliminated to achieve a more straightforward game. In order to play this game a spreadsheet and a laptop on each table are needed. The laptops are used for the people´s play sheets which eliminated risks of miscalculating inventory levels.^[10]

d. Software Version

The software version of the beer game is an online approach that can be played online. This approach can be either used as a one player simulation demonstration or as a multiplayer simulation demonstration.^[11]

Rules of the Game[edit]

The game is played in 24 rounds and in each round of the game the following 4 steps have to be performed:

• Check Deliveries: How many units of beer are being delivered to you from your wholesaler.

• Check orders: How many units your customer has order.

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• Deliver Beer: Deliver as much beer as you can to satisfy the demand (in this game the step is performed automatically.

• Make order decision: Decide how many units you need to order to keep your stock.

The goal of the game is to meet customer demand for cases of beer through the distribution side of a multi-stage supply chain with minimal expenditure on back orders and inventory. As we said there are four stages, manufacturer, distributor, supplier, retailer, with a two-week communication gap of orders toward the upstream and a two-week supply chain delay of product towards the downstream. There is a one-point cost for holding excess inventory and a one-point cost for any backlog (old backlog + orders - current inventory). In the board game version, players cannot see anything other than what is communicated to them through pieces of paper with numbers written on them, signifying orders or product. The retailer draws from a deck of cards for what the customer demands, and the manufacturer places an order which, in turn, becomes product in four weeks.^[12]