Post on 03-Apr-2018
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The Beer Game
A production-distribution game tounderstand inventory management
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Introduction
The beer game is a demonstrator of thebehaviour of supply chains
It is based on the main principle of system
dynamics:
Structure produces behaviour
The game is employed for educationalpurposes at most MBA s worldwide
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Overview of the system
There exist four nodes in the games supplychain (look at the board):
Retailer (e.g., a supermarket that sells beer to
end-customers) Wholesaler (e.g., a local warehouse that
consolidates various items and provides them to
local retailers) Distributor (e.g., a national importer of this
particular beer with a centralized warehouse)
Factory, where beer is brewed and packaged
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Overview of the nodes
Each position: Is identical, in terms of the rules of the game,
except for the factory
Has an initial inventory of beer
Receives orders from and ships beer to the
downstream node of the chain
Orders beer from the upstream node
One or two players are associated with it
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Overview of delays (lead times)
Beer is received after a shipping delay oftwo time units (e.g., 2 weeks or days)
In case of the factory, beer is received after
a production delay (it takes 2 time units tomanufacture any beer batch)
Orders are received after a mailing delay (it
takes 2 time units from the moment youplace an order to the moment this isprocessed by the upstream node)
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Objective of the game
The goal is to minimize the total cost Costs are computed as follows:
Inventory carrying costs (costs of holding
inventory for one time unit) are 0.50 per caseof beer per week (time unit = 1 week)
Out-of-stock costs (or backlog costs, i.e., no on-
hand inventory to satisfy orders) are 1.00 percase of beer per week
Sum of carrying and backlog costs is total cost
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Rules of the game
No communication between positions isallowed, e.g., retailers should not talk toanyone else same for wholesalers,
distributors and factory Only communication is through the passing
of orders and the receiving of beer
Retailers are the only ones knowing actualcustomer orders they should not revealthis information to anyone else
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Initialization of the board
Each chip on the board represents a case of beer(one unit of inventory)
There exist twelve (12) chips representing twelvecases of beer in each inventory position(warehouse of each node)
There exist four (4) chips in each shipping delayand production delay box
There exist order slips in each order box (ordersplaced, incoming orders, production requests) facedown
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Additional information
The raw materials inventory at the factoryand the production capacity is infinite (i.e.,the factory can produce any batch size)
The capacity of the shipping trucks (movinginventory between nodes) is infinite
The flow of materials (cases of beer) is
from factory to retailer, while the flow ofinformation (orders) is reverse (from theretailer to the factory)
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Steps of the game
Step 1: Receive inventory and advance shipping delays
Factory advance the production delay
Step 2:
Look at incoming orders and fill them
Retailer looks at customer order cards Factory looks at incoming orders, not production
requests
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Steps of the game
Step 2 (continued): All incoming orders plus orders in backlog
must be filled
If inventory is insufficient to fill incomingorders plus backlog, fill as many orders as you
can (push all your inventory forward) and place
unfilled ones to backlog
Orders to Fill = New Orders + Backlog
this week this week last week
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Steps of the game
Step 3: Record inventory or backlog
Step 4:
Advance order slips
Factory brews, i.e., it converts the production
request (from last week) into cases of beer andputs the cases (chips) in the first production
delay
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Steps of the game
Step 5: Place and record your orders (retailer,
wholesaler, distributor)
Factory places and records its productionrequest
This is the only decision you have to make!
Synchronize your steps (select a team leader
and follow his commands)
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Documentation
Write down: Level of inventory (count of chips in your
warehouse)
Backlog (count of chips in unfilled orders)
Orders placed
at the Record Sheet provided at eachposition
Best of luck!