02Beer Game Steps

7/28/2019 02Beer Game Steps

1/14

1

The Beer Game

A production-distribution game tounderstand inventory management


2/14

2

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


3/14

3

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


4/14

4

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


5/14

5

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)


6/14

6

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


7/14

7

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


8/14

8

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


9/14

9

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)


10/14

10

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


11/14

11

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


12/14

12

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


13/14

13

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)


14/14

14

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!

02Beer Game Steps

Documents

Transcript of 02Beer Game Steps