Beer Game

Topics: Supply chain management, Supply chain, Inventory Pages: 9 (3024 words) Published: September 14, 2008
I didn’t research the Beer Game itself prior to the game being played. I did read the summary provided of the game, but if I had done a little research on the web prior to the game, I would have had quite a bit of insight. It seems this game is very well known and used quite often in schools and management training to show the supply chain in action. The game has been around since the 1960’s when a group from MIT’s Sloan School of Management introduced the game as a part of a research project. The game was originally named the production-distribution game and is continued to be known as this but has been coined the Beer Game (Sterman,1992).

The game has four players per team; Retailer, Wholesaler, Distributor, and Factory. The pennies represent cases of beer. A deck of cards represents customer demand. Each simulated week, customers purchase from the retailer, who ships the beer requested out of inventory. The retailer in turn orders from the wholesaler, who ships the beer requested out of their own inventory. Likewise the wholesaler orders and receives beer from the distributor, who in turn orders and receives beer from the factory, where the beer is brewed.

At each stage there are shipping delays and order processing delays. The players' objective is to minimize total team costs. Inventory holding costs are $.50/case/week. Backlog costs are $1.00/case/week, to capture both the lost revenue and the ill will stock-outs cause among customers. Costs are assessed at each link of the distribution chain. (Sterman,1999).

Since the Beer game has been around since the 1960’s the game is the best known simulation game of its kind and allows players a glimpse of the intricacies within the supply chain. Other games that deal with supply chain management are: Poker Chip, Wood Supply, LEAP Supply Chain, ITL and LEGO games (Cox, 2006). The Beer Game far outreaches all the other games; its focus is on dynamic complexity within the supply chain.

Complexity within the supply chain has two forms, dynamic and detail. While the Beer Game focuses on dynamic complexity within the supply chain system, the Poker Chip Game focuses on the detail complexity of the systems. Detail complexity is where many variables, definitions, and lists of items are used to describe a system. (Cox, 2006) When you start listing the elements within the system that the Beer Game limits the Poker Chip Game allows some of these elements to exist. However, by limiting the aspects within the system, the player is able to visualize and understand and learn the basics of the supply chain.

All business areas are affected by the supply chain but the complexities of the chain often time causes stress in the area when management is concerned. Simulation games allow players to grasp hard to define concepts quickly and reach further into the complexities of the system. Bain and Company reports that 85% of senior executives surveyed say that improving supply chain performance is a top priority for their firm. But, 50% reported having only basic information on their supply chain. (Cox, 2006) To receive better information, management must be in tune with questions to ask and to understand the information they receive. So a basic understanding must be gained.

In the Beer Game, the supply chain provides the rhythm of the game but all the challenges and nuances associated to supply chain were removed or were made to be systematic / consistent in nature except for inventory management Thus, the focus of the game was the ability to manage the inventory levels within the system. Teams focused on one product, Beer. Teams had only one vendor and customer. The factory didn’t have any supply issues for materials. Shipping and ordering delays were reliably constant. And finally there were set players in the supply chain: retailer, wholesaler, distributor, and factory. So the rest of the supply chain couldn’t get much cleaner than this setup. The system...
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