Root Beer Game - Supply Chain

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Supply Chain Paper
Operations Management
Root Beer, Inc

In the first round of the root beer supply chain game there was a lot of confusion, mystery, and chaos; and the data showed that (Please see separate excel spreadsheet of data with mean, standard deviation, and variation calculated). Analysis of the data shows a classic bullwhip effect; the customer places an order and order fluctuations build up through the supply chain. You can also see that these effects are magnified as you get farther from the customer up the supply chain. This holds true for mean, standard deviation, and variation. Without proper communication between the supply chain, it felt like every group was working blind and three steps behind. This was due to the long lead time between the customer, retailer, wholesaler, distributor, and factory. It is interesting to note that all groups went from having inventory, to being significantly backlogged and ending with a huge inventory again. The factory did not have to make another bottle after week 23 due to such high inventory. The second round ended with improved results. In the second round, each channel within the Root Beer Company was able to communicate with each other and all had POS data. This communication led to a more efficient supply chain. The data shows (see excel spreadsheet) a lower mean, lower standard deviation, and lower variance then the first round. There was still a bullwhip effect but this time it was much tighter towards the mean. Inventory and orders in the second round more matched customer demand then in the first round. We did not show such large backlogs or inventories this time around.

This simulation showed how important communication is to a successful supply chain. When you cannot communicate with the other groups in your supply chain, it is very easy to distort and improperly interpret demand signals. For example, as inventory decreases, it could be interpreted as an increase in demand...
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