Beer Game Analysis

Topics: Inventory, Supply chain management, Supply chain Pages: 10 (3554 words) Published: January 12, 2013
* Introduction:
The beer game is a simulation first developed at the Massachusetts Institute of Technology’s Sloan School of Management in the 1960s. This game was made in other to experiment how real organisations functions, where the consequences of every decisions play out as clearly as possible in the game as they would in a real organisation (Senge, 1990). Narayanan Arunachalam (2006) described the game as a popular classroom exercise for business schools conceived at MIT with the primary purpose of demonstrating industrial dynamics. The beer game is a “laboratory replica” of a real organisational setting, helps to highlight the possible disabilities and their causes of an organisation. The beer game however in this case was created to fail and highlight possible problems which an organisation may face in its supply chain which is the bullwhip effect. The game includes four players which include the retailer, the wholesaler, the distributor and the factory which is in an uplink setting. After playing the game, below we will be giving a detailed report of the events that took place at the course of the game.

* Data analysis:
The objective of the beer game is to minimize the total cost for everyone in the supply chain by maintaining low stocks and managing to deliver all orders (, 2011). However, the game was created to fail and below is a summary of events that took place during the game.

Figure 1: Inventory/Backorder of the supply chain
During the course of playing the game, we followed the zero strategy which stated that “place zero orders upstream when your individual inventory is higher than demand”. This rule was largely what shaped the game and influenced the results in terms of inventory and backorders. The retailer had a considerable good start in the game with a good record in inventories of 12 units till week 5 when demand rose from customers and this caused the inventory rate to fall. In week 6, due to no shipments and the bullwhip effect, the retailer started having back orders from the customers. Although the demand stayed the same from week 6, the retailer continued to experience backorders till week 21 when the wholesaler sent a lot of supplies at once; this made the inventories to rise to a peak of 113 units in week 24. The wholesaler started with an inventory of 12 units which remained the same in week 2. However, due to incoming shipments from the distributor and a lack of demand from the retailer, the inventory rose to 16 units in week three and 20 units in week 4 and remained the same till week 6. Due to an increase in demand from the retailer and a lack of shipments from the distributor, the inventories fell to 6 units and in week 7 and at week 8, the wholesaler was having back orders. Backorders keep reoccurring and fluctuating until week 21 when it rose to 16 units of inventory and reached a peak of 136 units in week 25. The distributor during the game had the same inventory rate for the first two weeks. The distributor maintained similar inventory rates till week 9 when the distributor started recording backorders this was due to the inability of the distributor to meet the orders of the wholesaler. The distributor continued to experience fluctuations in backorders until week 25 when it got a lot of supplies from the factory the inventories at the end of this week was at 40. The factory had started the game with an inventory of 12 units which remained the same till week 10. This was largely due to a lack of huge demands from the distributor. The factory however started experiencing backorders at week11. Backorder rates kept fluctuating during the weeks due to the inability of the factory to meet the needs of the factory on time. At week 25, the factory got a huge sum of supplies from the brewery which made its inventory to reach a peak of units. The high rate of back orders was caused by long lead times, the bullwhip effect and the effects...
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