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Session 3 - On-Line Beer Games Rules

The Beer Game is a supply chain simulation where players in different roles (retailer, wholesaler, distributor, manufacturer) must coordinate orders and production to minimize costs while meeting demand. Each player receives orders from downstream and places orders upstream with a 4 week lead time. The goal is for each player to minimize total logistic costs of inventory and backlog while the retailer alone knows the real customer demand. The simulation aims to demonstrate challenges in supply chain coordination.

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Aakansha Deshmukh
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58 views14 pages

Session 3 - On-Line Beer Games Rules

The Beer Game is a supply chain simulation where players in different roles (retailer, wholesaler, distributor, manufacturer) must coordinate orders and production to minimize costs while meeting demand. Each player receives orders from downstream and places orders upstream with a 4 week lead time. The goal is for each player to minimize total logistic costs of inventory and backlog while the retailer alone knows the real customer demand. The simulation aims to demonstrate challenges in supply chain coordination.

Uploaded by

Aakansha Deshmukh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1

THE BEER GAME


Rules of the game

Prof. Thanos Papadimitriou


Operations and Technology Management Unit
INTRODUCTION 2

• The Beer Game is a Business Game that aims at highlighting the relevance (in terms of potential for
improvements) and the challenges of Supply Chain Management
• Supply chain management means in general terms collaboration and coordination among the
different actors belonging to a Supply Chain
• Managing efficiently a Supply Chain is however critical and complex for different reasons:
– Coordination among different actors having different goals and objectives is often critical. It
requires ….
– Market demand variability and unpredictability
– Constraints (supply, production, delivery, …)
– Lead times
– Product portfolio proliferation, product life cycle time reduction, demand seasonality, …
• The Beer Game has been developed by the Sloan’s System Dynamics Group at M.I.T.
• The Beer Game has been played and simulated by thousands of people at different levels (MBA,
executives, CEOs, …)
INTRODUCTION 3

• The Beer Game consists of the simulation of purchasing and production order
decisions to be taken by different players in a 4 tiers/levels sequential Supply Chain
(retailer, wholesaler, distributor and manufacturer)

Information flow

Customer

Physical flow
INTRODUCTION: SIMPLIFICATIONS 4

Infinite
• There are no warehousing constraints at each
level of the Supply Chain. The warehousing warehousing
capacity has no limits capacity

• The factory has no production constraints:


– no lot size (min) constraints
Infinite
– no production capacity constraints production
capacity
• The suppliers of the manufacturer:
– are 100% reliable in terms of volumes, mix
and lead time (OTIF = 100%): they are Raw Material
capable of fulfilling all production requests Suppliers:
OTIF
– do not impose minimum lot size constraints Reliable 100% OTIF
OBJECTIVE 5

• The goal is to minimise the total logistic cost (for each player)

Customer

Retailer Wholesaler Distributor Manufacturer


Total logistic cost Total logistic cost Total logistic cost Total logistic cost

• Total logistic cost (cumulative over time):


− Inventory costs: 0,5 € per beer case per week
− Back-log costs: 1€ per beer case per week

The player with the lowest total logistic costs is the WINNER !!!
Special prize for the best R, W, D and M
RULES OF THE GAME 6

• The RETAILER is the ONLY ONE to know the REAL FINAL CUSTOMER DEMAND;
the retailer should NOT SHARE this information with the other upstream players

• Communications and interactions among different players of the Supply Chain are not
allowed (except for the exchange of orders)

• Each player receives orders from the downstream player and delivers goods
downstream
– Your clients do not cancel orders placed and are available to wait (with no time
limits) for the deliver; this has however a cost (BACKLOG COST)

• Each player places orders to the upstream player and receives goods from upstream
• Order Lead Time = 4 weeks Order week 1 + LT 4w = delivery week 5
– PO week 1 (end of the week, after downstream deliveries)
– Delivery Week 5 (beginning of the week, before downstream deliveries)
– (From PO to Delivery there are 3 week of demand)
RULES OF THE GAME 7

• The back-log calculation:


– Order to fill = new weekly order + last week’s back-log

Last Week’s Backlog (0 or #) 2

+ New Orders 4

= Orders to fill 6

- Amount Shipped 5

= This Week’s Backlog 1


PRELIMINARY STEPS: 8

INITIALIZATION OF THE GAME


• Starting point is not with an empty pipeline

• Beginning Inventory:
– warehouse and factory inventory: 12 pcs
– transit inventory (shipping e production delays): 4 pcs

• Initial (unknown/covered/past) list of orders


9

HOW TO START THE BEER GAME SIMULATION


THE BEER GAME SOFTWARE 10

Red Groups Blue Groups


THE BEER GAME SOFTWARE - SDA BOCCONI 11

USER VIEW

Player’s decision
DO NOT «ORDER»
PO
before the game has started

Click for details


THE BEER GAME SOFTWARE - SDA BOCCONI 12

USER VIEW
Select / Unselect

OUT IN
THE BEER GAME SOFTWARE - SDA BOCCONI 13

• Control that your supply chain is full


– 1 retailer + 1 wholesaler + 1 distributor + 1 factory
WAIT till the professor gives the START to the simulation!

• Please
– Take your time to define the order quantity (1 minute minimum)
– Once you take the decision of the PO, please wait until everyone
to do the same. Then the system will proceed to the next week
– Do not gamble with the numbers. Apply your logic and approach,
an MBA-Style approach !!!
– Remember that the best player/role will win the prize!
– The system will end the game automatically.

• During the game, you can write on the whiteboard / chat


(do not share data or demand or inventory availability)
14

You can start !!!

Red Groups Blue Groups

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