The document discusses simulating supply chains and describes a beer game simulation where participants will take on roles in a supply chain from retailer to factory and must work together to manage inventory and fulfill orders over 50 weeks while minimizing total costs of inventory and backlogs. It provides background on the simulation including initial conditions, order processing each week, and costs to consider for inventory and backlogs.
2. Contents
• Simulating an ‘efficient’ supply chain
• Overcoming challenges in efficient supply chains
2
3. • Functional products satisfy basic needs,
which don’t change very much over time and
have stable, predictable demand and long
life cycles
• Their stability invites competition, which
often leads to low profit margins.
• To avoid low margins companies introduce
innovations in fashion or technology
(differentiation).
• The very newness of innovative products
makes demand for them unpredictable and
their life-cycles short
Supply Chain Strategy –
The first step is to consider the nature of the demand
Functional
products
Innovative
products
Main features Examples
• Fashion
• High tech products (e.g. smart
phones)
• Basic food (e.g. pasta)
• Commodities
• BEER
4. Life cycle
The first step is to consider the nature
of the demand
Functional
(Predictable
demand)
Innovative
(unpredictab
le demand)
Contribution
margin
Product
variety
Demand
forecast
error
Stockout
rate
End
season
markdown
Lead time
Long: more
than two
years
Short: 3
months to 1
year
5% to 20%
20% to 60%
Low (10 to
20 variants
per
category)
High (up to
millions of
variants per
category)
10%
40% to
100%
1% to 2%
10% to 40%
0%
10% to 25%
6 month to 1
year (made
to order)
1 day to 2
weeks
(made to
order)
5. Primary
Purpose
Then managers must match to it the
right SC strategy - FISHER MODEL
Physically
efficient SC
Market-
Responsive
SC
Manufacturing
focus
Inventory
strategy
Lead time
focus
Choice of
suppliers
Product
design
strategy
Supply
predictable
demand
efficiently at
the lowest
possible cost
Respond
quickly to
unpredictable
demand in
order to
minimise
stockouts,
force
markdowns
and obsolete
inventory
Maintain
high average
utilisation
rate
Deploy
excess
buffer
capacity
Generate
high turns
and
minimise
inventory
throughout
the chain
Deploy
significant
buffer stocks
of parts or
finished
goods
Shorten
lead time
as long as
it doesn’t
increase
cost
Invest
aggressive
ly in ways
to reduce
lead time
Select
primarily
for quality
and cost
Select
primarily
for speed,
flexibility
and
quality
Maximise
performance
and
minimise
cost
Use modular
design in
order to
postpone
product
differentiatio
n for as long
as possible
6. The Beer Game: managing a supply chain
• Four links in the supply chain (R, W, D, F). You will manage one link in the chain.
• Most of you will have a partner, with whom you will jointly manage your link
• You will be playing as a team (entire supply chain), against the other teams.
• The winner is team with the lowest cumulative cost at the end of the game.
Retailer Wholesaler Distributor Factory
7. How the Supply Chain Works
• We will play for a simulated year (50 weeks)
• Every week each link in the chain:
Receives a delivery from their immediate upstream supplier
Receives an order from their immediate downstream customer
Fills as much of that order as possible
Places a new order with their immediate supplier
8. Initial Conditions
• The supply chain starts in steady state, with 4 cases in each
4 4 4 4
4 4 4 4
• In week 1, every link in the chain holds 12 cases of inventory.
Shipping delay
Production delay
Stage of the order submission and processing system.
• The first week the customer will order 4 cases, and you will all place an order for 4 cases.
9. What happens each week
4 4 4 4
4 4 4 4
• Receive a delivery from your supplier; trucks advance; brewery bottles a batch.
• All links receive a new order from their customer, and fill orders.
• New inventory is recorded: Ending Inventory = Starting Inventory + Delivery – Shipment.
• W, D, and F receive prior week order from their customer.
• Brewery (factory) starts a new batch based on the prior week production schedule.
• Each link places a new order (factory sets the production schedule)
4 4 4 4
11. Cost example
What is the Team cost for Week 1?
What is the Retailer cost for Week 1?
12. When the simulation opens,
use Team Chat to introduce
yourselves to your
teammates.
Share your name and role (e.g.,
“John Sterman, Distributor”).
Most of you will have a partner,
with whom you will jointly
manage your role in the supply
chain. Some of you may have
more than one partner.
Together with your teammates,
select the name for your beer.
After you decide, one of the
Retailers submits the team name.
13. Player view
• Reports and charts showing key
data
• Field to enter your decision:
How much to order from your
supplier
• Structure of the supply chain,
identifying your role and
showing inventory levels
14. Click here to open view of
the supply chain
Chat with your partner at
any time. You and your
partner decide together
how much to order each
week.
Table shows the current status of your link in the chain, and
where you enter your orders.
15. Reading your display
Your inventory at the start of the week (12 cases in Week 1 in this example)
You receive a delivery of 4 cases from your supplier (the Factory)
You receive an order for 4 cases from your customer (the Wholesaler)
You fill the order and ship 4 cases to the Wholesaler…
Leaving you with an inventory of 12 cases at the end of Week 1
In this example:
You are the Distributor
It is Week 1
16. Chat with your partner at any
time. You and your partner
jointly decide how much to
order each week.
New messages sound a tone.
You can turn the alert sound
off here.
Close the chat window to see
the graphs.
Placing your order
You and your partner decide together
what to order (use chat to talk).
17. Placing your order
You and your partner jointly decide what to order.
One of the partners clicks to become the Editor.
The Editor enters the order decision.
You can switch Editors at any time.
18. This graph will show the
orders you placed with your
supplier
This table will show your
inventory or backlog, cost
each week, and order
history.
This graph will show your
Net Inventory.
Inventory will be a positive
number,
Backlog will be a negative
number.
You are now the editor and enter the order
decision for your role.
Switch between yourself and your partner at
any time.
Placing your order
Submit your order. You will be asked to confirm it:
Enter your order
4
19. This graph will show the
orders you placed with your
supplier
This table will show your
inventory or backlog, weekly
cost, and order history.
This graph will show your
Net Inventory.
Inventory will be a positive
number,
Backlog will be a negative
number.
Check marks will appear here when the other links in your supply
chain submit and confirm their orders.
A check mark will appear here when you submit and confirm your
order.
20. Countdown timer shows time remaining until orders
are recorded and we start the next week. Timer
starts at 0:20 seconds
All players have submitted their orders
If you have not entered an order when time
runs out, the system uses your order from
the prior week.
27. Using your mouse or
trackpad, sketch your
estimate of end-
customer orders (the
orders received by the
Retailer).
Enter the maximum
customer order here
Submit your sketch
Retailers: you know what the
customers did — you don’t draw a
sketch. Please don’t reveal the
customer orders to anyone until
your facilitator directs you to.
