TOTAL PARTICIPATORY BEER GAME
                         Hugh M. Seyfarth, Richard T. Farmer School of Business Administrati...
Game”. In this simulation, even with perfect information       the supply change and the movement of goods forward to
and ...
beer and place an order for more beer (again, stressing
demand). This process transcends the supply chain, and            ...
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Total Participatory Beer Game.doc

  1. 1. TOTAL PARTICIPATORY BEER GAME Hugh M. Seyfarth, Richard T. Farmer School of Business Administration Miami University, Oxford, OH 45056, 513-523-2491 seyfarhm@muohio.edu Abstract methodology employed is a shift away from technology, and hopes to include as many students as possible as The use of interactive activities is a cornerstone to actual interactive members of the supply chain. It is well effective pedagogy. Probably the most famous activity in proven fact that students would rather actively participate the field of operations and supply chain management is and be involved in classroom activities. Moreover, the the Beer Distribution Game, or more simply, “The Beer version discussed in this paper hopes to simplify some of Game.” Developed in the early 1960s at MIT, the game the difficultly in the general mechanics of the game, thus has been played by thousands of undergraduate, graduate saving valuable class time to actually play the game and students and business professional. Over the years, the discuss the issues and intricacies inherent in supply chain game has evolved beyond the traditional “board-based” management. version by leveraging technology. Today, many versions of the “Beer Game” are available on the Internet and in Literature Review computer software packages. Moreover, because of the games inherent simplicity, the rules are easily altered to As more academics and business managers have highlight specific learning objectives. The purpose of this embraced the pedagogical use Beer Game, the paper is to illustrate another alternative on how to use the sophistication of how it is employed in the classroom Beer Game in the undergraduate classroom setting. setting has expanded well beyond the traditional “board- Called the “Total Participatory Beer Game”, the goal is to based” game discussed by Sterman. Instructors have actively involve all 35 students as actual pieces of the altered the rules to illustrate specific concepts—from the beer supply chain. By creating two independent supply bullwhip effect and fluctuations in inventory levels, to the chains (each composed of 15-16 students) many of the use of local performance measures between the nodes of complexities of supply chain management can be the supply chain verses more holistic global performance illustrates, explained and simplified. measure of the supply chain (Stewart, 2001). Moreover, with the aid of computer technology, many versions are Introduction played electronically with the aid of the Internet (Jacobs, 2000 and Chen & Samroengraja, 2000). Jacobs explains Interactive classroom activities are vital for educators to that while the traditional version of the game is a valuable illustrate complex concepts to students. One famous learning experience, it is very time consuming as a result exercise is the Beer Distribution Games, or more simply of explanation, actually playing the game, and the post- the “Beer Game” (Sterman, 1992). Developed closed to game activities of tabulating results, costs and building 40 years ago at MIT, the game has been played by graphs. In total, a minimum of thee hours of class time undergraduates, graduate students and business executives must be allotted for the game. The Internet version of the to experience and interact with the concepts surrounding Beer Game performs many of the “busy work” tasks of supply chain management. Traditionally, the game is recording inventory levels to allow students to focus on played on a “Monopoly-type” game board with four the actual strategy of the game, and saves much needed players representing the four links of the simple supply class time for learning, analysis and discussion. chain: factory, distributor, wholesaler, and retail. Through the game, players are exposed to the transfer of Some noted benefits to the electronic, Internet or information from the customer (through demand at the computer-based Beer Game are also discussed and retail level) and how this demand filters through the illustrated by Simchi et al. (2003). Specifically, students supply chain form the retailer to the factory. The are too concerned with the mechanics of the board-based traditional “board-based” game also contains both game and the order of operations to actually benefit from shipping delays and processes order delays to simulate the the actual playing of the game, and that no real strategy lag in the supply chain and the lead-time necessary to fill evolves by the players as they are participating in the orders. game. It is the contention of many Beer Game facilitators that the electronic or computer versions are easier to The purpose of this paper is to continue the evolution and understand and allow students to focus on the desired use of the Beer Game as a pedagogical tool to aid student learning objectives. Bean (2002) discussed a further comprehension of complex business topics. The adaptation to the Beer Game called the “Near Beer
  2. 2. Game”. In this simulation, even with perfect information the supply change and the movement of goods forward to and communication, the supply chain still illustrates the the customer. bullwhip effect as a result of procurement and manufacturing delays. Following the standard Beer Game rules, with the supply chain in equilibrium, we begin playing the game. The In addition the contemporary business press has discussed equilibrium state of the supply chain is 15 cases of the importance of the Beer Game. Stewart (2001) inventory at each of the four nodes along the supply highlights the benefits of the use and more importantly, chain. Each order delay contains demand for five cases of the need to understand of the concepts illustrated by the beers, and each shipment delay mirrors demand with five Beer Game. Real world examples of excess inventories cases of beer. I introduce the game the day before we (e.g. Cisco’s May 2001 $2.2 billion write down of excess actually play and provide the game rules and a diagram of inventory) and that fluctuating demand can have crippling the supply chain. The diagram below is a simplified consequences. Stewart purports the Beer Game as an version and includes the rules provided to students: excellent example to illustrate real-world supply chain difficulties—that limited information between supply chain participates can lead to serious cost escalations and can ultimately lead to job cuts in an effort to trim runaway Shipments of Beer (Goods) costs. Moreover, concepts illustrated by the Beer Game (bullwhip effect) are also receiving attention in the Retail...Wholesale...Distributor...Factory business press, again, because of the cost implications and the result of poor demand forecasting and long production led times (“Chain Reaction”, 2002). Demand for Beer (Information) Total Participatory Beer Game • A two-person team will operate each node along The genesis of this version of the Beer Game was the the supply chain. You will be responsible for result of a lack of raw material. I only had one “board- inventorying and ordering cases of beer. based” version of the game, but I wanted my entire class • A single student will be used to represent and to participate (average class size in the survey Operations operate both shipping delay and order delay. Management course is 33-35 students). Since I was These delays represent lag time of one week in “long” in students and “short” on board space I decided to the supply chain. There is a two-week delay use the students as the actual parts and participants in the between the nodes of the supply chain. Ex: There supply chain. Using Sterman’s diagram I place students will be two students between “Retailer” and in the roles of retailer, wholesaler, distributor and the “Wholesaler”. factory. I also have eight students take the rolls of both • Beer orders are passed face down, with only the the shipping and order delays. retailer knowing actual customer demand. No communication is allowed between the nodes of In a class of 33-35 students I assemble two teams to the supply chain. represent two independent beer supply chains. Classroom layout must allow for some degree of flexibility. Once the supply chains teams are organized and the rules Individual desks are easy to rearrange, and classrooms are explained I normally have four or five students that that employee the case-study layout separated by a central are not included in either supply chain. I label these aisle are easy to organize into two independent supply students “supply chain consultants” and employ them as chains. Each team is composed of 14-16 students. beer customers and supply chain facilitators. These Pennies, nickels and dimes are used to simulate cases of students are invaluable as they help confused students by beer, while small pieces of papers are used as order forms. maintaining a holistic view of the supply chain. The Two-student teams are assigned to each of the four nodes students also facilitate the game “set-up”, thus saving of the supply chain. This is done to allow students to valuable class time. The consultants are also very actively inventory and order cases of beer, and also valuable during the post-game review, and I will highlight maintain inventory holding and backorder costs ($.50 this in the “Discussion” section of this paper. holding cost per case and $1.00 backorder cost per case). An individual student monitors each “delay” along the The simulation begins with a practice round that is played supply chain, with each student controlling the “shipping “open”. Orders are placed at each retailer and the general delay” and either “order placed” or “incoming order” mechanics of the game are experienced for the first time. place depending on where they sit in the supply chain. The retailers fill the order, receive the next shipment of These students represent the flow of information back into
  3. 3. beer and place an order for more beer (again, stressing demand). This process transcends the supply chain, and The last part of the discussion involves how to fix or is carried out by the wholesaler, distributor, and the correct the supply chain to avoid the problems factory. It is important that the students who represent highlighted above. It is during this discussion that shipping and order delays pass the physical cases of beer the “consultants” can add valuable insight as they (pennies) toward the retailer and the orders for beer viewed the supply chain globally, and not locally as (demand information) back toward the factory. those who participated. Some typical solutions: After the practice round we follow the same standard • Better communication between all nodes of format with demand at five cases of beers to be sure both the supply chain. supply chains are comfortable with the ordering and • Turn the orders face up and allow those shipping process. At the fifth week customer beer demand students to communicate information back is doubled to ten cases, with only the retailer aware of this into the supply chain. change in demand. Again, it is stressed that information • Introduce Internet real-time ordering and sharing is not permitted between students along the point of sale information to provide the supply chain. On average we play 15-25 weeks of the factory better demand information. game. At the conclusion of the game each supply chain • Eliminate non-value adding activities along node computes their inventory/backorder totals, and these the supply chain—in a sense remove results are summarized and juxtaposed against one redundant students, and seek to decrease another. shipping times. Discussion Conclusion One of the interesting differences of the Total The Beer Game has illustrated the principles of supply Participatory Beer Game verse other versions is the ability chain management for over 40 years. The strength of this to discuss problems that occur along the supply chain in pedagogical tool is its inherent simplicity and flexibility, real time. Again, at the end of the game we “turn over” coupled with the creativity of those practitioners that the facedown orders and reveal the size of the orders. continually adapted the game. Whether the game is Student are surprised to learn that while demand only played on a game-board, over the Internet or in a total doubled from five to ten cases of beer, the actual orders participatory classroom environment the goal must are often four to five times greater than original demand. continue to force interactive student participation in the This is an excellent illustration of the bullwhip effect. We complexities of supply chain management. then trace the demand orders back to the factory and it is quickly determined that the factory’s current capacity References would have been unable to meet demand. 1. Bean, M. “Bullwhips and Beer: Why Supply When I stop the game we discuss how each node of the Chain Management is so Difficult.” Forio supply chain felt during the game. I also ask how the Business Simulations, April 20, 2002. “order delay” students felt while playing the game. The 2. “Chain Reaction.” The Economist. January 31, answers compose the post-game discussion. Typical 2002. responses: • Beer demand increased too fast without any 3. Chen, F., and Samroengraja, R “The Stationary Beer Game.” Production and Operations warning. Management Society, Vol. 9 No. 1, Spring 2000. • Once backorder occurred, frustration levels grew greater and greater every “week”. 4. Jacobs, F. “Playing the Beer Distribution Game • The factory had no idea of the orders that were over the Internet.” Production and Operations ultimately going to reach them. Management Society, Vol. 9 No. 1, Spring 2000. • The four nodes of the supply chain had little 5. Simchi-Levi, D., Kaminsjy, P., and Simchi-Levi, concern for the inventory levels of the other E. “Appendix A: Computerized Beer Game.” members of the supply chain. Designing & Managing the Supply Chain, 2nd • “Order delay” students felt they have no impact Ed. Burr Ridge, IL: McGraw Hill, 2003. on the supply chain. Non-value added 6. Stewart, T. A. “Barely Managing: Beer Today, participants, and once the simple task of passing Gone Tomorrow.” Business 2.0, August 2001. beer forward and orders back the game was 7. Sterman, J. ‘The Beer Game.” OR/MS Today, “boring”. October 1992.

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