Introduction
The Beer Game is a role-playing simulation developed at MIT in the 1960's to clarify the advantages of taking an integrated approach to supply chain management. We have developed this computerized version of the Beer Game to make it easier to play the Beer Game as well as to illustrate certain Supply Chain Management issues which cannot be demonstrated by the traditional (non-computerized) Beer Game. This game is distributed with the textbook "Designing and Managing the Supply Chain" by D. Simchi-Levi, P. Kaminsky, and E. Simchi-Levi.
The Scenario
The Beer Game is a simulation, in which you, the player, are faced with the following scenario:
In this exercise, you will be faced with the following scenario: Consider a simplified beer supply chain, consisting of a single retailer, a single wholesaler which supplies the retailer, a single distributor which supplies the wholesaler, and a single factory with unlimited raw materials which makes (brews) the beer and supplies the distributor. Each component in the supply chain has unlimited storage capacity, and there is a fixed supply lead time and order delay time between each component.
Each week, each component in the supply chain tries to meet the demand of the downstream component. Any orders which cannot be met are recorded as backorders, and met as soon as possible. No orders will be ignored, and all orders must eventually be met. At each period, each component in the supply chain is charged a $1.00 shortage cost per backordered item. Also, at each period, each component owns the inventory at that facility. In addition, the wholesaler owns inventory in transit to the retailer, and the distributor owns inventory in transit to the wholesaler, and the factory owns both items being manufactured and items in transit to the distributor. Each location .is charged $.50 inventory holding cost per inventory item that it owns. Also, each supply chain member orders some amount from its upstream supplier. It takes one week for this order to arrive at the supplier. Once the order arrives, the supplier attempts to fill it with available inventory, and there is an additional two week transportation delay before the material being shipped by the supplier arrives at the customer who placed the order.
The goal of the retailer, wholesaler, distributor, and factory, is to minimize total cost, either individually, or for the system.
Running the Simulation
NOTE: We have attempted to make the computerized version of the Beer Game faithful to the original version.
Over the years role of supply chain has been altered. The distribution has switched from shipping from one focal point, now technology has shortened the process that will to ship directly from the manufacture to the customer that will tie in to the distribution channels. Though distribution is costly, a person would think all the risk will be eliminated. Contrarily to what people may think, distribution have many risk it must account. When the product is unloaded onto the truck, it’s the trucker sole responsibility to ensure the customer receive their product. Distribution initially start at beginning when it is
The United States beer industry represents 233 million hectoliters of the world’s 1,501 million hectoliters and is a dynamic part of the United States national economy, contributing billions of dollars in wages and taxes. Within the U.S., the beer market accounts for nearly 50% of total volume of alcohol, with the import specialty and light beer segments driving growth.
A supply chain is a system through which organizations deliver their products and services to their customers. The network begins with the basic ingredients to start the chain of supply, which are the suppliers that supply raw materials, ingredients, and so on. From there, it will transfer the supplies to the manufacturer who builds, assembles, converts, or furnishes a product. The chain now needs to get the product to the consumer by transporting the finished product from the manufacturer through a warehouse or distribution center. An example is that Wal-Mart has a nearby distribution center where products are delivered there and then split up to be delivered to a retail Wal-Mart. “Wal-Mart will take responsibility for breaking down larger loads and delivering the product to other Wal-Mart stores” (Ehring 1).
In the beer game, the two main problems that cause high inventory or backorder costs associated with the ordering policy of each participants; are the uncertain demand and the lack of communication between different participants in the game who are the retailer, wholesaler, distributer and manufacturer. In order to operate the supply chain efficiently, the participants of the beer game should be in a coordination to fulfill the customer demand.
With most aspects of life it is frequently the failures, as opposed to successes, from which we learn the most indelible lessons. With this approach in mind, The Beer Game to a large extent serves as the very antithesis of a properly functioning supply chain. In other words, the exercise demonstrates how NOT to manage a logistic operation. Hopefully, an examination of the pitfalls and shortcomings of a worst case scenario and avoiding the same types of mistakes will lend insight how to correctly manage a supply chain. What otherwise appears as a simple classroom exercise actually represents a powerful training tool with enduring lessons directly transferable to real world application.
Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales
In this case, Heineken long lead-time from order to delivery prohibits the company from being flexible and adapting quickly to market demand fluctuation. Therefore the implementation of an innovative Internet system called HOPS, would improve its supply chain performance by reducing the lead-time from order to delivery. In 1996, distributors and sales representatives had to plan out orders three months ahead of delivery, it was daunting task for them to predict the factors that would affect the product sales such as weather, special promotions, and local demand fluctuations in advance.
2. SEVEN-ELEVEN'S SUPPLY CHAIN STRATEGY IN JAPAN CAN BE DESCRIBED AS ATTEMPTING TO MICRO-MATCH SUPPLY AND DEMAND USING RAPID REPLENISHMENT. WHAT ARE SOME RISKS ASSOCIATED WITH THIS CHOICE?
Coyle, J., Langley, C., Gibson, B., Novack, R. and Bardi, E. (2008).Supply Chain Management: A Logistics Perspective. 8th ed. Cengage Learning, p.366.
Inventory is the proxy for information. In the absence of timely and accurate consumption data, each node in the supply chain compensates for the lack of information with inventory. Not only does poor information flow build supply chain inventories, but it also restricts each company’s ability to react to increases in demand, causes extended outages, service interruptions and lost sales. As actual demand for products is disseminated up the supply chain in a more real time environment, the more closely aligned production is with demand. As the gap between production and demand diminishes, so to does supply chain inventories and service level interruptions.
Inventory management is a method through which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle of the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seen more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company; effective and efficient inventory management is of critical importance.
For many years, beer has accumulated the mainstream idea that beer is typically consumed in the party-type scenes. It has also created a popular thinking that young men that drink beer are manly, wild, girl-loving, partying individuals. Recently, however, it has seemed as though beer companies have begun to stray away from that way of thinking and have begun forming a new ideology. That being, that beer is an alcoholic beverage that can bring people together to have a good time. Guinness has taken this way of thinking and pushed it even further. With this ad, Guinness wants to show that men who drink beer can still be manly, but also sensitive, sympathetic and supportive at the same time. They show these qualities through the actions of the men playing the basketball game.
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,
Beer was a thick porridge-like drink consumed through a straw. In both Egypt and Mesopotamia, beer could not be taken without a meal. Everything they ate, they had to drink beer with it. It was also widely consumed by everyone, rich and poor, men and women, adults and children, from the top of the social pyramid to the bottom. “Beer had an important function as a social drink…sharing a drink with someone is a universal symbol of hospitality and friendship. It singles that the person offering the drink can be trusted, by demonstrating that it is not poisoned or otherwise unsuitable for consumption.” (Page 18) Throughout this time period beer brought people together through the
In addition, at the time, the economy was doing great, therefore, using the push system to stock pile inventory was acceptable. However, during the dot-com bust of the 2000’s, its sales and the demand for its products greatly decreased. Unfortunately, during this time, Cisco discovered that it possessed an abundance of inventory, and, wrote off more than $1 billion in inventory. Consequently, the company learned that acquiring inventory in anticipation of market demand, and not factoring in the human element of its business increased its risks of failure. Obviously, Cisco wanted to meet its customer’s demands, however, the problem was that it held more inventory than what the customers were demanding. Nevertheless, afterwards, it knew that it needed to adopt a new, more efficient approach to inventory. Therefore, Cisco had to reevaluate its supply chain system and seek input from IT, customers, suppliers, and finance. Further, by including input from these sources, Cisco adopted the more efficient pull system. The pull system, is dependent upon producing smaller repeating orders. Rather than the push system, which relies on larger less repeating orders. Effective inventory management, when administered correctly, can reduce and keep the inventory to a more desired level. In addition, Cisco discovered that inventory management can reduce inventory levels, enhance cash flow and reduce overall