The Production-Distribution Game

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Presentation transcript:

The Production-Distribution Game or “The Beer Game”

Sam M. Walton College of Business Background Developed by Sloan’s Systems Dynamics Group in the early 1960’s Jay Forrester Originally called the “production-distribution” game Today’s version involves facing a promotion Sam M. Walton College of Business

Sam M. Walton College of Business Overview Production and distribution of beer on a game board Each team has four echelons: retailer, wholesaler, distributor and factory Small red chips represent cases of beer The cards show consumer demand for the period and only the retailer gets to see them Do not open envelopes until instructed Contents of your envelope are for your eyes only!!! Sam M. Walton College of Business

Sam M. Walton College of Business Process Retailer takes chips out of inventory based upon consumer demand Retailer orders from the wholesaler, who ships out of inventory based on the orders This continues at each echelon There is one period of order delay and one period of shipping delay Total lead time is at least two periods Sam M. Walton College of Business

Sam M. Walton College of Business Objective The objective is to minimize the total cost your supply chain incurs Inventory, backlogs, and orders are recorded at the end of each period Inventory holding costs are $0.50 per case per period based on ending inventory Backlogs are $1.00 per case per period Sam M. Walton College of Business

Sam M. Walton College of Business Orders Orders are written on the adhesive side of the small post-it notes There is no minimum or maximum order If you do not want to order any units, write an order for 0 Orders that are not filled become backlogs and must be filled in future periods Sam M. Walton College of Business

Sam M. Walton College of Business Initial Position Each echelon has 8 cases of beer Each echelon has one outstanding order for 4 cases of beer and one incoming shipment of 4 cases Sam M. Walton College of Business

Sam M. Walton College of Business Rules Each echelon cannot communicate with other echelons except through orders and shipments Only the retailer gets to see consumer demand Consumer demand will be 4 units for all periods except the promotional period Assume we will play for 30 weeks All order cards remain face down at all times Sam M. Walton College of Business

Sam M. Walton College of Business Beginning of Period WHOLESALER Shipping Delay Current Inventory Order 4 Retailer Consumer Demand Sam M. Walton College of Business

Step 1: Look at Incoming Orders Consumer Demand Order Order 4 4 4 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Sam M. Walton College of Business Step 2: Stage Orders Consumer Demand Order Order 4 4 4 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Sam M. Walton College of Business Step 3: Write a New Order Consumer Demand Order Order 3 5 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Step 4: Fill Out Record Sheet Consumer Demand Order Order 3 5 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Step 5: Move Inventory Downstream Consumer Demand Order Order 3 5 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Sam M. Walton College of Business End of Period Consumer Demand Order Order 3 5 Retailer WHOLESALER Current Inventory Current Inventory Shipping Delay Sam M. Walton College of Business Shipping Delay

Sam M. Walton College of Business Remember… The objective is to minimize the total cost your supply chain incurs Satisfy demand and avoid backlogs Minimum lead time of 2 periods Demand is 4 units except of promotional period The are no transportation problems, no machine breakdowns, no labor problems, no capacity limits, and no financial constraints Sam M. Walton College of Business

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