THE BEER GAME

1. THE BEER GAME

2. AGENDA • Presentation of İstanbul Kültür University • Presentation about Supply Chain Management • Introduction to “Beer Game” • Lunch Break • Selection of “Beer Game-Team Members” • Playing Beer Game • Entry of game results to computer • Debriefing of Beer Game • Announcing the WINNER team

3. THE BEER GAME - 1 • The beergame (or beer distribution game) was originally invented in the 1960s by Jay Forrester at MIT as a result of his work on system dynamics. • While the original goal of the simulation game was to research the effect of systems structures on the behaviour of people (“structure creates behaviour”), the game can be used to • demonstrate the benefits of information sharing, • supply chain management and • eCollaboration in the supply chain. • A range of different versions of the beergame have emerged over the years.

4. THE BEER GAME - 2 • The “Beer Game” is a role-play simulation of production-distributionsystemfor a consumer product, such as beer. • Game lets students experience typical coordination problems of (traditional) supply chainsin which information sharing and collaboration does not exist.

5. THE BEER GAME - 3 • In the “Beer Game” students enact a four stage supply chain; • retailer • wholesaler • distributor • Factory • The task is to produce and deliver units of beer: the factory produces and the other three stages deliver the beer unitsuntil it reaches the customer at the downstream end of the chain.

6. THE BEER GAME - 4 • The aim of the players is rather simple: each of the four groups has to fulfill incoming orders of beer by placing orders with the next upstream party. • Communication and collaboration are not allowed between supply chain stages, so players create bullwhip effect continuously. This effect is unavoidable.

7. OBJECTIVE OF THE BEER GAME

8. OBJECTIVE OF THE BEER GAME • In real business life, there are many factors that effect decision making like financial factors, machine breakdowns, resource and capacity constraints etc. In this game, all these factors will be ignored except inventory cost (holding cost) and backordering cost (backlog cost, stock-out cost). • For each team, the objective of the game is to minimize total cost of their supply chain.

9. ESSENTIAL RULES - 1 • Every order has to be fulfilled, either directly (if the players’ inventory is enough) or later in subsequent rounds. • Inventory and backlog result in cost; • each item in stock costs EUR 0.50 per week, • while each item on backlog costs EUR 1.00. • Hence, the optimal strategy for the players is to run their business with as little stock as possible without being forced to “move into backorder”. • Players are not allowed to communicate. • No speaking, no looking at other’s cards, no cheating. • During each week, the Retailer is the only one who sees the customers’ actual demand. The Retailer is prohibited from telling the demand to the Wholesaler, Distributor, and Factory.

10. ESSENTIAL RULES - 2 • Values of game chips as below; • BLACK  5 beers • WHITE  1 beer • BLUE 0 beer (if shipping quantity is zero) • While writing on the order card, underline 6 and 9 to avoid of confusion. • It is allowed to make orders with zero quantity. In such cases write zero on the order cards. • Similarly, it is allowed to ship zero quantity when inventory is zero. • If shipping quantity is 0; player has to put a blue chip on “shipping delay” box. • When a team finishes their steps for a week, they HAVE TO WAIT FOR THE BELL RING to start the next week. • If they don’t wait the bell ring, they will pay 50 Euro aspenalty.

11. Team member roles • R1: Retailer, R2: Retailer (score sheet) • W1: Wholesaler, W2: Wholesaler (score sheet) • D1: Distributor, D2: Distributor (score sheet) • F1: Factory, F2: Factory(score sheet) • C: Carrier • P: Producer

12. THE BOARD

13. STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then (Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped) Step 2: Example #1

14. STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then (Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped) Step 2: Example #2

15. STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then (Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped) Step 2: Example #3

16. STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then (Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped) Step 2: Example #4