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The Beer Distribution Game. APICS Hampton Roads: 10-17-06. G. L (Jerry) Kilty, CFPIM, CIRM, CSCP. 2519 McMullen Booth Road Suite 510 Q Clearwater, FL 33761 727 725-7674 [email protected]. The Beer Distribution Game. Purpose of the Game. Introduce the principle that structure produces - PowerPoint PPT Presentation
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Quality Management Solutions, Inc.
APICS Hampton Roads: 10-17-06 The Beer Distribution Game
G. L (Jerry) Kilty, CFPIM, CIRM, CSCP
2519 McMullen Booth Road
Suite 510 Q
Clearwater, FL 33761
727 725-7674
Quality Management Solutions, Inc.
Purpose of the Game The Beer Distribution Game
Introduce the principle that structure producesbehavior
Experience the pressure of playing a role in a complex system and understand the impact ofcollective decisions on system performance
Show the impact and importance of information flow on the supply chain
Quality Management Solutions, Inc.
Objectives for Your Teams The Beer Distribution Game
Minimize total supply chain costs -- watchyour inventory levels
Achieve high order fill rates -- keep yourcustomers happy and keep their business
The team with the lowest total cost wins
Cost of inventory: $1.00/case/wk
Out-of-stock cost: $2.00/case/wk
Quality Management Solutions, Inc.
Rules of the Game The Beer Distribution Game
1 Pick a team name
Each company fills out Record Sheets – Inventory/Backlog and Orders
No communication between positions
Retailers -- do not reveal what customers actually order
Play for 50 weeks
2
3
4
5
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Overview of the Game - The Supply Chain The Beer Distribution Game
Retailer Wholesaler Distributor Factory
Customer
Maximize customerloyalty and sales
Back orders meanhigh customer dis-satisfaction, loss ofsales, and loss ofmarket share
Track record ofhigh service levels
One of a few selectsuppliers
Poor service = lossof business
Pretty good customer service
On notice: in danger of losing business if fail toachieve requiredfill rates
Strategy = qualityand on time
Distributor cross docks so needs high service level
Charge-back penaltiesif late
Quality Management Solutions, Inc.
Let the Game Begin The Beer Distribution Game
We will walk through the first few weeksslowly until you get the hang of it
For the first two weeks, order four cases/wk
As the facilitator calls the weeks, follow theInstruction sheet
Good Luck!!
Quality Management Solutions, Inc.
The Beer Distribution GameAbout Week 8 or 9...
Back orders appear
Back orders are cumulative
Orders to fillthis week = New orders
this week + Back ordersfrom last week
….and explain
Quality Management Solutions, Inc.
Debriefing: Purpose of the Game The Beer Distribution Game
Experience the pressures of a complex system
Understand the impact that the collective results of many individual decisions can have on system performance
Recognize that internal structure -- not external events -- causes system behavior
Highlight the importance of coordination in an organization in meeting customer and company objectives
Quality Management Solutions, Inc.
Debriefing: Lesson #1 The Beer Distribution Game
Even though different people working in the same structure act exercise their own free will, the qualitative patterns of behavior are the same: Oscillation -- Orders and inventories are
dominated by large amplitude fluctuations, with an average period of about 20 weeks
Amplification -- The amplitude and variance of orders increases steadily from customer to retailer to factory. The peak order rate at the factory is on average more than double the peak order rate at retail.
Phase Lag -- The order rate tends to peak later as one moves from the retailer to the factory.
Retailer Orders
Factory Orders
Time Lag
Quality Management Solutions, Inc.
…And the winner is…. The Beer Distribution Game
Quality Management Solutions, Inc.
Debriefing: Lesson #1 continued The Beer Distribution Game
1. Consumer Sales
Time
OrderQuantity
20
0
3. Wholesaler Orders to Manufacturers
Time
OrderQuantity
20
0
2. Retailer Orders to Wholesalers
Time
OrderQuantity
20
0
4. Manufacturer Orders to Supplier
Time
OrderQuantity
20
0
Source: Prof. Tom Davis, “The Role of Variability in the Supply Chain” Seminar, Stanford University, Sept., 1996.
The “Bullwhip Effect” in Action
Quality Management Solutions, Inc.
The Forrester Effect
Dem
and
Time
Dem
and
Time
Dem
and
Time
Dem
and
Time
RetailerManufacturer DistributionSupplier Consumer
CREDIT CARD
1234 5678 90121234 5678 9012VALID FROM GOOD THRU
XX/XX/XX XX/XX/XXPAUL FISCHER
XX/XX/XX XX/XX/XXPAUL FISCHER
Dem
and
Time
Dem
and
Time
Dem
and
Time
IMPACTIncreased Variability
• Poor communication• Lack of visibility• Human error• Process constraints
(e.g., capacity, batch sizes)
• Time lags
Small Changein Demand
Quality Management Solutions, Inc.
Debriefing: Lesson #1 continued The Beer Distribution Game
Weeks
Qua
ntity
Actual Customer Orders
Quality Management Solutions, Inc.
Debriefing: Lesson #2 The Beer Distribution Game
Internal Structure -- Not External Events -- Causes System Behavior
Although each player was free to make his or her own decisions, the same patterns of behavior emerge in every game, demonstrating the powerful role of the system in shaping our behavior.
Understanding how well-intentioned, intelligent people can create an outcome no one expected and no one wants is one of the profound lessons of the game.
Quality Management Solutions, Inc.
Group Exercise The Beer Distribution Game
What would you do to improve the supply chain?
Take 20 minutes
Presentations
Quality Management Solutions, Inc.
Wrap Up The Beer Distribution Game
Integrated planning and scheduling processes
Demand-pull manufacturing systems
Integrated supply chain (VMI, CRP, etc.)
Enterprise-wide information systems
Process-based organizational structure
Co-location of functional departments
Other?
Supply chain improvements…..
Quality Management Solutions, Inc.
The Beer Distribution Game
THE END
Quality Management Solutions, Inc.
THANK YOU! The Beer Distribution Game
G. L (Jerry) Kilty, CFPIM, CIRM, CSCP
2519 McMullen Booth Road
Suite 510 Q
Clearwater, FL 33761
727 725-7674
