The Beer Distribution Game
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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

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Apics hampton roads 10 17 06

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]

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Purpose of the Game

Introduce the principle that structure produces

behavior

Experience the pressure of playing a role in a

complex system and understand the impact of

collective decisions on system performance

Show the impact and importance of information

flow on the supply chain

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Objectives for Your Teams

Minimize total supply chain costs -- watch

your inventory levels

Achieve high order fill rates -- keep your

customers 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.


Apics hampton roads 10 17 06

The Beer Distribution Game

Rules of the Game

1

Pick a team name

2

Each company fills out Record Sheets – Inventory/

Backlog and Orders

3

No communication between positions

4

Retailers -- do not reveal what customers

actually order

5

Play for 50 weeks

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Overview of the Game - The Supply Chain

Customer

Retailer

Wholesaler

Distributor

Factory

Maximize customer

loyalty and sales

Back orders mean

high customer dis-

satisfaction, loss of

sales, and loss of

market share

Track record of

high service levels

One of a few select

suppliers

Poor service = loss

of business

Pretty good

customer service

On notice: in

danger of losing

business if fail to

achieve required

fill rates

Strategy = quality

and on time

Distributor cross

docks so needs high

service level

Charge-back penalties

if late

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Let the Game Begin

We will walk through the first few weeks

slowly until you get the hang of it

For the first two weeks, order four cases/wk

As the facilitator calls the weeks, follow the

Instruction sheet

Good Luck!!

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

Back orders appear

Back orders are cumulative

The Beer Distribution Game

About Week 8 or 9...

….and explain

Orders to fill

this week

New orders

this week

Back orders

from last week

=

+

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Debriefing: Purpose of the 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.


Apics hampton roads 10 17 06

The Beer Distribution Game

Debriefing: Lesson #1

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.


Apics hampton roads 10 17 06

The Beer Distribution Game

…And the winner is….

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

1. Consumer Sales

2. Retailer Orders to Wholesalers

20

20

Order

Order

Quantity

Quantity

0

0

Time

Time

3. Wholesaler Orders to Manufacturers

4. Manufacturer Orders to Supplier

20

20

Order

Order

Quantity

Quantity

0

0

Time

Time

Source: Prof. Tom Davis, “The Role of Variability in the Supply Chain” Seminar, Stanford University, Sept., 1996.

The Beer Distribution Game

Debriefing: Lesson #1 continued

The “Bullwhip Effect” in Action

Quality Management Solutions, Inc.


The forrester effect

Manufacturer

Distribution

Retailer

Supplier

Consumer

Demand

Demand

Demand

Demand

Demand

Time

Time

Time

Time

Time

Increased Variability

Small Change

in Demand

IMPACT

  • Poor communication

  • Lack of visibility

  • Human error

  • Process constraints (e.g., capacity, batch sizes)

  • Time lags

Demand

Demand

Time

Time

The Forrester Effect

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Debriefing: Lesson #1 continued

Actual Customer Orders

Quantity

Weeks

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Debriefing: Lesson #2

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.


Apics hampton roads 10 17 06

The Beer Distribution Game

Group Exercise

What would you do to improve the

supply chain?

Take 20 minutes

Presentations

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

Wrap Up

Supply chain improvements…..

  • 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?

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

THE END

Quality Management Solutions, Inc.


Apics hampton roads 10 17 06

The Beer Distribution Game

THANK YOU!

G. L (Jerry) Kilty, CFPIM, CIRM, CSCP

  • 2519 McMullen Booth Road

  • Suite 510 Q

  • Clearwater, FL 33761

  • 727 725-7674

  • [email protected]

Quality Management Solutions, Inc.


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