Beer Game --- MIT Supply Chain Simulation Game. Players Retailer, Wholesaler, Distributor and Manufacturer. Goal Minimize system-wide (chain) long-run average cost. Information sharing: Mail. Demand: Deterministic, Stochastic Costs Holding cost: $0.50/case/week.
1. New shipments delivered.
2. Orders arrive.
3. Fill orders plus backlog.
4. Decide how much to order.
5. Calculate inventory costs.
Order of events: the simulation is run as a series of weeks. Within each week, first the retailer, then the wholesaler, then the distributor, and finally the factory, executes the following series of events, as the simulation proceeds upstream:
1. The contents of Delay 1 are moved to inventory, and the contents of Delay 2 are moved to Delay 1. Delay 2 is 0 at this point.
2. Orders from the immediate downstream facility (or in the case of the retailer, external customers) are filled to the extent possible. Remember that an order consists of the current order, and all accumulated backorders. Remaining orders (equal to current inventory minus the sum of the current orders and backorder) are backlogged, to be met as soon as possible. Except for retailers, which ship orders outside the system, the orders are filled to the Delay 2 location of the immediate downstream facility. Also, at this point the factory’s “Production Request” should convert raw materials into product and place these units into “Production Delay 2.” Finally, for all players this is the start of the two-week delay.
3. Backorder and inventory costs are calculated.
4. Orders are placed. The user indicates the desired order amount.
Note that this sequence of events implies several things.
First, once an upstream facility fills an order, there is a two period delay before this material can be used to fill a downstream order. Also, there is a one period order delay.
This means that if, for example, the retailer places an order for 5 units in this period, the wholesaler does not even attempt to fill the order until next period. This period, the wholesaler attempts to fill the order from the previous period. This can be considered a one period order processing lag. Thus, there is a total of three periods of delays between when a facility places and order, and when the results of that order arrive in inventory.
Also, recall that there is no guarantee that an order will be met, even with that three period lag. An upstream supplier can only fill an order if it has the necessary inventory. Otherwise, it will backlog that order, and attempt to fill it as soon as possible. The exception to this is the factory. There is no production capacity limit, so the factory’s order will always be filled in its entirety after the appropriate delay.
At each weekly ordering point, you will have decided how many units to order, based on the following information:
• Your current inventory.
• How much will arrive in one week.
• How much will arrive in two weeks.
• The size of your most recent order.
• The demand you are currently facing.
• Previous demand you have been unable to meet, and have backlogged.
• The amount you most recently supplied.
• The amount you ordered from your upstream supplier in prior weeks which has not yet been shipped.
• Any historical information you have recorded.
5. Fill the pipeline: Place an order slip in each of the seven small boxes labeled “Order Placed”, “Incoming Orders”, or “Production Requests”, Each order ship should have the number 4 written on it and be placed face down.
6. Place a copy of the sheet labeled “Game Record (by Week)” near each of the “Current Inventory Square”
7. Place approximately 100 small pieces and 20 cards at the “Raw Materials” location on the board.
--- Fill incoming orders PLUS orders in backlog
--- If you don’t have enough inventory, ship as much as you can and the rest to your backlog
3. Record your inventory or backlog
(Factories introduce production requests from last week into the production delay)
(Factory place and record production requests)
Last week’s backlog ____________
+ New Orders ____________
= Order to fill ____________
- Amount shipped ____________
= This Week’s backlog ____________
Please Don’t Tell What
The Customer Orders Were
--- Total your inventory
--- Total your backlog
--- Calculate your total cost
2. Plot your inventory or backlog
How Did You Feel
[ A factor of 10 improvement is possible!]
even though very different people play
The Beer Game Production-Distribution Exercise: Running Large Sessions