The Root Beer Game • Simulates the operation of a simple supply chain • Illustrates important systems principles • Developed at MIT in the 1960s
Playing the Root Beer Game • Introduction • The goal in this simulation game is to distribute root beer to customers in a manner to satisfy the customer and earn the most profits for your business. Each of you will play the role of a manager of key distribution aspects of Panther’s Root Beer Corp. • Objective • The objective of the game is to satisfy the requirements of your immediate customer in the best possible way! • Roles Customers <> Retailer <> Distributor <> Brewery
Rules of the Game • The supply chain partners’ only communication is by reading and writing down numbers on color coded sheets of paper • Blue Sheet • Place an order • Read Demand • Pink Sheet • Ship to fill order • Receive filled order • All moves, inventories and backlogs are recorded on scorecards
Playing the Game • Each player has a starting inventory of 12 barrels • One turn = One week of business activity • Each “turn” in the game has 4 major steps 1. Read this week’s demand from your customer 2. Ship Root Beer to your customer in response to (1) 3. Take receipt of Root Beer from your supplier 4. Place an order with your supplier for more Root Beer * Note that this week’s receipt is in response to your last week’s order
Step 1: Read Demand to begin new week (Monday) • Read Demand that your customer placed at the end of previous week • Record the Demand • Discard the blue piece of paper
Step 2a: Ship Product From Inventory (Tuesday) • Decide how much to ship to your customer in response to last week’s demand • Record how much you’ll ship • Write amount on pink sheet of paper and place it face down for your customer to pick up
Step 2b. Calculate Backlogs • Backlog = Orders that you received but did not fill • Backlog is cumulative New Backlog = Old Backlog + (Demand from Step 1 - Amount Shipped in Step 2a)
Step 3a. Receive Product from Supplier (Wednesday) • Turn the pink piece of paper from your supplier in response to last week’s order • Record how much was received • Discard the pink sheet of paper * Brewery can brew any amount of Beer; but requires 2 weeks to brew any planned amount
Step 3b. Update Inventory • New Inventory = Inventory of start of week - Amount Shipped in Step 2a + Receipts from Step 3a.
Step 4. Place New Order with Supplier (Thursday) • Decide how much to order for next week • Record how much you’ll order • Write the amount on the blue sheet of paper and place it face down • Wait for another week
News Flash • In a highly anticipated interview with Barbara Walters, Monica Lewinsky acknowledged that she did consume Panther’s Root Beer on certain occasions...
Important Rules • Follow the sequence, don’t jump ahead • On step 2a, you can ship as much as you want (as much as you have in inventory!) • You can not have negative inventories at any time! • You must accept all deliveries (No returns!!)
Your Cost Structure • Inventory Carrying Cost is $1 per barrel per week • Cost of a Backlog is $2 per barrel per week
Summary 1. Receive Demand 2a. Make Shipment Decision 2b. Calculate Backlog 3a. Receive Product 3b. Calculate New Inventory 4. Make Ordering Decision Update Scorecard