The Beer Distribution Game - Internet Version

Topic Logistic supply chains, system dynamics

Purpose To introduce participants to the supply chain concept and to the effects decisions along the chain have on inventory levels and costs.

Introduction In this game the retailer sells cases of beer to a consumer and orders cases of beer from the wholesaler; the wholesaler sells cases of beer to the retailer and orders cases of beer from the distributor; and the distributor sells cases of beer to the wholesaler and orders beer from the factory (brewery). The factory brews the beer. For each week of play, every participant follows the same cycle in this order and concurrently:

1. Receive new orders and shipments, advance shipping delays and calculate new inventory levels (these tasks are done automatically by the server program.

2. Ship cases of beer according to new orders and backlog, subject to inventory availability,

3. place orders for (or brew) more beer (these decisions are entered using a Web form).

There are only two costs involved in this simplified version of a logistics supply chain: inventory holding cost ($1.00/case/week) and back order costs ($2.00/case/week). Each team has the goal of minimizing the sum of these costs by balancing the cost of having inventory (inventory holding cost) with the cost of being out of inventory when a customer orders beer (back order cost).

The server program keeps track of the costs incurred by each team. At the end of the game, the total game cost for the distribution system is the sum of the four individual participants' total costs (retailer cost + wholesaler cost + distributor cost + factory cost). The goal is to minimize team costs.

Materials The game is played using a Web browser such as Netscape using a set of specially designed forms for making decisions and viewing the status of the game.

Participants Four Positions:

Factory (brewery)

Distributor

Wholesaler

Retailer

Each position may be played by one or a pair of participants.

Action The game begins with a fully-loaded "pipeline" of cases of beer:

- 16 cases of inventory in each position's "current inventory,"

- 4 cases in each of the "production delay" pipeline,

- 4 cases in each of the "shipping delay" pipeline,

- each position has an initial order for 4 cases of beer.

Each position can communicate orders via the Web form only. No other form of communication is allowed between positions.

Questions for Discussion

About System Dynamics

1. Did you feel yourself controlled by forces in the system from time to time?

2. Did you find yourself "blaming" the person next to you for your problems?

3. What accounts for the dramatic fluctuations in the inventory levels? How might these fluctuations be mitigated.

About the Distribution Chain

1. What, if anything, is unrealistic about this game?

2. How would you determine the cost of holding inventory?

3. How would you determine the cost of a back order?

4. Why are there order delays?

5. What occurs in the chain when a "customer" places an order?

6. Why are there production delays? Shipping delays?

7. Why have both distributor and wholesalers? Why not ship beer directly from the factory to the retailer?

8. Must the brewer be concerned with the management of the raw materials suppliers? If so, why? How can the suppliers affect the brewing process? Who manages the suppliers?

9. How was the capacity of the brewery determined? Is there much flexibility in the capacity?

10. Should an inventory policy be used? If so, what should it be?