Computerized Beer Game

Designing & Managing the Supply Chain

Appendix A

Youn-Ju Woo

Outline

Introduction

The Traditional Beer Game

The Scenarios

Playing a round

Options and Settings

Summary

Introduction

Traditional Beer Game Role-playing simulation of a simple production and distribution

system MIT developed in the 1960s

Computerized Beer Game Similar to Traditional Beer Game Possible to test the various SCM concept

The Traditional Beer Game (1)

Retail Manager• Observing external demand• Filling demand as much as

possible• Record Back orders• Place order with wholesaler Demand

Card

Factory Manager• Observing demand• Filling demand and back

orders• Begins production

Wholesaler Manager• Observing demand • Filling demand and back

orders• Place order with distributor

Distributor Manager• Observing demand • Filling demand and back

orders• Place order with factory

The Traditional Beer Game (2)

Goal of Team Minimize : Total cost = Holding cost + Shortage cost

Game Rules Back-order should be filled ASPS Each manager has only local information 25 ~50 weeks Holding cost $0.50, Shortage cost $1

End of the game Players are asked to estimate customer demand The demand information is opened to players

• Demand is 4 during the 4 weeks and 8 during the last

The Traditional Beer Game (3)

Difficulties The students focus on correctly following the rules, not develop-

ing an effective strategy Demand pattern does not reflect a realistic supply chain sce-

nario Doesn’t demonstrate several important issues in SCM

• The real objective is to minimize the total system cost, not individual performance

Shortening cycle times and centralizing information are useful

The computerized Beer Game is developed

The Scenarios (1) A simplified beer supply chain

Consist of a single retailer, a single distributor, a single whole-saler and a single factory

Each component has unlimited storage capacity, fixed lead time and order delay time

Every week, each component tries to meet the de-mand of downstream component Meet every back order ASPS No ignore any order Member orders item to the upstream component

Place an order W

Supplier gets order

W+1

Arrive or-dered item W+3

The Scenarios (2)

Other options to model various situations Lead time reduction, global information sharing, centralized

management

A centralized scenario Factory manager controls the entire supply chain and has infor-

mation of external demand and entire inventory Only factory can place orders Only retailer pays a $4.0 shortage cost

Playing a round (1)

Modeling the first scenario Player chooses one component

(Retailer, Wholesaler, Distributor, Factory) Computer takes the remaining roles

Playing a round (2) Order of Events

Step 1

◦ Contents of delay 2 moved to delay 1

Step 2

◦ Order from downstream facility are filled

◦ Order = current order + back orders

◦ Remaining orders = current inventory – Order

Back orders

◦ Except the retailer, the orders are filled to the delay 2 location of the downstream

Step 3 ◦ Total costs = accumulated cost from previous period + shortage and Holding cost

◦ Holding cost = $ 0.5 ×(Inventory at facility + in transit to the next downstream)

◦ Shortage cost = $ 1 ×Back orders

Step 4

◦ Player input the order quantity, other orders are placed by computer

Playing a round (3) Understanding the Screen

Example; Distributor

Total cost : Accumulated cost from previous period and shortage

and Holding cost Backorder: Orders received by the Distributor but not yet met

from inventory

Number of items in inventory

In transit to inventory

Delay 1: No. of items will arrive in one week

Playing a round (4)

Start Button

Week 0 Initial inventory : 4 unit Delay 1 : 4 unit Delay 2 : 4 unit

Week 1 Inventory : 8 unit Delay 1 : 4 unit Delay 2 : 0 unit

Input order quantity

1. Click start

Playing a round (5)

2. Enter a demand amount ( Ex, Input 3) Make balance inventory holding costs and shortage costs Check the amount of back order your upstream supplier already

has to fill After entering the quantity, the remaining members play automat-

ically, the screen is updated

Total cost = (4 + 0 + 8) ×$ 0.5 = $ 6

Playing a round (6)

3. Select Next Round The upstream supplier will try to meet last period’s order (3) Enter order 6

Total cost = $ 6 + (0 + 0 + 12) ×$ 0.5 = $ 12

Playing a round (7)

3. Select Next Round Total cost = $ 12 + (0 + 12 + 0) ×$ 0.5 + 18 ×$ 1 = $ 36

How much order quantity should be entered?

Order = current order + back orders

Level of back order at the beginning of this round, before the player attempted to fill downstream or-ders

How much total back order

Current level of back order

Options and Settings (1)

File Commands File-Reset : Reset the game File-Exit : Exit the game

Options Commands Options-Player

Options and Settings (2) Options Commands

Options-Policy • s-S: When inventory falls below s, the system order to bring inventory to S

• S-Q: When inventory falls below s, the system places an order for Q

• Order to S: Each week, the system order bring inventory to S

• Order Q: Each week, the system orders Q • Updated s: The order-up-to level s is updated

- The moving average of demand over past 10 wks

- Inventory level falls below s, the system orders up to s, the maximum order size is S

• Echelon: A modified version of perododic re-view echelon policy

.5

.5

.5

.5

: ( ) ( ) ( ) ( )

: ( ) ( ) ( ) ( )

: (2 ) ( ) ( ) (2 )

: (3 ) ( ) ( ) (3 )

retailer s L r AVG D M STD D L r

wholesaler s L L r AVG D M STD D L L r

distributor s L L r AVG D M STD D L L r

factory s L L r AVG D M STD D L L r

Options and Settings (3) Options - Short Lead Time

• Remove delay 2, shorten lead time to 1 week Option - Centralized

• The interactive player manages the factory, can observe external demand and react it

• The inventory is only held by Retailer Option - Demand

• Set the external customer demand• Deterministic – Select the constant

demands and weeks• Random Normal – Select Means,

stds, weeks Option – Global Information

• Display iventory and cost information

and external demand at all of the stages

Options and Settings (4) The Graphs Commands

Graphs - Player

Graphs – Others

Graphs - System

Options and Settings (5) The Reports Commands

Reports - Player

Reports – Others

Reports - System

Summary

Usage of Computerized Beer Game Test the Traditional Beer Game

Possible to test the various SCM concept• Shortened lead time• Centralized SCM• SCM with Global information system • Setting Various Demand

Display Results• Graph• Report

The Risk Pool Game

Designing & Managing the Supply Chain

Appendix B

Youn-Ju Woo

Outline

Introduction

The Scenarios

Playing several round

Options and Settings

Summary

Introduction

Concept of Risk Pooling If each retailer maintains separate inventory and safety stock,

the higher level of inventory is needed than using pooling system

Risk Pooling Game Execute both system simultaneously

• A system with risk pooling – Centralized System• A system without risk pooling – Decentralized System

Compare the performances to understand the concept

The Scenarios Centralized Game

A supplier serves a warehouse, which serves three retailers

Decentralized Game Three retailers order separately , and supplier ships material directly to

each retailer

If the demand is not fulfilled at the time, it is lost. The goal in both system is to maximize profit

Supplier Warehouse

Retailer

Retailer

Retailer

Order

Supply

Order

Supply2 periods

2 periods

Supplier

Retailer

Retailer

Retailer

Order

Supply4 periods

Playing a round (1)

Description of Screen

Supplier

Inventory at least 4 period away from re-tailers

Order from supplier

Allocation to retailers

Inventory of retailers

Cost of goods sold

Holding Cost

= Revenue – (COGS + Holding)

= Demand met / To-tal demand * 100

Playing a round (2) Order of Events Step 1.

Step 2.

Step 3.

Step 4.

Step 5.

• Centralized System: Four period moves to three periods

away, inventory three periods is added to warehouse inventory• Inventory one moved to retailer inventory

• Each retailer fills demand as much as possible• Both systems faces the same demand

• Centralized System: Enter an order for the supplier or keep the default value

Allocate the warehouse inventory to the retailers• Decentralized System: Enter an order for each retailer or keep the default value• The allocation amount must be less than or equal to the total warehouse inventory• Press Orders button

• Orders are filled

• Cost, Revenue, and service level is calculated

Playing a round (3)

Playing a round (4)

Options and Settings (1)

Play – Play Options Initial Conditions

• The retailers must have same initial inventory• The transit inventories should be same

Demand• Normal distribution

with mean and standard deviation• The slider control enables to control

the correlation of demand at retailers

Options and Settings (2)

Inventory Policy• Safety Stock policy

- Select order-up-to levels

- Using multipliers by

mean demand and Std. deviation• Weeks of Inventory policy

- A single value multiplied by

mean demand

Cost• Holding cost, Cost, and Revenue cost

are per item per period

Options and Settings (3) The Reports Commands

Reports - Orders

Reports – Demands