The Beer Game Challenge

“The line between disorder and order lies in logistics” – Sun Tzu

The Beer Game was originally invented in the 1960s by Jay Forrester at MIT as a result of his work on system dynamics. While the original goal of the simulation game was to research the effect of systems structures on the behavior of people (“structure creates behavior”), the game can be used to demonstrate the benefits of information sharing, supply chain management, and eCollaboration in the supply chain.

It is a role-play supply chain simulation that lets participants experience typical supply chain problems. In the game students enact a four-stage supply chain. The task is to produce and deliver units of beer: the factory produces and the other three stages deliver the beer units until it reaches the customer at the downstream end of the chain. The aim of the players is rather simple: each of the four groups has to fulfil incoming orders of beer by placing orders with the next upstream party.

Communication and collaboration are not allowed between supply chain stages, so players invariably create the so-called whiplash effect.

The Beer Game is played in smaller groups of 3, each of these groups sits around one table and plays one supply chain stage. The game runs in weeks and it starts in week 1. In each week, each supply chain group has to proceed with a set of steps. A supply chain is typically played by 8 to 12 people; more than one supply chain can run in parallel. The game is typically run for 40-50 rounds.

There are two different kinds of cost:
1. Inventory cost: Items in stock have a per week holding cost.
2. Backorder cost: If an incoming order cannot be (fully) fulfilled, items are outstanding and have to be put on “backorder” to be fulfilled in the following week(s). Each item on backorder also has a per week cost.

The goal of the team is to work most efficiently and minimize costs! The final part of the session is a short discussion directly after the game, where participants are debriefed around their decision making process throughout the game and what they think the average customer demand was.

A few key parameters:

Is the Beer Game Challenge right for your team?
This activity is perfect especially for supply chain teams and helps highlight that different people in the same organizational structure produce the same (or similar) results. A typical organizational response is to find the “person responsible” and blame him. But the game clearly demonstrates how inappropriate this response is. The focus should be on the structure instead.

The game brings to the fore different supply chain concepts that affect performance like demand forecasting, lead time, batch ordering and price fluctuations. If these are concepts that you think your team will be better off knowing and being sensitive to, do challenge your team to take the Beer Game Challenge today!

Contact Us today - we will be glad to meet up and discuss the possibilities for your team!