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  Factory Manager • Observing demand • Filling demand and back orders • Begins production Demand Card  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 .

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 .50.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.

not developing an effective strategy  Demand pattern does not reflect a realistic supply chain scenario  Doesn’t demonstrate several important issues in SCM • The real objective is to minimize the total system cost.The Traditional Beer Game (3)  Difficulties  The students focus on correctly following the rules. not individual performance  Shortening cycle times and centralizing information are useful The computerized Beer Game is developed .

each component tries to meet the demand of downstream component  Meet every back order ASPS  No ignore any order  Member orders item to the upstream component Place an order Arrive ordered item W W+1 Supplier gets order W+3 . a single wholesaler and a single factory  Each component has unlimited storage capacity. fixed lead time and order delay time  Every week. a single distributor.The Scenarios (1)  A simplified beer supply chain  Consist of a single retailer.

0 shortage cost . centralized management  A centralized scenario  Factory manager controls the entire supply chain and has information of external demand and entire inventory  Only factory can place orders  Only retailer pays a $4.The Scenarios (2)  Other options to model various situations  Lead time reduction. global information sharing.

Playing a round (1)  Modeling the first scenario  Player chooses one component (Retailer. Factory)  Computer takes the remaining roles . Distributor. Wholesaler.

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.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 . 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.

Distributor Number of items in inventory In transit to inventory Delay 1: No. of items will arrive in one week  Total cost : Accumulated cost from previous period and shortage and Holding cost  Backorder: Orders received by the Distributor but not yet met from inventory .Playing a round (3)  Understanding the Screen  Example.

Playing a round (4) 1. Click start Start Button Input order quantity  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 .

Playing a round (5) 2. Enter a demand amount ( Ex. the screen is updated  Total cost = (4 + 0 + 8) ×$ 0.5 = $ 6 . the remaining members play automatically. 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.

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 Level of back order at the beginning of this round. before the player attempted to fill downstream orders How much total back order Current level of back order  How much order quantity should be entered?  Order = current order + back orders .

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.5 distributor : s  (2  L  L  r )  AVG ( D)  M  STD( D)  (2  L  L  r ).Inventory level falls below s.5 . the system orders up to s. the system order bring inventory to S • Order Q: Each week.5 wholesaler : s  ( L  L  r )  AVG ( D)  M  STD( D)  ( L  L  r ).5 factory : s  (3  L  L  r )  AVG ( D)  M  STD( D)  (3  L  L  r ).The moving average of demand over past 10 wks . the maximum order size is S • Echelon: A modified version of perododic review echelon policy retailer : s  ( L  r )  AVG ( D)  M  STD( D)  ( L  r ). the system places an order for Q • Order to S: Each week. the system order to bring inventory to S • S-Q: When inventory falls below s. the system orders Q • Updated s: The order-up-to level s is updated .

Options and Settings (3)  Options .Demand • Set the external customer demand • Deterministic – Select the constant demands and weeks • Random Normal – Select Means.Short Lead Time • Remove delay 2.Centralized • The interactive player manages the factory. stds. shorten lead time to 1 week  Option . weeks  Option – Global Information • Display iventory and cost information and external demand at all of the stages . can observe external demand and react it • The inventory is only held by Retailer  Option .

Player  Graphs – Others  Graphs .System .Options and Settings (4)  The Graphs Commands  Graphs .

System .Options and Settings (5)  The Reports Commands  Reports .Player  Reports – Others  Reports .

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 .

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 .Introduction  Concept of Risk Pooling  If each retailer maintains separate inventory and safety stock.

which serves three retailers Order Order Retailer Warehouse Supply 2 periods Supplier Supply 2 periods Retailer Retailer  Decentralized Game  Three retailers order separately . and supplier ships material directly to each retailer Order Retailer Supplier Supply 4 periods Retailer Retailer  If the demand is not fulfilled at the time.The Scenarios  Centralized Game  A supplier serves a warehouse. it is lost.  The goal in both system is to maximize profit .

Playing a round (1)  Description of Screen Order from supplier Inventory at least 4 period away from retailers Allocation to retailers Inventory of retailers Cost of goods sold Holding Cost = Revenue – (COGS + Holding) Supplier = Demand met / Total demand * 100 .

Cost. • Centralized System: Four period moves to three periods away. 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  • Step 4. and service level is calculated . Revenue. inventory three periods is added to warehouse inventory • Inventory one moved to retailer inventory  • • Step 2. Orders are filled  • Step 5. Each retailer fills demand as much as possible Both systems faces the same demand  • • • • Step 3.Playing a round (2)  Order of Events  Step 1.

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 .

Select order-up-to levels .A single value multiplied by mean demand  Cost • Holding cost.Options and Settings (2)  Inventory Policy • Safety Stock policy . Cost.Using multipliers by mean demand and Std. and Revenue cost are per item per period . deviation • Weeks of Inventory policy .

Orders  Reports – Demands .Options and Settings (3)  The Reports Commands  Reports .

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