Supply Chain Dynamics Revealed through the Beer Game

Categories: Business Demand Inventory

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Introduction

The beer game involved an impressive interplay between the various echelons of the supply chain. The weekly records documented revealed a number of pit falls that were created and experienced at different levels of the chain. The factory echelon in particular posed a significant setback by the creation of backlogs due to inadequate shipments which dissatisfied the consumer. Better function of the entire chain would greatly rely on fore mostly increased effectiveness at the factory echelon in terms of delivery and heightened networking and interactions amongst the remaining echelons.

The writing of this report seeks to furnish the reader with a number of key findings that have been deduced from research conducted pertaining to the beer game.

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This has been done against the backdrop of the role that our group played in the supply chain as well as role that other echelons played and the aggregate interplay of them all. The research method employed was the use of a weekly game record that entailed focusing on the inventory, backlog and orders that were placed.

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The report seeks to analyze the interplay between the various echelons of the supply chain as brought out by their interactions in the beer game.

The beer game

Prior to the game, the various echelons were provided with hints on how to go about it. The hints were that:

One could not look ahead at the orders.
Every member of a particular echelon had to stay in step with his team mates.
One partner would be tasked with the moving of the pieces whereas another would be recording on the game record.
Echelons would receive orders and ship “downstream” after which they would fill in an order slip and slip it underneath the board.
There is a receipt from “upstream” in response to the orders placed.

The steps of the game, which were repeated on every week, were:

Each echelon received inventories and advance shipping delays.
They would later look at their incoming orders and fill them.

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This included filling in the orders in backlog. In the event that an echelon did not have adequate inventory an echelon had to ship as much as it could and add the rest to the backlog.
The various groups would then record their inventory and backlog.
Each echelon would then advance the order slips and factory brew.
They then recorded their orders.

The weekly game records

Within the supply chain, my echelon played the role of the distributor. The recordings were done for twenty week duration. The first four weeks were characterized by a steady supply which slightly increased on the fifth and sixth weeks. There was, however, an exponential decline between the seventh and ninth weeks beyond which there was no inventory to record. There was no backlog realized until the tenth week. The trend of the backlog, through the remaining eight weeks was one that kept on fluctuating with no certainty as far as predicting either a rise or fall for the ensuing week.

However, the last two weeks witnessed a rise to peak that peaked the records. The orders placed by the wholesaling echelon were very low in the outset with no certainty as to whether they would increase or decrease in the subsequent weeks. The eighth week, however, saw the orders take an upturn which again took a nosedive in the eleventh week. Between the twelfth and sixteenth weeks, the orders registered slight increases which reached their height in the final three weeks.

The demand placed on the retailer echelon

Given the above mentioned statistics, we can safely conclude that in the first seven weeks the retailer experienced low and fluctuating demand for the beer from the end consumer. These were succeeded by three weeks of unusually high demand which again drastically reduced on the eleventh week. The demand increased slightly in the twelfth week and leveled off with no increase on the thirteenth. This changed as there was an increase noted on the fourteenth and fifteenth weeks. This remained constant throughout the sixteenth week. The seventeenth week brought a slight decline in the demand which steadily rose on the eighteenth.

Demand placed on the retailer must have been highest on the eighteenth, nineteenth and twentieth weeks.

Bad behaviour from my echelon and in the relations with other echelons

The distributor echelon faced the problem of being unable to identify adequate wholesalers that would have guaranteed a steady and increasing demand for the beer. There was also the problem an inability to effectively market the beer in the initial weeks of the game. All these resulted in abysmally low demand for the beer in the first seven weeks. As the distributor, our echelon received no order on the fifth week.

Besides, there emerged the problem of an apparent inability to sustain consumer demand especially between the eleventh and thirteenth weeks which saw the demand decrease significantly. The factory echelon posed a great setback to the success of the entire supply chain. Though from it our echelon experienced only one problem, it was by far the most debilitating. Often the factory delivered beer whose quantity was way below that which had been ordered by the retailers. The result was an increasing backlog that implied end consumers had to be kept waiting.

On particular weeks, for a total order as high as forty-three the factory had the dismal shipment of only eleven. By that time, we already had a backlog of twenty three. Cumulatively, therefore, we as the distributors had a backlog of thirty four. The consumers also presented a problem. Their trend was characterized by low demand when the inventory was reasonably high and high demand when there was very little supply. This inhibited our ability to meet their demand satisfactorily.

Steps taken by the distributor echelon

So as to counter these costly trends, the distributor echelon took a number of steps.

Carried out a form of market research which aimed at equipping us with knowledge required as far as consumer tastes and preferences of packaging and selling were concerned.
Expanded the breadth of our wholesaler clientele. This aimed at directly increasing the demand for the beer.
Carried out marketing and advertisements in partnership with the wholesalers and retailer so as to increase the final consumers’ awareness of the existence of the beer.
To sustain consumer demand, we came up with incentives that spread across the different levels of the supply chain. Discounts played a significant role in ensuring that our weekly demand was elevated.
Nothing more than notifying the supplier of the inconvenience created by failed deliveries could have been done to solve the problem stemming from the factory echelon.

The action that the consumer should have taken

The consumers should have analyzed their consumption habits and used them to place orders in advance, preferably a week prior to the date they intended to have the beer. This would have created the benefit of ample time for the distributor echelon to follow upon the backlog that would be required to cater for the deficit that was created.

Recommendations on imrovements

To heighten the performance of the entire supply chain, I would implement the following recommendations on the respective echelons:

Factory: Employ the use of a means of carriage that would transport the beer to its destination as fastest and in the most convenient way possible. It would be important that the capacity of the carriage be expanded in order to facilitate the possibility of single trip transportation of the beer.
Distributors and retailers would have to carry out collaborative marketing and advertisement strategies so as to reinforce the ultimate impact with which the beer hit the potential consumer.
There would be need for increased interaction between the remaining echelons (distributor, retailer and consumer) so as to enable the exchange of ideas and identify the loopholes that are impeding success at various stages in the supply chain.

Conclusion

This report has exhaustively covered the beer game. The supply chain and the dysfunctions that negated its success have been identified and the appropriate remedies proposed.

It has also been brought to the fore that no echelon in the chain is independent of another; its success is a summation of the balance between success ad failures at the various echelons.

References

Sterman J. (2001), "Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiment",London: Management Science Modelling for Learning Organizations, John Morecroft and John Sterman, eds. , Portland Lack, N. , Chambers S. , Johnston R. , Operations Management, Washigton:Pearson Education, 2001. Slack N. and Lewis M. , Operations Strategy, Lndon:Pearson Education, 2002.