Beer Game and the Bullwhip Effect
09.11.2018
As part of the lecture "Logistics Management and Technologies", on 07.11.2018 we organized with students of industrial engineering the well-known "Beer Distribution Game" of MIT Sloan, which simulates a supply chain with four participants: Beer Brewery, Distributor - Logistics Service Provider, Wholesaler and Retailer.
We formed three groups. In each round of the game, participants decide how much to order from their respective supplier. As their own basic information, they have their current inventory and their existing customer orders at their disposal for this purpose. Each company in the supply chain has the same goal: to minimize the costs of the capital tied up in the warehouse, while at the same time remaining able to deliver. Ideally, this should minimize the total cost of the value chain.
In the end, students understand the importance of developing proper demand strategies and improving the functioning of the supply chain by taking into account the lack of connection between the different partners or actors along the value chain, and the variable requirements of the consumer. The surprising results of the simulation explain how a supply chain reacts inefficiently through the so-called Bullwhip Effect.
We formed three groups. In each round of the game, participants decide how much to order from their respective supplier. As their own basic information, they have their current inventory and their existing customer orders at their disposal for this purpose. Each company in the supply chain has the same goal: to minimize the costs of the capital tied up in the warehouse, while at the same time remaining able to deliver. Ideally, this should minimize the total cost of the value chain.
In the end, students understand the importance of developing proper demand strategies and improving the functioning of the supply chain by taking into account the lack of connection between the different partners or actors along the value chain, and the variable requirements of the consumer. The surprising results of the simulation explain how a supply chain reacts inefficiently through the so-called Bullwhip Effect.
