Beer distribution game
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The beer distribution game (also known as the beer game) is a simulation game created by a group of professors at MIT Sloan School of Management in early 1960s to demonstrate a number of key principles of supply chain management. The game is played by teams of at least four players, often in heated competition, and takes from one to one and a half hours to complete. A debriefing session of roughly equivalent length typically follows to review the results of each team and discuss the lessons involved.
The purpose of the game is to understand the distribution side dynamics of a multi-echelon supply chain used to distribute a single item, in this case, cases of beer.
The object of the game is to meet customer demand for cases of beer through the distribution side of a multi-stage supply chain with minimal expenditure on back orders and inventory. There are four stages, manufacturer, distributor, supplier, retailer, with a two week communication gap of orders toward the upstream and a two week supply chain delay of product towards the downstream. There is a one-point cost for holding excess inventory and a one-point cost for any backlog (old backlog + orders - current inventory). In the board game version, players cannot see anything other than what is communicated to them through pieces of paper with numbers written on them, signifying orders or product. The retailer draws from a deck of cards for what the customer demands, and the manufacturer places an order which, in turn, becomes product in four weeks.
Verbal communication between players is against the rules so feelings of confusion and disappointment are common. Players look to one another within their supply chain frantically trying to figure out where things are going wrong. Most of the players feel frustrated because they are not getting the results they want. Players wonder whether someone in their team did not understand the game or assume customer demand is following a very erratic pattern as backlogs mount and/or massive inventories accumulate. During the debriefing, it is explained that these feelings are common and that reactions based on these feelings within supply chains create the bullwhip effect.
The game is used to illustrate one of the links between System Dynamics theory and the Feedback Control Theory which inspired it - that systems with positive feedback loops and high gain can lead to oscillation and overload, such as that which happens with microphones and amplifiers.
For a complete understanding, the game is played not only within a supply chain, but two or three supply chains are set up (when there are enough players and volunteers to help). In real life, more than the understanding one gets by playing as different entities in a single supply chain, it is the learning when supply chains compete with each other that the real strategic intent is made clear.
The team or supply chain which turns up with the least total costs when played over 12-15 cycles is the winner, although the point of the game is to illustrate in a compelling way, the effect that lack of communication has in the supply chain.
Senge, Peter M. "The Fifth Discipline: The Art and Practice of the Learning Organization." New York: Currency Doubleday. 1990. 423 pp.
Computer-based tools for running Beer Game Sessions:
- Online, multiplayer "root-beer" game--a modified version of the original MIT game
- The Beer Distribution Game online
- The Beer Distribution Game Simulation Model (java applet)
- A classroom friendly online version
- Free beergame software for classroom use in higher education
- Free online, multiplayer beergame from MA-system, with the aim to maximize the supply chain net revenue
Non computer-based kits for running Beer Game Sessions: