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
 Wholesaler Manager
• Observing demand
• Filling demand and back
orders
• Place order with distributor
 Factory Manager
• Observing demand
• Filling demand and back
orders
• Begins production
Demand
Card
 Distributor Manager
• Observing demand
• Filling demand and back
orders
• Place order with factory
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 $0.50, 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
The Traditional Beer Game (3)
 Difficulties
 The students focus on correctly following the rules, 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, not individual
performance
 Shortening cycle times and centralizing information are useful
The computerized Beer Game is developed
The Scenarios (1)
 A simplified beer supply chain
 Consist of a single retailer, a single distributor, a single
wholesaler and a single factory
 Each component has unlimited storage capacity, fixed lead time
and order delay time
 Every week, 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
W+3
Supplier
gets order
The Scenarios (2)
 Other options to model various situations
 Lead time reduction, global information sharing, 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 $4.0 shortage cost
Playing a round (1)
 Modeling the first scenario
 Player chooses one component
(Retailer, Wholesaler, Distributor, Factory)
 Computer takes the remaining roles
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, 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 = $ 0.5 ×(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
Playing a round (3)
 Understanding the Screen
 Example; 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 (4)
1. Click start
Input order
quantity
Start Button
 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, 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, the remaining members play
automatically, the screen is updated
 Total cost = (4 + 0 + 8) ×$ 0.5 = $ 6
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, the system
order to bring inventory to S
• S-Q: When inventory falls below s, the system
places an order for Q
• Order to S: Each week, the system order bring
inventory to S
• Order Q: Each week, the system orders Q
• Updated s: The order-up-to level s is updated
- The moving average of demand over past 10 wks
- Inventory level falls below s, the system orders up to
s, 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 ).5
wholesaler : s  ( L  L  r )  AVG ( D)  M  STD( D)  ( L  L  r ).5
distributor : s  (2  L  L  r )  AVG ( D)  M  STD( D)  (2  L  L  r ).5
factory
: s  (3  L  L  r )  AVG ( D)  M  STD( D)  (3  L  L  r ).5
Options and Settings (3)
 Options - Short Lead Time
• Remove delay 2, shorten lead time to 1 week
 Option - Centralized
• The interactive player manages the factory, can observe external demand
and react it
• The inventory is only held by Retailer
 Option - Demand
• Set the external customer demand
• Deterministic – Select the constant
demands and weeks
• Random Normal – Select Means,
stds, weeks
 Option – Global Information
• Display iventory and cost information
and external demand at all of the stages
Options and Settings (4)
 The Graphs Commands
 Graphs - Player
 Graphs – Others
 Graphs - System
Options and Settings (5)
 The Reports Commands
 Reports - Player
 Reports – Others
 Reports - System
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
Introduction
 Concept of Risk Pooling
 If each retailer maintains separate inventory and safety stock,
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
The Scenarios
 Centralized Game
 A supplier serves a warehouse, which serves three retailers
Order
Retailer
Order
Supplier
Supply
2 periods
Warehouse
Retailer
Supply
2 periods
Retailer
 Decentralized Game
 Three retailers order separately , and supplier ships material directly to
each retailer
Order
Retailer
Supplier
Retailer
Supply
4 periods
Retailer
 If the demand is not fulfilled at the time, 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
Playing a round (2)
 Order of Events

Step 1.
• Centralized System: Four period moves to three periods
away, inventory three periods is added to warehouse inventory
• Inventory one moved to retailer inventory

Step 2.
•
•

Each retailer fills demand as much as possible
Both systems faces the same demand
Step 3.
•
•
•
•

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.
•

Orders are filled
Step 5.
•
Cost, Revenue, and service level is calculated
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
Options and Settings (2)
 Inventory Policy
• Safety Stock policy
- Select order-up-to levels
- Using multipliers by
mean demand and Std. deviation
• Weeks of Inventory policy
- A single value multiplied by
mean demand
 Cost
• Holding cost, Cost, and Revenue cost
are per item per period
Options and Settings (3)
 The Reports Commands
 Reports - Orders
 Reports – Demands