About the Beer Game
The Beer Game is a role-play simulation game that lets participants experience typical coordination problems of (traditional) supply chains, in which information sharing and collaboration does not exist. In more general terms, this supply chain represents any non-coordinated system where problems arise due to lack of systemic thinking.
The Beer Game (or beer distribution game) was originally invented in the 1960’s by Jay Forrester at MIT as a result of his work on system dynamics.
While the original goal of the simulation game was to research the effect of systems structures on the behavior of people (“structure creates behavior”), the game can be used to demonstrate the benefits of information sharing, supply chain management, and collaboration in the supply chain.
The most popular business game for supply chain
This experiential, competitive business simulation game demonstrates the need for coordination throughout the supply chain. Suppliers, manufacturers, sales people, and customers have their own, often incomplete, understanding of what real demand is. Each group has control over only a part of the supply chain, but each group can influence the entire chain by ordering too much or too little. Further, each group is influenced by decisions that others are making.
This lack of coordination coupled with the ability to influence while being influenced by others leads to the Bullwhip Effect (shortages and overstocks across the supply chain).
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The Bullwhip Effect
In the Beer Game participants enact a four stage supply chain. The task is to produce and deliver units of beer: the factory produces and the other three stages deliver the beer units until it reaches the customer at the downstream end of the chain.
The bullwhip effect is a well-known symptom of coordination problems in (traditional) supply chains.
It refers to the role played by periodical order amounts as one moves upstream in the supply chain toward the production end.
Even when demand is stable, small variations in that demand, at the retail-end, tend to dramatically amplify themselves upstream through the supply chain. The resulting effect is that order amounts become very erratic. Very high one week, and then zero the next.
The term was first coined around 1990 when Procter & Gamble perceived erratic and amplified order patterns in its supply chain for baby diapers. The effect is also known by the names whiplash or whipsaw effect.
As a consequence of the bullwhip effect a range of inefficiencies occur throughout the supply chain:
- high (safety) stock levels
- poor customer service levels
- poor capacity utilization
- aggravated problems with demand forecasting
- ultimately high cost and low levels of inter-firm trust
While the effect is not new, it is still a timely and pressing problem in contemporary supply chains.