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Friday, September 30, 2011

Higher Education

Higher Education: "Supply Chain Management Simulation: Root Beer Game"


This online simulation illustrates how oscillations arise in a simple supply chain and how variability increases with each link in the supply chain, a dynamic referred to as the "bullwhip effect." Based on the classic Beer Game developed by Jay Forrester at MIT in the 1960s, this team based simulation portrays a typical supply chain with each chain (team) consisting of four links: retailer, wholesaler, distributor and factory. Each player manages one link in the chain. At each stage of the distribution process, players face order processing challenges and shipping lags as well as central stock management problems. The player's objective is to minimize total costs and to keep inventories low, but not too low, to avoid backlogs. Incoming orders deplete pre existing inventory so players need to monitor inventory levels to strive for an optimal level. There is a delay between placing and receiving the root beer orders, which creates a supply line of unfilled orders. The simulation allows instructors to customize parameters governing shipping delays, information delays, POS visibility, and demand curve, creating a rich set of comparative data for the class debrief. A single-player version is also available. A Facilitator's Guide provides an overview of all simulation screens/elements as well as a comprehensive Teaching Note.

Learning Objective:

1) Illustrates the main factors contributing to the bullwhip effect: (a) Demand forecasting & standard forecast smoothing techniques (b) Lead time impact on supply chain (c) Impact of batch ordering on the wholesaler (d) Magnifying effects of inflated orders on the bullwhip phenomenon (e) How centralized information mitigates the bullwhip effect. 2) In the post-play discussion, students can learn techniques to control the bullwhip effect, including: (a) Reducing uncertainty by providing centralized information about demand (b) Reducing variability - i.e. by discouraging price promotions (c) Reducing lead time (d) Establishing strategic partnerships--particularly those involving information-sharing. 3) Post-play discussion should also cover the elements of effective forecasting. See the Teaching Note for specific points to cover.

Subjects Covered:

Demand planning; Inventory management; Simulations; Supply chain management; Supply chain optimization

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