Beer Game Analysis Essay

* IntroductionThe beer indorse is a simulation first developed at the Massachusetts Institute of engineerings Sloan School of Management in the 1960s. This granulose was make in other to experiment how existent organisations functions, where the consequences of every decisions play protrude as clearly as possible in the racy as they would in a echt organisation (Senge, 1990). Narayanan Arunachalam (2006) described the granulose as a popular classroom exercise for business schools conceived at MIT with the primary point of demonstrating industrial dynamics. The beer game is a laboratory replica of a real organisational setting, attend tos to eminentlight the possible disabilities and their pay offs of an organisation. The beer game however in this font was created to transgress and t all(prenominal)light possible problems which an organisation may face in its picture cosmic string which is the bullwhip strength. The game includes four players which include the retaile r, the interlocutor, the distributer and the grind which is in an uplink setting. After playing the game, below we exit be giving a detai guide report of the events that took place at the course of the game.* Data synopsisThe objective of the beer game is to minimize the total bell for everyone in the interpret scope by wielding low stores and managing to deliver on the whole effectuates (http// ply drawing string.mit.edu/games/beer-game, 2011). However, the game was created to decease and below is a summary of events that took place during the game.Figure 1 chronicle/Backorder of the depict chainDuring the course of playing the game, we followed the cipher dodging which stated that place zero in orders upstream when your individual fund is higher than direct. This recipe was by and large what shaped the game and influenced the results in terminals of scrutinise and backorders. The retailer had a considerable good start in the game with a good record in inv entories of 12 units boulder clay calendar work hebdomad 5 when contract rose from nodes and this caused the pargonntage value to fall. In work calendar hebdomad 6, cod to no shipments and the bullwhip effect, the retailer started having back orders from the customers. Although the consume stayed the same from calendar week 6, the retailer continue to experiencebackorders till week 21 when the jobber sent a lot of supplies at once this do the inventories to plagiarize to a aggrandizement of 113 units in week 24. The wholesaler started with an gillyflower of 12 units which remained the same in week 2.However, due to incoming shipments from the allocator and a lack of take from the retailer, the document rose to 16 units in week three and 20 units in week 4 and remained the same till week 6. Due to an make up in posit from the retailer and a lack of shipments from the distributor, the inventories fell to 6 units and in week 7 and at week 8, the wholesaler was ha ving back orders. Backorders keep reoccurring and fluctuating until week 21 when it rose to 16 units of inventory and reached a peak of 136 units in week 25. The distributor during the game had the same inventory rate for the first 2 weeks. The distributor maintained similar inventory rates till week 9 when the distributor started recording backorders this was due to the inability of the distributor to consider together the orders of the wholesaler.The distributor continued to experience fluctuations in backorders until week 25 when it got a lot of supplies from the pulverization the inventories at the end of this week was at 40. The grinder had started the game with an inventory of 12 units which remained the same till week 10. This was largely due to a lack of huge demands from the distributor. The grinder however started experiencing backorders at week11. Backorder rates kept fluctuating during the weeks due to the inability of the factory to correspond the needs of the fa ctory on conviction. At week 25, the factory got a huge sum of supplies from the brewery which made its inventory to reach a peak of units. The high rate of back orders was caused by long cart track whiles, the bullwhip effect and the cause of the zero dodging. This made backorders to be on the get on for all the interpret chain operators. Increase in demand also play a great role in causing the high recite of backorders which in turn made the total cost to hike at a higher pace than it should.Figure 2 Order chartAbove is a chart showing the order levels of the Retailer, wholesaler, distributor, factory and customer. At the course of the game, due to the zero strategy, all supply chain operators had to even off zero orders from week one to week 4, because demand was less than the inventory. The customerdemand remained the same at 4 units until week 5. In week 5, demand from the retailers order rate had change magnitude from zero to 16 while demand rose to 8 units compare d to previous weeks.The orders of the wholesaler, distributor and factory remained zero in this week because they had high inventories. The decrease in inventories of the retailer resulted in the increase in order rates which was caused by a decrease in shipment which is a bullwhip effect. By week 11, all the supply chain operators had increased their order rate because their inventory levels were down. And back orders followed alongside changes in order changes which are all caused by the bullwhip effect. In week 21, the bullwhip effect were decreased which resulted to increased inventories and the zero regularization coming in.* Issues that you encountered using the zero strategy* Increase in BackordersThe biggest scrap we faced during the beer game was the challenge of constantly increasing backorders which give the gate be seen in figure1. The retailer had a peak backorder rate of 49, the wholesaler 90, the distributor 85 and the factory 72 backorders. Backorder means a distr ibution term that refers to the status of items on a purchase order in the event that some or the entire inventory required to fulfill the order is insufficient to satisfy demand leading to a remaining percentage point for the organisation to match this demand (Donovan, 2010). After using the zero strategy for a few weeks, we found the backorder analogous a chain reply star from retailer up to the factory.* Zero inventory and Safety hackneyedWe know that in the real business, zero inventories and investment degraded means that the telephoners ability of resisting the risk of backorders and shortage of supply is pared. But this is the case in the beer game where we went on with zero inventory and safety stock for weeks. This showed that the come with was incompetent in partakeing its own standards.* High rise of costCost control is very important for a political party, high cost operation is unacceptable. During the beer game, due to the high cost of back orders, we were speed on an outrageous cost per week. This was either due to enormousinventory or massive backorders. The cost of the backorders $1.00 and inventory cost $0.60. After we bury this game, we found that the cost of each supply chain operator was high and a total cost of $2, 862. At the initial stage, the increase in cost was little and similar when back orders rose, the cost became tremendous.* Delay in shipment (Long lead time)During the game, it took dickens weeks for the retailer to get supplies from the wholesaler and doubly as long if the wholesaler has non enough resources for the retailer. That means that it took two weeks to receive from the wholesaler, when the wholesaler is out of stock, it takes four weeks, and when the distributor is out of stock it takes six weeks for the distributor to get stock from the factory and finally, when the factory is out of stock, it takes seven weeks for the retailer to receive supplies. This shipment delay makes it difficult to meet cus tomer demands and causes high cost due to backorders.* Lack of talkDuring the beer game there was no communication of any sort between the supply chain operators and this led to so many misjudgements. The lack of communication led to the bullwhip effect which cost us a lot by resulting in back orders, and high costs.* Challenges encountered in beer game* Bullwhip EffectThe bullwhip effect was coined in by Proctor and Gamble (P&G) when the company experienced extensive demand amplification for their diaper products (Lee et .al, 1997). The bullwhip effect is a phenomenon in the supply chain whereby unpredictable elements introduced by human behaviour in the lower stir up of the chain becomes more pronounced the higher up the chain they fall (Baugher, 2012). By synchronizing the supply chain the bullwhip effect stand be eliminated. The bullwhip effect describes how in right info, and a disconnection between labor and real-time supply chain information result in loss of receipts full-grown customer service, high inventory levels and unrealised profits (Agarwal, 2009). With indite to figure 1 above, we can observe that the bullwhip effect did occur during the beer gamesimulation. An example of such a situation is in week 5 when the consumer demand increased from 4 units to 8 units.The retailer then made an order of 16 units upstream in week 5, when the wholesaler got the figures the wholesaler then made an order of 20 units in week 7. This continued with the distributor, who ordered 25 units upstream in week 9, the reaction of the factory was similar with an order of 26 units in week 11. This shows a entwine in demand upstream as illustrated in figure 3. The major cause of the bullwhip effect was the increase in consumer demand in week 5 and 6. Which later came to a normal state in week 7 at 8 units as illustrated in figure 2? The individual demand forecasts from the supply chain operators also caused the bullwhip effect.Lack of communication is also ve ry common when the supply chain operators may non provide sufficient or accurate information up the supply chain on the subject of current market conditions causing out-of-the- mien levels of inventory (Coyle et.al, 2003). This was the case during the beer game which can be seen that with time, the demand was interpreted differently as it went upstream. This the entire supply chain faced backorders due to the bullwhip effect from week 6 onwards even though the demand remained the same from week 8 onwards. The implications of the bullwhip effect includes excess inventories which was the case at the closing weeks of the game, problems with quality, increased raw materials costs, overtime expenses, increased inventory costs, increased backorder costs and increased shipping costs (Bowersox, D.J, 2007).* Long lead timeLead time delay occurs when the time it takes to obtain, make and deliver the complete goods to a customer takes lifelong than the time the customer is prepared to wait for it to reach them (Fawcett et.al, 1992). During the beer game, it takes 2weeks for the wholesaler to get information from the retailer and vice versa. It takes the distributor two weeks to get information from the wholesaler and it takes two weeks for the wholesaler to get information from the distributor.It also takes two weeks for the factory to get information from the distributor and two weeks for the distributor to get supplies from the factory. It takes the brewery one week to get information from the factory and one week for the factory to get information from the brewery. So like it was experienced in the beer game,when all the supply chain operators are dried out, doing the math, it takes seven weeks for supplies to go from the brewery down to the consumer, and six weeks for information to go from the retailer to the factory. The longer the lead time, it creates negative impact on the firm as it reduces the customers responsiveness and reactions (Stock, J.R and Lambert, D.S, 2001).* Zero strategyThe zero strategy which is a rule for playing the game clearly states that we as the operators place zero orders uplink if demand is less than inventory. This went along way to cause a lot of delays in shipments because of long lead times. This is because when the inventory of the retailer as seen in figure 1 becomes less than demand, it took 5 weeks for the factory to have such an effect. This made the lead time even longer and caused the bullwhip effect as well as enormous back orders.* break orders to reduce inventoryDuring the course of the game, we had to neglect backorders in order to reduce inventory and bring through costs. This can be seen in figure 3 below where the retailer did not dramatically increase demand to meet back orders but did this on a gradual basis in order to reduce inventory and holding cost. However when the supplies finally came, the effects were middling as bad with inventory rates skyrocketing overnight. Figure 3 Inventory and Demand of retailer* Ways to improve the zero strategy* Improve communicationBy improving communication levels among the supply chain operators will help to solve the problem of assumptions, inappropriate decisions and reduce the bullwhip effect. In both actual supply chains and supply chain simulation, we can cut supply chain fluctuations by 80% by sore order-to-delivery time by half (Simchi et.al, 2003). Improvement in communication will help to improve the faculty of the dodging by eliminating assumptions and stimulating a synchronized supply chain which will help in getting all the partners to operate in a way that is mutually supportive, corporative and sheer(a) (Grard P. Cacho et al.)* Point of Sale (POS) brassPoint of Sale trunk is a means or can be referred to as a system which is meant to deal with the gross sales of goods. Point of sale system is software that workings with hardware in order to inspect and monitor sales in order to give accurate demand and sale s information (http//www.gofrugal.com/pos/ point-of-sale.html?gclid=CPyHobrW-q4CFQ8b6wodkDXwwg,2004). By implementing this system, the company can be able to get accurate demand which will help the company in eliminating sudden demand spikes like seen in the beer game. An example of a company which uses such a system is Wal-Mart and the system works well for the company helping to monitor all sales and demand, reduce the risk of inventory shrinkage, manage special demands, maintain control, improve efficiency and help the company make timely and accurate reports (http//www.carolinabarcode. com/run-my-store-a-36.html, 2012).* Just in time inventory systemJust in time (JIT) also known as just in time inventory system manages the inventory and lessens the costs of inventory control and the cost of maintaining the inventory of a business. This helps the company to reduce a substantial number of its inventories, reduce ordering and save warehousing costs (Bowersox, D.J, 2007). A real li fe example of a company using the Just in time inventory system is Dell computer corporation which uses the just in time system so that an order for a customized private computer that comes in over the internet at 9am can be delivered by truck to the customer by 9pm.This system allows dell to save costs and with this, the company under prices its products compared to its rivals by about 10% to 15% (McWilliams, 1997)(Source Gray McWilliams, Whirlwind on the web, Business Week, April 7, 1997.). This system would lead to more efficiency of the bear game eliminating backorders and charge just enough stock for the company to produce when needed. This strategy will by many supply chain operators such as the distributor and the wholesaler leaving just the factory and the retailer making products available alertly and almost eliminating the bullwhip effect.* Push and send BoundaryThe push line process is a forecast and exercise driven in anticipation for demand, while the lead proces s is demand driven and is initiated in response to real demand (Chopra and Meindl, 2001). The present trend around the world is a swing from a push system to a pull system this is because the pull system helps in trim down inventory levels. Push and pull boundary occurs when the demand intersects expectation of upcoming demand. Pull systems are based on real demands and production and manufacturing of goods through with(p) in relationship with the demands of the consumers (Bowersox, D.J, 2007).Figure 3 Push/pull boundary in Dells supply chainThe above diagram shows the push and pull boundary of Dells supply chain. The company combines both push and pulls boundary systems in running its operations. The company by-passes a lot of areas in the supply chain by manufacturing and selling nowadays to its customers. The process starts with consumer ordering and then the manufacturing cycle which are known as pull boundary systems.The inventory of the company will be stocked up followi ng the demand of customers in order for the product to be made. All the processes included in the procurement of a product is implemented by Dell and this is regarded as a push approach in general because it reacts to future demands effectively making products available in time and keeping low inventories. This system will be of great help to the beer game helping in making raw materials readily available for production and keeping inventories and costs low.* Eliminate swordplay in shortage situationsDuring the beer game, the gaming shortage situation was experienced when there was a shortage in raw materials and inventories for the manufacturing of these products. When shortages occur, instead of allocating products based on orders, it is allocated in a relation to past sales record. This will make customers have no need to exaggerate their demands because it will cause them negative results. General motors has used this method for a long time in the allocation of its supply. T his will help to make the beer game have more reliable demand data.* free burning system (fixed order-quantity)In the beer game, order time is the same which is once a week. This makes it easier for the retailers to make quick orders for products required. However, the quantity of the product differs and it would be easier if the demand rate was fixed with adjustments made to make the order rate cater for inventory, original stock and demand. This will go a long way in making things easier and decreasing the bullwhip effect which can be seen to be prevalent in the game.* Adopt the Vendor Managed Inventory StrategyThe vendor managed inventory strategy is a strategy which manages the quantity of goods produced by a manufacturing business allowing the manufacturer to decide the quantity to keep and how much to ship to the retailer. This is a strategic move for manufacturers in order for them to be able to increase profitability by eliminating stock while improving on sales and overa ll performance.* Avoid multiple demand forecast updatesAs can be noted in the beer game, the bullwhip effect causes the demand forecast to be multiplied as it goes uplink. Instead, making same orders from downstream been the retailer to the supplier to be the same will make things much easier eliminating high inventories and the bullwhip effect.* Reasons for Changes made to the Zero StrategyThe zero strategy is considered as a bad strategy due to its wearure during the simulation test. While we obeyed the zero rule of the zero strategy while playing the game, we noticed that the game started to fail with a dramatic fall in inventory rate, lack of original stock, increase in backorders and a rise in the total operations cost. This led to the total failure of the game because the zero strategy did not allow us to meet the needs of consumers because of too many uplinks in the supply chain and long lead time. The bullwhip effect also comprise a great disadvantage to the strategy bec ause it contributed greatly to the failure of the game. * force on the outcome of the game* Decrease in cost as a result of little inventories and no backorders.* Elimination of some supply chain operators which will reduce lead time and results in quick flow of information and supplies.* Decrease or eliminate the bullwhip effect.* Decrease lead times and make delivery quicker.* Have safety stock for big situations.* ConclusionHaving conducted the above analysis on the zero strategy, it is important that I stress that the bullwhip effect can take a high campana on a company with reference to the game. The game however was a tremendous failure with poor results which includes increase in backorder rates, lack of inventories, rise in cost and long lead time. These issues can however be overcome by using the POS system, just in time inventory system (JIT), improve communication among supply chain operators and the push and pull boundary system. With example of success from companies that have tried these systems and its success in the beer game, I think these changes will go a long way in making the beer game simulation a success.