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Q.6 Explain Jurans Quality Trilogy and Crosbys absolutes of

quality. List out the pillars of total productive maintenance.

Ans.JURANS QUALITY TRIOLOGY

Juran uses his famous universal Breakthrough Sequence to implement

quality programmes. The universal break through sequences are ;

7 Proof of need: there should be a compelling need to make

changes.

8 Project identification: here what is to be changed is identified.

Specific projects with time frames and the resource allocation are

decided.

9 Top management commitment: Commitment of the top

management is to assign people and fix responsibilities to

complete the project.

10 Diagnostic journey: Each team will determine whether the

problems result from systemic causes or are random or are

deliberately caused. Root causes are ascertained with utmostcertainty.

11 Remedial Action: This is the stage when changes are

introduced. Inspection, testing, and validation are also included at

this point.

12 Holding on to the gains: the above steps results in beneficiary

results. Having records or all actions and consequences will help

in further improvements. The actions that results in the benefits

derived should be the norm for establishing standards.

JURAN HAS CATEGORISED COST OF QUALITY IN TO FOUR

CATEGORIES:

13 Failure costs internal: These are cost of rejections, repairs in

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terms of materials, labour, machine time and loss of morale.

14 Failure costs-External: These are cost of replacement, on-site

rework including spare parts and expenses of the personnel,

warranty costs and loss of goodwill.

15 Appraisal costs: These are cost inspection, including

maintenance of records, certification, segregation costs, and

others.

16 Prevention costs: Prevention cost is the sequence of three sets

of activities, Quality planning, Quality control, and Quality

improvement, forming the triology to achieve TOTAL QUALITY

MANAGEMENT.

JURANS ARGUMENT SAYS THAT;

17 Quality is the result of good planning consideration the needs of

both internal and external customers and develops processes to

meet them. The processes are also planned to meet them.

18 Quality is built into the system of manufacture, inputs and

processes that are on stream like raw material, spare parts,

labour, machine maintenance, training, warehousing, inspection

procedures, packaging, and other. All these have to follow

standards and control exercises to make sure that mistake do not

occur often and that if mistakes do occur then they are correctedat the source.

19 Quality improvement measures are essential to keep the quality

culture alive. Newer methods will be found, some operations can

be eliminated, improved technology available. In short, as

experience is gained things can always be done better. IT is for

the management to take the initiative an encourage the

employees to be on lookout for opportunities for improvement.

CROSBYS ABSOLUTES OF QUALITY

Like Deming, Crosby also lays emphasis on top management

commitment and responsibility for designing the system so that defects

are not inevitable. He urged that there be no restriction on spending for

achieving quality. In the long run, maintaining quality is more

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economical than compromising on its achievement. His absolutes can be

listed as under:

20 Quality is conformance to requirements, not goodness

21 Prevention, not appraisal, is the path to quality.

22 Quality is measured as the price Paid for non-conformance and as

indices

23 Quality originates in all factors. There are no quality problems. It is

the people designs and processes that create problems.

Crosby also has given 14 points similar to those of Deming. His

approach emphasizes on measurement of quality, increasing awareness,

corrective action, error cause removal and continuously reinforcing the

system, so that advantages derived are not lost over time. He opinedthat the quality management regimen should improve that overall

health of the organization and prescribed a vaccine. The ingredients are.

24 Integrity: Honesty and commitment help in producing everything

right first time, every time.

25 Communication: Flow of information between departments,

suppliers, customers helps in indentifying opportunities.

26 Systems and operations: These should bring in a quality

environment so that nobody is comfortable with anything less

than the best.

TOTAL PRODUCTION MAINTENANCE(TPM)

Maintenance is a function in any operations system. Maintenance keeps the

equipments in good condition. Generally equipments deteriorate becauseusage wear to the parts introducing inaccuracies on the products made on

them. When the deterioration produces components which exceeds the

permitted deviations rendering them unacceptable, maintenance is undertaken

to bring back the machine to produce acceptable components. Sometimes the

failure is sudden and serious and the equipment stops working. Disruption of

production and emergency repairs works are costly and schedules are missed

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causing delays in supplies and consequent losses. These breakdowns occur

because the equipment was carrying hidden defects which were not apparent.

All theses are attended to by the maintenances department. Historical records

indicate the probability of failures over different periods thus enabling us to

plan to attend to them. With progress in automation, we have costly

equipments. We have flow lines and any one machine breaking down causes aseries of machine to be idle. So, we have to move towards zero breakdowns

like we want to move towards zero defects by implementing TQM Tools.

TPM puts the responsibility of maintenance where it belongs to and the

operator who uses the equipment. It is a companywide activity which involves

all the people. The main thrust is eliminating all break downs. The focus is on

the operating personnel because they would know about malfunctioning earlier

and more than anybody else. They work on the machine and are aware of the

slightest variations that occur and thus should be able to plan to remove the

cause before it becomes serious. So every planned maintenance activity

reduces the probability of a breakdown, Ownership of the operation andmachine increases the commitment of the workmen. Autonomy is the starting

point for learning and excellence. The worker can suggest better ways of

improving quality, productivity, and design. This help in continuous

improvement, Team work and participation improves the quality culture. The

principles of 5S- the housekeeping activities which improve efficiency at

workplace is considered a measurable standard to aid the implementation at

TPM even in the office rooms.

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(Book ID: B1133)

Set- 2 (60 Marks)

Q1. EXPLAIN LOGICAL PROCESS MODELLING AND

PHYSICAL PROCESS MODELLING. WHAT ARE THE

INGREDIENTS OF BUSINESS PROCESS?

ANS.LOGICAL PROCESS MODELLING

Logical process modeling is the representation of putting

together all the activities of business process in details and

making a representation of them.

The initial data collected need to be arrange in a logical

manner so that, links are made between nodes for making

for the workflow smooth. The steps to be followed to make

the work smoother are given below:

27Capture relevant data in detail to be acted upon.

28Establish controls and limit access to the data during

processes execution

29Determine which task in the process is to be done and

also the subsequent task in that process.

30Make sure that all the relevant data is available for all

the tasks.

31Make the relevant and appropriate data available for

that task.32Establish a mechanism to indicate acceptance of the

results after every task or process. This is to have an

assurance that flow is going ahead with

accomplishments in the desired path.

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Some of these activities may occur in a sequential order

whereas, some of them run parallel. There may even be

circular paths, like re-work loops. Complexities arise when

the processes activities are not connected together.

Logical processes model consists of only the business

activities and shows the connectivity among them. The

process model is a representation of the business activities

different from the technology dependent ones. Thus, we

have a model that is singularly structured only for business

activities. Computer programmes are also present in the

total system. This allows the business oriented executives to

be in control of the inputs, processes and outputs. The

logical process model improves, control on the access to

data. It also indentifies, who is in possession of data at

different nodes in the dataflow network that has been

structured.

A few of the logical modeling formats are given below.

33Process Descriptions with task sequences and data

addresses.

34Flow chart with various activities and relationships

35Flow diagrams

36Function hierarchies

37Function dependency diagram

Every business activity, when considered as a logical process

model, can be represented by a diagram, it can bedecomposed and meaningful names can be given to the

details. Verb and noun form combinations can be used to

describe at each level. Nouns give the name of the activity

uniquely and are used for the entire model meaning the

same activity.

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PHYSICAL PROCESS MODELLING

Physical process modeling is concerned with the actual

design of data base meeting the requirement of the

business.

Physical modeling deals with the conversion of the logical

model into a relation model. Object gets defined at the

schema level. The objects here are tables created on the

basis of entities and attributes. A database is defined for the

business. All the information is put together to make thedatabase software specific. This means that the objects

during physical modeling vary on the database software

being used. The outcomes are server model diagrams

showing tables and relationships with a database.

BELOW ARE THE INGREDIENTS OF BUSINESS PROCESS.

The ingredients that might be used in a business process can

be briefly outlined as shown below.

38The data which accomplishes the desired business

objective.

39Acquisition, storage, distribution, and control of data

which undertakes the process across tasks.

40Persons, teams, and organizational units which helps to

perform and achieve the tasks.

41Decision which enhances the value of data during the

process.

Q.2 EXPLAIN PROJECT MANAGEMENT KNOWLEDGE

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AREAS.WITH AN EXAMPLE EXPLAIN WORK

BREAKDOWN STRUCTURE.

Ans. The knowledge areas of project management are thefollowing:

42Project integration management, cost management,

communications management.

43Project scope management, quality management, risk

management.44Project time management, human management,

procurement management.

45For a project to be successful, it is necessary to

understand its relationship with other management

disciplines. Other management supporting disciplines

are business legal issues, strategic planning, logistics,

human resource management, and domain knowledge.

WORK BREAK DOWN STRUCTURE.

The entire process of a project may be considered to be made up on

number of sub process placed in different stage called the work

breakdown structure (WBS).

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WBS is the technique to analysis the content of work and cost by

breaking it down into its component parts. Projects key stages from the

highest level of the WBS, which is then used to show the details at the

lower levels of the project. Each key stage comprises many task

identified at the start of planning and later this list will have to be

validated.

WBS is produced by indentifying the key elements, breaking each

elements down into component parts and continuing to breakdown until

manageable work packages have indentified. These can then be

allocated to the appropriate person. The WBS does not shown

dependencies other than a grouping under the key stages. It is not time

based- there is no timescale on the drawing.

Chart showing the example of work break down structure.

A Work Breakdown Structure is a results-oriented family tree that captures all the work of

a project in an organized way. It is often portrayed graphically as a hierarchical tree,

however, it can also be a tabular list of "element" categories and tasks or the indented task

list that appears in your Gantt chart schedule. As a very simple example, Figure 1 shows a

WBS for a hypothetical banquet.

EXAMPLE 1.

EXAMPLE -2

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Q.3 TAKE AND EXAMPLE OF ANY PRODUCT OR PROJECT AND

EXPLAIN PROJECT MANAGEMENT LIFE CYCLE.

ANS. A life cycle of a project consists of the following steps.

46 Understanding the scope of the project.

47 Establishing objectives of the projects

48 Formulating and planning various activities.

49 Executing the project

50 Monitoring and controlling the project resources.

51 Closing and post completion analysis

PHASES OF PROJECT MANAGEMENT LIFE CYLCE.

Project management life cycle has six phases:

52 Analysis and evaluation phase.

53 Marketing phase

54 Design phase

55 Execution phase

56 Control-inspecting, testing, and delivery phase

57 Closure and post completion analysis phase.

58 ANALYSIS AND EVALUATION PHASE: Analysis and evaluation

phase is the initial phase of any project. In this phase, informationis collected from the customer pertaining to the project. From the

collected information, the requirements of the project are

analyzed. According to the customer requirement, the entire

project is planned in a strategic manner. The project manager

conducts the analysis of the problem and submits a detailed

report to the top management.

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59 MARKETING PHASE: A project proposal is prepared by a group

of people including the project manager. This proposal has to

contain the strategic adopted to market the product to the

customer.

60 DESIGN PHASE: Design phase involves the study of inputs andoutputs of the various project stages.

a. Inputs received consist of project feasibility study,

preliminary project evaluation details, project proposal, and

customer interviews.

b. Outputs produced consist of system design specifications,

functional specifications of the project, design specifications

of the project and project plan.

61 EXECUTION PHASE In execution phase, the project manager and

the term members work on the project objectives as per the plan.

At every stage during the execution, reports are prepared.

62 Control- inspecting testing and delivery phase: During this

phase, the project teams works under the guidance of the project

manager. The project manager has to ensure that the team

working under him is implementing the project designs accurately.

The project has to be tracked or monitored through its cost,

manpower, and schedule. The project manager has to ensure

ways of managing the customer and marketing the future work, as

well as ways to perform quality control work

63 Closure and post completion analysis phase: Upon

satisfactory completion and delivery of the intended product or

service the staff performance has to be evaluated. The project

manager has to document the lessons from the project. Reports

on project feedback are to be prepared and analyzed. A project

execution report is to be prepared.

Let us have a quick recap of what is involved in the above

phases

c. Analysis and evaluation phase: The preparation stage

involves the preparation and approval of project outline,

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project plan, and project budget.

d. Assigning task to the team members: The next stage

involves selecting and briefing the project team about the

proposals, followed by discussions on the roles and

responsibilities of the project member and the organization.

e. Feasibility study: The feasibility or research stage

establishes whether the project is feasible or not and

establishes the risk factors likely to be faced during the

course of the project execution and the related key factors

to overcome the problem

f. Execution phase: A detailed definition and plan for the

project and its execution is prepared by the team and

coordinated by the project manager.

g. Implementation stage: The implementation stage

involves the execution of the project as per the plan, this

also involves careful monitoring of the project progress and

managing the changes, if any, within the scope of the

project framework.

64 Closure and post completion analysis phase:The final stage

involves satisfactory delivery of the product/service to the

customers. Upon completion, a project review is to be conducted

by the project manager along with team member, sponsors, and

customer. A project review process involves discussions about the

progress, performance, hurdles that were overcome and problems

faced , so that, such instances could be avoided in future projects.

Example No.1

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Example No.2

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Example No.3

Q.4 EXPLAIN PMIS. WHAT IS DIFFERENCE BETWEEN KEY

SUCCESS FACTOR (KSF) AND KNOWLEDGE (K) FACTOR ?

EXPLAIN WITH EXAMPLES.

ANS. PMIS (PROJECT MANAGEMENT INFORMATION SYSTEM)

An information system is mainly aimed at providing the

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management at different levels with information related to the system

of the organization. It helps in maintaining discipline in the system.

An information system dealing with project management tasks is the

project management information system. It helps in decision making in

arriving at optimum allocation of resources. The information system isbased on a database of the organization. A project management

information system also hold schedule, scope changes, risk assessment

and actual results.

The information is communicated to managers at different levels of the

organization depending upon the need. Let us find how a project

management information system is used by different stakeholders.

WHO NEEDS INFORMATION AND WHY?

Upper managers To know information on all project regarding

progress, problem, resource usage, costs and

project goals. This information helps them take

decisions on the projects. They should review the

projects at each milestone and arrive at appropr

decision.

Project manager and

department managers

To see each project schedule, priority and use of

resources to determine the most efficient use

across the organization.

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Project team members To see schedule, task lists and specification so th

they know what needs to be done next.

The fours majors aspects of a PMIS are:

65 Providing information to the major stakeholder.

66 Assisting the team members, stakeholders, managers with

necessary information and summary of the information shared to

the higher level managers.

67 Assisting the manager in doing what if analysis about project

staffing, proposed staffing changes and total allocation ofresources.

68 Helping organizational learning by helping the members of the

organizations lean about project management.

Usually, the team members, and not the systems administrators of the

company, develop a good PMIS. Organisations tend to allocate such

responsibility by rotation among members with a well designed and

structured data entry and analytical format.

DIFFERENT BETWEEN KEY SUCCESS FACTORS (KSF) AND

KNOWLEDGE (K) FACTOR

Key success factors (KSF) Knowledge (k) factor

The KSF should be evolved based on a

basic consensus document (BCD)

Knowledge is the most powerful move

the wheels of progress

KSF will also provide an input to

effective exit strategy (EES)

Knowledge (k) factor is an index of

extent to which one can manager to

with yesterdays knowledge content

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also the extent to which tod

knowledge will be used tomorrow.

Broad level of KSF should be available

at the conceptual stage and should be

firmed up and detailed out during theplanning stage. The easiest way would

be for the team to evaluate each step

for chances of success on a scale of

ten.

K factor would render the developm

process more productive. The k facto

course, undergoes correction throobsolescence, since changes are

phenomenal.

KSF should be available to the

management, duly approved by the

project manager before execution and

control stages.

Leaders should recognize the knowle

potential of the younger manag

Seniority is no more an automate s

for knowledge. It is equally importan

younger member not suppress tknowledge potential from its applicatio

KSF rides normal consideration of time

and cost- at the levels encompassing

client expectation and management

perception-time and cost come into

play as subservient to these major

goal.

Here time and cost does not ma

knowledge is to be updated time to

to get better results.

In order to provide complete stability

to fulfillment of goals, a project

manager needs to constantly evaluate

the key success factor from time to

time.

As age and experience advance wis

gains, but knowledge should always

updated and utilized. It is the tas

every team members to maximize t

factor in all directions.

Example of Key success factor

According to TeachMeFinance.com, a turnkey project is "a project in which a

builder/developer contracts to construct a completed facility that includes all itemsnecessary for use and occupancy." Unfortunately, many turnkey businesses never

capture the interest of the buyers. Whether you're building in brick and mortar or

building in computercode, there are several factors critical to the success of your

turnkey project.

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Know the Business

Several businesses can be set up as turnkey businesses, from food service to copy

management to telemarketing and sales. Whichever you decide, it is important to

have an intimate knowledge of the business you are building. One key factor in a

successful turnkey business is being able to anticipate the needs and desires of the

potential owners before they are brought on board. A salesman, for example, looking

to purchase a turnkey sales business will need an office as a base of operations; but

since so much of the sales process is done through phones, computers and other

electronic devices, the turnkey developer may want to include additional power

outlets in the construction of the building, or desks with onboard power strips and

surge protectors. These small additions can make a turnkey project a success.

Know the Area

Internet businesses often have nationwide access to clientele, but brick-and-mortar

turnkey operations sometimes run into trouble in areas poorly suited to the service

they offer. For example, an outdoor food service stand opening in Wilkes-Barre,

Pennsylvania, will not do as much business (at least during the winter months) as

one opening in an Orlando, Florida, theme park. Knowing the area where you are

constructing your turnkey business includes knowing the weather conditions, the

dominant demographic, the current popularity and number of businesses like the one

you are creating and the average income of the public. Planning a turnkey business

that uses these factors to its advantage will make the business more readily sellable.

Make Connections

Turnkey businesses are designed to be ready to operate as soon as the buyer takes

ownership. Still, once they are sold, many businesses of this type run into problems

when it comes to resupplying, logistics and advertising. Because of this, many

buyers are wary of turnkey operations. One way to quell any "down the road" fears is

to have this part of the infrastructure accounted for. Make contact with businesses

which help advertise businesses, ship products, supply copy paper and any other

stock the owner might require. Obtain discounts from as many as possible

Example of Knowledge (k) factor

ABSTRACT

Most organisations are aware that in todays highly competitive environment managing

effectively their knowledge is the only way to achieve a sustainable competitive advantage.

One of the primary areas to which knowledge management can be applied is the field of

project management. An increasing number of business sectors are adopting a project

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approach to carry out a range of essential activities where valuable knowledge is gained.

Knowledge from projects is an important resource for further projects, because projects

solve innovative and interdisciplinary tasks. However, the majority of organisations do notmanage the information gained through past projects. Failure to transfer knowledge from

past to future projects leads to wasted activity and unnecessary expenses by reinventing

the wheel. Therefore, knowledge management is a critical success factor for manyprojects.

The purpose of this Management Report is to approach knowledge management from the perspective of project management. The main objective is to define how knowledge

management can be enhanced within a project by analysing suitable tools and relevant

theories. The research is based on the high-speed train project XY of the company XXX.

This project is an important milestone for XXX to improve its market position in Spain.The knowledge gained through the XY project will be the key factor for the success of the

further high-speed train projects.

The main finding of the case study highlights that there is a lack of formal knowledge

management activities at the project. The project team focuses mainly on personalinteraction for transferring knowledge and information technology is not used to its full potential. A hybrid approach to knowledge management for project environments is

suggested, taking into account technical as well as human-specific aspects. The main

recommendation is to determine a knowledge management strategy, which preferablyfocuses on transferring tacit knowledge and gives information technology a support

function. Other areas of improvement are creating an open and constructive project culture,

including knowledge initiatives in reward systems and fostering documented project review

sessions. Finally, general conclusions are provided to answer the main research question ofthis management report.

Q.5 EXPLAIN THE SEVEN PRINCIPAL OF SUPPLY CHAIN

MANAGEMENT.TAKE AND EXAMPLE OF ANY PRODUCT IN THE

MARKET AND EXPAIN THE SECENRIO OF BULLEHIP EFFECT.

Ans: Seven principles of SCM are:

69 Group customer by needs: Effective SCM groups customers by

distinct service needs, regardless of industry and then tailors

services to those particular segments.

70 Customize the logistics networks: In designing their logistic

network, companies need to focus on the service requirement andprofit potential of the customer segments identified.

71 Listen to signals of market demand and plan accordingly:

sales and operations planners must monitor the entire supply

chain to detect early warning signals of changing customers

demand and needs. This demand driven approach leads to more

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consistent forecast and optimal resource allocation.

72 Differentiate the product closer to the customer: companies

today no longer can afford to stockpile inventory to compensate

for possible forecasting errors. Instead, they need to postpone

product differentiation in the manufacturing process closer toactual consumer demand. This strategy allows the supply chain to

respond quickly and cost effectively to changes in customer

needs.

73 Strategically manage the sources of supply: By working

closely with their key suppliers to reduce the overall costs of

owning materials and services, SCM maximizes profit margins

both for themselves and their suppliers.

74 Develop a supply chain wide technology strategy: As one ofthe cornerstones of successful SCM, information technology must

be able to support multiple levels of decisions making. It also

should afford a clear view and ability to measure the flow of

products, services and information.

75 Adopt channel spanning performance measures: Excellent

supply chain performance measurement systems do more than

just monitor internal functions. They apply performance criteria to

every link in the supply chain-criteria that both service and

financial metrics.

BULLWHIP EFFECT IN SCM

An organization will always have up and downs. It is necessary that

the managers of the organization keep track of the market conditions

and analyze the changes. They must take decisions on the resources

and make necessary changes within the organization to meet the

market demands. Failing to do so may results in wild swings in the

orders. This may adversely affect the functioning of the organization

resulting in lack of coordination and trust among supply chain

members. The changes may affect the information and may led to

demand amplification in the supply chain. The Bullwhip effect is the

uncertainty caused from distorted information flowing up and down

the supply chain. This has its affect on almost all the industries,

poses a risk to firms that experience large variations in demand, and

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also those firm which are dependent on suppliers, distributors and

retailers. A bullwhip effect may arise because of:

76 Increase in the lead time of the project due to increase in

variability of demand

77 Increase in the stocks to accommodate the increase demand

arising out of complicated demand models and forecasting

techniques.

78 Reduced service levels in the organization.

79 Inefficient allocation of resources.

80 Increased transportation cost.

How to prevent it ?

Bullwhip effect may be avoided by one or more of the following

measures:

81 Avoid multiple demand forecasting.

82 Breaking the single order into number of batches of orders.

83 Stabilize the prices, avoid the risk involved in overstocking by

maintaining a proper stock

84 Reduce the variability and uncertainty in point of sale (POS) and

sharing information

85 Reduce the lead time in the stages of the project

86 Always keep analyzing the past figures and track current and

future levels of requirement.

87 Enhance the operational efficiency and outsourcing logistics to a

capable and efficient agency

Example of one product the effect Bullwhip theory.

The Beer GameThe beer game was developed at MIT by the Systems Dynamic Group in

the 1960s. The game

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involves a simple production/distribution system for a single brand of

beer. There are three

players in the game including a retailer, a wholesaler, and a marketing

director at the brewery.

Each player's goal is to maximize profit.

A truck driver delivers beer once each week to the retailer. Then the

retailer places an order with

the trucker who returns the order to the wholesaler. There's a four week

lag between ordering and

receiving the beer.

The retailer and wholesaler do not communicate directly. The retailersells hundreds of products

and the wholesaler distributes many products to a large number of

customers.

The following represents the results of a typical beer game:-

3.1 The Retailer

Week 1: Lover's Beer is not very popular but the retailer sells four cases

per week on average.

Because the lead time is four weeks, the retailer attempts to keep

twelve cases in the store by

ordering four cases each Monday when the trucker makes a delivery.

Week 2: The retailer's sales of Lover's beer doubles to eight cases, so on

Monday, he orders 8

cases.

Week 3: The retailer sells 8 cases. The trucker delivers four cases. To be

safe, the retailer decides

to order 12 cases of Lover's beer.

Week 4: The retailer learns from some of his younger customers that a

music video appearing on

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TV shows a group singing "I'll take on last sip of Lover's beer and run

into the sun." The retailer

assumes that this explains the increased demand for the product. The

trucker delivers 5 cases.

The retailer is nearly sold out, so he orders 16 cases.

Week 5: The retailer sells the last case, but receives 7 cases. All 7 cases

are sold by the end of

the week. So again on Monday the retailer orders 16 cases.

Week 6: Customers are looking for Lover's beer. Some put their names

on a list to be called

when the beer comes in. The trucker delivers only 6 cases and all aresold by the weekend. The

retailer orders another 16 cases.

Week 7: The trucker delivers 7 cases. The retailer is frustrated, but

orders another 16 cases.

Week 8: The trucker delivers 5 cases and tells the retailer the beer is

backlogged. The retailer is

really getting irritated with the wholesaler, but orders 24 cases.

3.2 The Wholesaler

The wholesaler distributes many brands of beer to a large number of

retailers, but he is the only

distributor of Lover's beer. The wholesaler orders 4 truckloads from the

brewery truck driver

each week and receives the beer after a 4 week lag. The wholesaler's

policy is to keep 12

truckloads in inventory on a continuous basis.

Week 6: By week 6 the wholesaler is out of Lover's beer and responds

by ordering 30 truckloads

from the brewery.

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Week 8: By the 8th week most stores are ordering 3 or 4 times more

Lovers' beer than their

regular amounts.

______________________________________________________________________________

_________________________________________________________________________

_______

Week 9: The wholesaler orders more Lover's beer, but gets only 6

truckloads.

Week 10: Only 8 truckloads are delivered, so the wholesaler orders 40.

Week 11: Only 12 truckloads are received, and there are 77 truckloadsin backlog, so the

wholesaler orders 40 more truckloads.

Week 12: The wholesaler orders 60 more truckloads of Lover's beer. It

appears that the beer is

becoming more popular from week to week.

Week 13: There is still a huge backlog.

Weeks 14-15: The wholesaler receives larger shipments from the

brewery, but orders from

retailers begin to drop off.

Week 16: The trucker delivers 55 truckloads from the brewery, but the

wholesaler gets zero

orders from retailers. So he stops ordering from the brewery.

Week 17: The wholesaler receives another 60 truckloads. Retailers order

zero. The wholesaler

orders zero.

The brewery keeps sending beer.

3.3 The Brewery

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The brewery is small but has a reputation for producing high quality

beer. Lover's beer is only

one of several products produced at the brewery.

Week 6: New orders come in for 40 gross. It takes two weeks to brewthe beer.

Week 14: Orders continue to come in and the brewery has not been able

to catch up on the

backlogged orders. The marketing manager begins to wonder how much

bonus he will get for

increasing sales so dramatically.

Week 16: The brewery catches up on the backlog, but orders begin todrop off.

Week 18: By week 18 there are no new orders for Lover's beer.

Week 19: The brewery has 100 gross of Lover's beer in stock, but no

orders. So the brewery

stops producing Lover's beer.

Weeks 20-23. No orders.

At this point all the players blame each other for the excess inventory.

Conversations with

wholesale and retailer reveal an inventory of 93 cases at the retailer and

220 truckloads at the

wholesaler. The marketing manager figures it will take the wholesaler a

year to sell the Lover's

beer he has in stock. The retailers must be the problem. The retailer

explains that demand

increased from 4 cases per week to 8 cases. The wholesaler and

marketing manager think

demand mushroomed after that, and then fell off, but the retailer

explains that didn't happen.

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Demand stayed at 8 cases per week. Since he didn't get the beer he

ordered, he kept ordering

more in an attempt to keep up with the demand. The marketing

manager plans his resignation.

3.4 Lessons from the Beer Game

1. The structure of a system influences behavior. Systems cause their

own problems, not external

forces or individual errors.

2. Human systems include the way in which people make decisions.

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3. People tend to focus on their own decisions and ignore how these

decisions affect others.

3.5 Lessons Related to the Learning Disabilities

1. People do not understand how their actions affect others.

2. So they tend to blame each other for problems.

3. Becoming proactive causes more problems.

4. The problems build gradually, so people don't realize there is a

problem until its too late.

5. People don't learn from their experience because the effects of their

actions occur somewhere

else in the system.

Stock variability amplification in a supply chain due to Bullwhip Effect

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JOB = D E C A B