Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan - 1 - Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali Industrial Engineering Department Yildiz Technical University Besiktas – Istanbul 34349 – Turkey Industrial Engineering Department Bogazici University Bebek – Istanbul 34342 – Turkey [email protected]Hakan Yasarcan Industrial Engineering Department Bogazici University Bebek – Istanbul 34342 – Turkey [email protected]Abstract A supply chain is a series of connected stock management structures. Therefore, the structure of a supply chain consists of many cascading inventory management problems. It is known that the optimal inventory control parameter values suggested by the literature are also valid for a supply chain. The motivation for this study is to investigate the effect of the literature suggested optimal values of the parameters of a dynamic decision making heuristic in the presence of semi-rationally managed supply chain echelons. The Beer Game is a well known board game widely used for educational and experimental purposes. We employ a soft coded one-to-one version of The Beer Game as an experimental platform to carry out the study. We use a much longer time horizon than the one used in the board version of The Beer Game to prevent a potential short-term horizon effect. The results of the simulation runs carried out in this study do not support the use of the well-established decision parameter values for the echelon of concern if the other echelons’ inventories are managed sub-optimally. Keywords: anchor-and-adjust heuristic; beer game; stock adjustment fraction; stock management; supply chain management; weight of supply line.
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Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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Results of a Beer Game Experiment: Should a Manager
Always Behave According to the Book?
Mert Edali Industrial Engineering Department
Yildiz Technical University Besiktas – Istanbul 34349 – Turkey
Industrial Engineering Department Bogazici University
The extreme costs reported in Table 1 are eliminated when the re-optimized
parameter values are used (Table 2). The reason behind the decrease in the costs values is
caused by the damping oscillations as it can be observed from figures 4, 5, and 6. Note that
we again present only the dynamics for the trial in which the wholesaler is the echelon of
concern because these dynamics are representative of the dynamics obtained in other trials.
Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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Fig. 4 The dynamics of the inventories when the wholesaler is using the re-optimized
parameter values
Fig. 5 The dynamics of the backlogs when the wholesaler is using the re-optimized
parameter values
Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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Fig. 6 The dynamics of the orders when the wholesaler is using the re-optimized
parameter values
6. Comparisons In this study, we carry out Beer Game experiments using a long-term horizon, 520
weeks. In the experiments, we assumed that all echelons are managed by semi-rational
decision makers (αs = 0.26 per week and wsl = 0.34) except for the echelon of concern. In
the first setting, the echelon of concern is managed by a rational decision maker (i.e., αs = 1
per week and wsl = 1) who behaves according to the book (i.e., the literature). However, in
the second setting, the decision maker managing the echelon of concern uses re-optimized
decision making parameter values. In all of the four trials under the second setting, where
either one of the retailer, wholesaler, distributor, or factory is selected as the echelon of
concern for each trial, the parameter values obtained for the echelon of concern depict a
semi-rational decision maker according to the literature (i.e., αs ≠ 1 per week and wsl ≠ 1).
Thus, a semi-rational decision maker obtains better results than a manager who behaves
according to the book in the presence of semi-rationally managed supply chain echelons.
If the echelon of concern is the retailer and if the decision maker uses the literature
suggested optimal parameter values in managing the inventory level of this position, the
total cost generated for the retailer at the end of the game would be $701 and the total team
Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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cost would be $4,715 (Table 1). If this decision maker uses the re-optimized parameter
values given in Table 2 (αs = 0.04 per week and wsl = 0.45), these cost values would be
$845 and $4,549, respectively. Therefore, if the retailer accepts a 20.54% increase in its
own costs and uses αs = 0.04 per week and wsl = 0.45 instead of αs = 1 per week and wsl =
1, a 3.52% decrease in the total cost can be obtained for the whole supply chain.
If the echelon of concern is the wholesaler and if the decision maker uses the
literature suggested optimal parameter values in managing the inventory level of this
position, the total cost generated for the wholesaler at the end of the game would be $9,611
and the total team cost would be $34,684.50 (Table 1). If this decision maker uses the re-
optimized parameter values given in Table 2 (αs = 0.09 per week and wsl = 0.07), these
cost values would be $2,222.50 and $7,320, respectively. Therefore, if the wholesaler uses
αs = 0.09 per week and wsl = 0.07 instead of αs = 1 per week and wsl = 1, a 76.88%
decrease in its own costs and a 78.90% decrease in the team total cost can be obtained.
If the echelon of concern is the distributor and if the decision maker uses the
literature suggested optimal parameter values in managing the inventory level of this
position, the total cost generated for the distributor at the end of the game would be
$10,192.50 and the total team cost would be $33,302 (Table 1). If this decision maker uses
the re-optimized parameter values given in Table 2 (αs = 0.52 per week and wsl = 0.95),
these cost values would be $2,212.50 and $7,535.50, respectively. Therefore, if the
distributor uses αs = 0.52 per week and wsl = 0.95 instead of αs = 1 per week and wsl = 1, a
78.29% decrease in its own costs and a 77.37% decrease in the team total cost can be
obtained.
If the echelon of concern is the factory and if the decision maker uses the literature
suggested optimal parameter values in managing the inventory level of this position, the
total cost generated for the factory at the end of the game would be $8,634 and the total
team cost would be $32,937.50 (Table 1). If this decision maker uses the re-optimized
parameter values given in Table 2 (αs = 0.95 per week and wsl = 0.78), these cost values
would be $2,055 and $7,605.50, respectively. Therefore, if the factory uses αs = 0.95 per
Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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week and wsl = 0.78 instead of αs = 1 per week and wsl = 1, a 78.29% decrease in is own
costs and a 77.37% decrease in the team total cost can be obtained.
7. Conclusions According to the literature, a “rational manager” must use “αs = 1 per week and
wsl = 1” in managing an inventory. Moreover, the sub-optimal decision making processes
(i.e., αs ≠ 1 per week and wsl ≠ 1) of human decision makers (i.e., semi-rational mangers)
is criticized. According to our results, it is possible for a “rational manager” to create
almost five times the costs obtained by a “semi-rational manager”. The surprising findings
of this study indicate that the criticisms in the literature are implicitly based on the
assumption that it is possible for all echelons to determine and agree on using the decision
making parameter values that are globally optimal. First of all, determining the globally
optimum parameter values in a real-life setting is not an easy task, perhaps impossible in
many cases. Secondly, in most cases, it will not be possible to make all supply chain
members to reach to a perfect agreement on using the globally optimum parameter values.
Therefore, in a real life situation, a manager must not blindly behave according to the book
(i.e., must not imprudently use the literature suggest decision making parameter values).
We suggest that a manager must be aware of the literature, but must not give up his own
judgment and must not blindly follow it. On the contrary, he will most probably achieve
good results if he combines the information reported in the literature with his own
experience and instincts. We hope that our study will trigger further studies in analyzing
the effects of the literature suggested optimum behaviors under imperfect realistic settings.
Acknowledgements This research is supported by a Marie Curie International Reintegration Grant
within the 7th European Community Framework Programme (grant agreement number:
PIRG07-GA-2010-268272) and also by Bogazici University Research Fund (grant no:
6924-13A03P1).
This paper was also published by Bogazici University (Edali and Yasarcan, 2015).
Results of a Beer Game Experiment: Should a Manager Always Behave According to the Book? Mert Edali and Hakan Yasarcan
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