The Beer Distribution Game 2 - · PDF fileThe Beer Distribution Game 2.0 Advanced And Engineered By Students Of Friedrich-Alexander-University Erlangen-Nürnberg 2013 Authors: Jacques

The Beer Distribution Game 2.0

Advanced And Engineered By Students

Of

Friedrich-Alexander-University Erlangen-Nürnberg

2013

Authors:

Jacques Ammon, Jan-Patrick Mainka, Christian Popp

In Collaboration With Dr. Walter Demmelhuber

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Table Of Contents

I. History 3

II. Game Components

a. Token & Cards 3

b. The Board 4

III. Object of the Game 4

IV. Setup

a. Overview Cards 4

b. Scorecard 5

c. Board 6

V. Playing the Game

a. Step 1: Incoming Goods 6

b. Step 2: Incoming Orders 7

c. Step 3: Outgoing Goods 7

d. Step 4: Stock Calculation 9

e. Step 5: Mail Out 10

VI. Instruction For The Game Master 10

VII. End Of The Game 10

VIII. Extension - Action Cards 11

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I. History

Former Professors of MIT Sloan School of Management invented the “Beer Distribution Game” to elucidate the

key principles of supply chain management in early 1960s. The game is a simulation of a simple supply chain

that trades cases of beer.

Core lesson of the Beer Distribution Game is to understand the distribution side dynamics. A multi-echelon

supply chain with prohibited communication among the players and with only one person who knows the exact

customer demand will lead to an effect so called bullwhip effect.

The bullwhip effect often occurs in forecast-based distribution channels where customer orders may create

heavy fluctuations within the supply chain of a distribution channel. The classic version of the Beer Distribution

Game was designed to translate this effect into a simple simulation with at least four players.

However, this Beer Distribution Game is more complex and offers various scenarios to play. The supply chain is

a complete integrated value-added chain that begins with a factory and continues with a regional warehouse, a

retail house and finishes with a wholesale house. The cost structure is more complex and due to classic supply

chain management problems it illustrates value-added chain position problems as well.

II. Game Components

Token: One token is a case of beer

Scorecard: Your scorecard helps you to manage your financial liquidity and your orders

Overview Card 4 different Overview Cards describe each player’s business and its cost structure

Additional Game Components

- Envelopes - Demand Cards - 9-sided Dice - Action Cards

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- The Board:

The board is the place of action and your inventory where you find your warehouse and the distribution channels

III. Object Of The Game

The Game finishes when one of the four players is bankrupt or 52 turns have passed successfully by all

four players.

IV. Setup:

a. Overview Cards

The Overview Cards show the individual values to calculate the weekly income.

Furthermore, it explains the five basic steps the player has to do every week.

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b. Scorecard

The Scorecard has to be filled in simultaneously by the players every round.

The Scorecard provides a better overview of the player’s goods and costs.

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c. Board

Place 3 tokens in each field Outgoing Goods, Incoming Goods and Factory Step 1/2. That means

that each player will receive his next order with a 3 week delivery delay. Also place 6 tokens in each individual Stock.

The golden circles in the graphic below symbolize the tokens.

In the first round the player has zero Open Orders and the goods demand is 3.

V. Beer Game – Playing The Game

Step 1: Incoming Goods

1a) Goods Flow The player has to put the tokens from the field Incoming Goods (alt. Factory Step2) in his own Warehouse. He has to note this amount of tokens on his Scorecard in the column Incoming Goods. 1b) Cash Flow Now the player has to pay for his Incoming Goods. Therefore he has to multiply the number of the incoming tokens with his personal purchase value. The personal purchase value can be found on the overview cards. The player has to write this result in the space right under the gap where he wrote the number of Incoming Goods. Example: 3 tokens lay on the green field ahead of player 2 (Regional Warehouse) at the beginning of round 2. First he puts the 3 token in his own Warehouse and notes that on his Scorecard (1). Next he enters the cash flow, by multiplying 3 (incoming tokens) with -4 (personal purchase value) (2).

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Step 2: Incoming Orders

Each player opens the envelope on the field Incoming Orders and takes the order slip. The player has to write this value in the field Incoming Orders. Example: It is the third round and the number 6 is noted on the order slip. So the player has to write the value 6 in the gap Incoming Orders on his Scorecard.

Step 3: Outgoing Goods

3a) Goods flow Two game situations are possible:

I) The player has at least as many tokens in his own Warehouse as the value of the Incoming Orders plus the Open Orders.

The player has to sum up the values of the Incoming Orders and the Open Orders. Afterwards he puts this amount of token into the box on the field Outgoing Goods. In addition the player notes this value on his Scorecard in the column Outgoing Goods. Example: The Incoming Orders are 6 and the player has 9 (7+2) tokens left in his own Warehouse. The player puts 6 tokens in the box on the field Outgoing Goods (1) and keeps 3 tokens in his Warehouse. He notes the value 6 in the column Outgoing Goods (2).

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II) The player has less tokens in his own warehouse compared with the value of the Incoming Orders plus the Open Orders.

The player has to put all his tokens in the box on the field Outgoing Goods. In addition he notes this value on his Scorecard in the column Outgoing Goods. Now Open Orders arrive because the player cannot satisfy the whole demand. The Open Orders result from the difference of the Incoming Orders minus the Outgoing Goods plus the Old Open Orders (New Open Orders = Old Open Orders + Incoming Orders – Outgoing Goods). The player notes this calculated value in the field New Open Orders on his Scorecard. Example: The Incoming Orders are 8 and the Old Open Orders 1. The player has only 6 (0+6) tokens in his Warehouse. He has to put all 6 tokens into the box from the field Outgoing Goods (1). Now he notes the value 6 under Outgoing Goods on his Scorecard (2). After this step the player calculates the amount of the New Open Orders (1+8-6=3) (3). So he writes the value 3 in the field New Open Orders on his Scorecard.

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3b) Cash flow The player receives money for Outgoing Goods. This results from the number of Outgoing Goods multiplied with the personal sales value (you find it on the Overview Cards). The player notes this value directly below the field, in which he already wrote the Outgoing Goods” in this round. In addition costs for the open orders accrue. The player has to multiply the number of New Open Orders with the price for Open Orders (2 units per Open Order) to calculate them. He has to write this value directly below the field, in which he already noted the New Open Orders in this round. Example: Player 2 (Regional Warehouse) has 6 Outgoing Goods in this round. The total sales value is 6*7=42 (1). Furthermore he has 3 New Open Order this round. So his total costs for Open Orders are 3*-2=-6 (2).

Step 4: Stock Calculation

4a) Goods Afterwards the player has to determine the New Stock. The New Stock level results from the Old Stock at the beginning of the round plus the Incoming Goods minus the Outgoing Goods. He has to write down this value in the field New Stock on his Scorecard. To proof his result he can count the tokens in his own Warehouse. Both values have to match throughout the game. 4b) Money The stock level causes stockholding costs. To calculate the stockholding costs every player has to multiply the amount of goods in his inventory with the stockholding costs per good (1.5 units per good). Example: Player 2 (Regional Warehouse) has 6 goods at the beginning of the second round in his stock. He gets 3 goods and sells 2. His New Stock at the end of round two counts: 6 + 3 – 2 = 7 (1). So his stockholding costs in round 3 are: 7 * -1.5 = -10.5 (2).

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Step 5: Mail Out Last step of each round consists of place new orders. Each player has to write his order on the order bill and puts it in the envelope. Now the player places the sealed envelope at the field Placed Orders on the play board. Finally the round is over and the game master lead to the next round which starts with step 1 again.

VI. Instruction For The Game Master The game master has to manage the goods and information flow and is responsible for the compliance with rules. Moreover, he plays the role of the external supplier for the Factory and the role of the end consumer. Managing the goods and information flow The game master has to pass along all goods in the supply chain before a new round starts. He takes care that every player gets the goods from the fields Incoming Goods (alt. Factory Step2) in his own Warehouse. Furthermore, he has to move the goods from the fields Outgoing Goods to the fields Incoming Goods. In addition it is the task of the game master to pass the order envelopes from the field Placed Orders to the field Incoming Orders. Role of the external supplier for the factory The game master has to put as many tokens in the box on the field Factory Step1 as the value of ordered goods. The factory always gets as many goods as ordered. Role of the end consumer The game master determines the demand for the Retail. Thereto he draws a Demand Card at the beginning of every round and puts it in an envelope on the field Incoming Orders at the Retail. After every round the game master has to put the demand card on to the appropriate pile and shuffle this pile.

VII. End Of The Game

The game ends after 52 weeks are played or at least 1 Player’s budget is below zero.

Furthermore you can use the ready-made excel templates to see additional mind-blowing result.

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VIII. Extension - Action Cards

The extension of the Beer Distribution Game 2.0 provides a more dynamic game flow due to Action

Cards.

Starting from round 5 the Game Master hast to roll a 9-sided dice each round.

There are various consequences for each number of the dice:

1: The Game Master draws a card from the Positive Pile

9: The Game Master draws a card from the Negative Pile

2-8: No cards are drawn

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