User Manual

The Supply Chain Game – A User Guide

Main Purpose

• Settings and flow of the game• Expected learnings and insights from the game• A tutorial to walk you through the game

What kind of game is it?

• One supplier• Sells a key component to all

buyers• Long production lead time

• 1~5 buyers• Sells to end customers• Zero order lead time• Has private information

about his end customers’ demand

Orders & Forecasts

Shipment & Dedicated Inventory

Goal: Make as much $$ as possible!!

Flow of the Game

ProductionSupplier

1. Supplier receives components from work-in-process

2. Buyer observed demand, orders and sends forecast

3. Supplier fills order as much as he can and decides production quantity

a. Supplier backlogs unfulfilled orders, OR

b. Supplier does not backlog; unfulfilled orders are lost

4. Demand from end customers is realized, all costs (production/purchasing, holding, backlog) and revenues calculated

Order &

Forecast

Order & Forecast

Work in Process

BuyersEnd

Customers

End Customers $$

$$

$$

Why Play This Game?• Supplier

– Inventory management• Balance overage and underage costs

– Manage Customer behavior– Impact of customer incentives, e.g., rewards for accurate forecasts

• Buyer– Supplier Management– Impact of orders/forecasts on suppliers’ allocation/inventory decision

• Supply chain– The impact of forecast sharing – The impact of capacity allocation rules on customer behavior and

profitability

Supplier’s Dialog BoxConsists of 8 Areas:1. Game Setup

2. Message/Indicator

3. Buyer Forecasts

4. Supplier Inventory & Production

5. Orders and Shipments

6. Shared Information

7. Action Buttons

Supplier’s Dialog Box1. Game Setup:• Sets the parameters of the game

• Shows # of buyers needed

• Exits the game

Supplier’s Dialog Box2. Message/Indicator:• Tells the player what action

needs to be taken next

• Current Period - Indicates the progress of the game

• Overall Supply Health – Sends Green/Yellow/Red signal to the buyers

Supplier’s Dialog Box3. Buyers’ Forecasts:• Shows buyers’ forecasts for

future periods

• Any changes in forecast will be indicated with a red line

• Sum function shows the total aggregate forecast

• Shows buyers’ order and forecast history upon clicking the buyer

• Forecast Churn - Shows how much buyer changes forecasts

Supplier’s Dialog Box4. Inventory & Production:• Inventory – Shows current

dedicated inventory

• WIP - Shows inventory that’s going to become available in the future

• Production - Supplier decides how much to produce

• Clicking on the Buyer produces a history of dedicated inventory

• Inventory can be displayed in absolute quantities or in weeks of demand

• Reallocate – Allows supplier to change dedicated inventory among buyers

Supplier’s Dialog Box5. Orders & Shipments:• Backlog - Shows supplier’s backlog

(can be turned off in Game Setting)

• Order - Shows buyers’ current period’s order

• Ship - Supplier decides how much to ship to each buyer, subject to availability of inventory

• Fill rate - Shows % of buyer’s orders the supplier has fulfilled

• As player enters shipment quantity, the corresponding inventory will be automatically deducted

Supplier’s Dialog Box

• Buyers’ Local Inventory

• Buyers’ Actual Demand

• Gives supplier extra visibility to the demand

6. Shared Information:

Supplier’s Dialog Box

• Send – Confirms shipment and production quantity, proceeds to the next period

7. Action Buttons:

• Financials – Shows revenue, costs and profits up to the current period, and many more.

• Parameters – Shows unit cost, revenue, production lead time, production capacity, etc. which was set in Game Settings

• Output Data – Saves the game in a text file

Buyer’s Dialog BoxConsists of 5 Areas:1. Message/Indicator

2. Dedicated Inventory

3. Forecasts

4. Orders

5. Action Buttons

Buyer’s Dialog Box1. Message/Indicator:• Tells the player what action

needs to be taken next

• Current Period – Indicates the progress of the game

Buyer’s Dialog Box2. Dedicated Inventory:• Shows the amount of inventory

reserved by the supplier for the buyer in the current and future periods

• Exactly the same amount as shown in the supplier’s Inventory and WIP boxes

• Green/Yellow/Red indicator of overall supply health

• Any changes to previously communicated dedicated inventory will be indicated by a red line

Buyer’s Dialog Box3. Forecasts:• Buyer enters forecasts here and

submit them to the supplier to guide/influence the supplier’s production decision

• Mean and Standard Deviation of Demand is only known to the buyer

• Buyer is allowed to revise forecasts, but supplier will notice how much the buyer changes forecast

• Forecast submitted shows up on supplier’s forecast panel

Buyer’s Dialog Box4. Orders:• Demand – The actual demand that needs to

be satisfied this period

• On Order – If the supplier backlogs, this field shows the quantity that the buyer has ordered and the supplier has not yet delivered

• Inventory – Shows current on-hand inventory at the buyer

• Backlog – If the buyer backlogs to his customers

• Place Order – The buyer enters order here and press ‘Send’ to submit it to the supplier

• Shipment Received – Shipment received in the previous period

Buyer’s Dialog Box

• Dedicated Inv History – History of past dedicated inventory provided by supplier

• Output Data – Saves the game

• Send – Submit orders and forecasts to the supplier

• Exit – Leaves the game

• Parameters – Shows buyer ID, unit cost and revenue, and the demand process (explained in more detail in Game Settings)

5. Action Buttons

• Financials – Shows revenue, costs and profits up to the current period, and many more

• Forecast History – History of past forecasts sent by the buyer

Game Setting DialogConsists of 4 Areas:

1. Cost & Revenue Setting

2. Visibility Setting

3. Demand Setting

4. Other Settings

Game Setting Dialog1. Cost & Revenue Setting:• Production Cost – Cost of producing 1 unit

• Holding Cost – Cost of holding 1 unit of inventory for 1 period

• Wholesale price – $$ paid by buyer to supplier per unit of goods delivered

• Retail Price – $$ earned by buyer per unit of goods sold

• Backlog Cost – Cost to the buyer per unit of demand backlogged

• Lead Time – # of periods the supplier has to wait for the goods to be available for shipment after production starts

• Min Build/Max Capacity– Minimum/Maximum production quantity per period

Cost to supplier when buyer stocks out

• The buyer does not directly incur backlog cost when he cannot satisfy all orders from the buyers. He incurs a backlog cost when the buyer cannot satisfy the demand from end customers.

Small Medium and Big Buyers:

• The ability to specify 3 different types of buyers, with different costs, revenues and demands

Game Setting Dialog2. Visibility Setting:• Supplier sees Buyers’ Inventory – Supplier knows exact how much

inventory each buyer has. Typical for traditional VMI arrangement

• Supplier sees Buyer’s Demand – Supplier observes buyer’s actual demand

• Visibility of Buffer Inventory – Buyer sees how much inventory the supplier has reserved for him. Some buyers may not have such visibility

Game Setting Dialog3. Demand Setting:• Small/Medium/Big – There can be up to 3 types of

buyers, each type having its own demand process, cost and revenue parameters

• Mean Demand – The average demand per period

• Std Dev of Demand – The fluctuation around the average demand per period. All demands follow a normal distribution

• Demand Process

1. Stationary – average demand is the same for each period with random fluctuations

2. Low/High – average demand can be low or high each period, plus random fluctuations

3. Diffusion – demand process follows a bass diffusion curve with ‘ramp-up’, ‘peak’ and ‘ramp-down’ phases. p and q input required

Game Setting Dialog3. Demand Setting:• Demand Process – If ‘Low/High’ is chosen, the user can

further specify the demand states, probability of high demand, as well as how low the average low demand will be (as a fraction of the average high demand), by clicking the ‘Low/High’ button.

• ‘Reset’ button defaults all demand states to ‘Random’, meaning that demand will be high or low with the probability specified in the topmost box

• After a game is played, all realized demand states are saved

Game Setting Dialog4. Other Setting:• Backlog – If supplier backlogs order from retailer, then

retailer (buyer) must backlog demand from end customers also. Otherwise, retailer can backlog or not backlog

• Overall Supply Health – Allows the supplier to indicate overall supply health using green/yellow/red indicator

• Reallocate Inventory – Allows Supplier to change previous communicate dedicated inventory

• Number of Buyers – From one to five

• Number of Periods – From one to twenty-six

• Dedicated Periods – Number of periods the supplier has to dedicate inventory

• Seed – Determines the random demands generated in each play. A different seed produces a different stream of demand

Thank You!