The Beer Game

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Wes Bucey

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#3
I'm confused. I understand all about "rubber banding" or "bull whip" in supply chains. I am unsure about the mechanics of this game. The player instructions seem to imply the consumer demand is "random" (within limits) as represented by a "deck of cards." The discussion, however, states the consumer demand is level, starting at 4 cases/week, rising to 8 cases/week. Did I miss something in the information presented or are there "secret instructions" (i.e. a rigged deck of cards?)

This looks like a lot of fun (at least as much as "red beads.") Thanks for bringing it to our intention.
 

Steve Prevette

Deming Disciple
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#4
Wes Bucey said:
I'm confused. I understand all about "rubber banding" or "bull whip" in supply chains. I am unsure about the mechanics of this game. The player instructions seem to imply the consumer demand is "random" (within limits) as represented by a "deck of cards." The discussion, however, states the consumer demand is level, starting at 4 cases/week, rising to 8 cases/week. Did I miss something in the information presented or are there "secret instructions" (i.e. a rigged deck of cards?)

This looks like a lot of fun (at least as much as "red beads.") Thanks for bringing it to our intention.
Actually it is "rigged". You tell the participants that "anything can happen" to demand, but all that actually happens is the demand goes from a steady state of 4 per week to a steady state of 8 per week. And yes, the results are very predictable, both groups of students experienced the bull whip. I will be charting and posting the groups' results in excel here.
 

Tim Folkerts

Super Moderator
#5
This is an interesting problem. I'm sure other minds have contemplated this challenge, but it got into my head and couldn't quite let it go. As I think about it, I have concluded that a "bull-whip" is 1) inevitable and 2) the best solution to the problem as stated (e.g. known delays up the supply chain, no marginal cost for sudden changes in production).

I think I have a pretty logical and efficient algorithm for placing orders and maintaining inventory (even when the orders at the retail outlet are not simply 8 after the first day), but then I realized this is also a class project and I don't want to be doing the students' homework for them ;). So maybe I'll give my answer later to see if it can match the students' scores.

Other observations:
1) This seems like the funnel problem - continually reacting to changes just makes things worse.
2) This also seems like the problem of controlling a furnace's temperature when doors are opened, loads change, etc. There are well developed algorithms for such situations that could be applicable here.



Tim F
 

Steve Prevette

Deming Disciple
Staff member
Super Moderator
#7
Tim Folkerts said:
I think I have a pretty logical and efficient algorithm for placing orders and maintaining inventory (even when the orders at the retail outlet are not simply 8 after the first day), but then I realized this is also a class project and I don't want to be doing the students' homework for them ;). So maybe I'll give my answer later to see if it can match the students' scores.
Tim F
If you "google" on The Beer Game, you will find some sites that do propose computer algorithms for this problem. The primary issue is keeping track of what you have already ordered in the past that is yet to come to you. It is sort of like trying to judge the 2nd derivative (acceleration) of the problem. I am reminded of the problem of "hovering" manually in a submarine. I was never good at judging the amount of water to bring on or pump out. You really had to have a good judge for acceleration and once the depth bottomed out, immediately start flooding water in, rather than waiting to get to the ordered depth before starting to bring on water, or the submarine will build up more and more oscillations about the ordered depth.
 
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B

Bill Pflanz

#8
Steve,

I know you are teaching Quantitative Methods which involve creating forecasting algorithms but have you thought about how a series of control charts could prevent the problems described?

Tim commented on the beer game similiarity to the funnel problem which is the reason for the question.

Bill
 

Steve Prevette

Deming Disciple
Staff member
Super Moderator
#9
Bill Pflanz said:
Steve,

I know you are teaching Quantitative Methods which involve creating forecasting algorithms but have you thought about how a series of control charts could prevent the problems described?

Tim commented on the beer game similiarity to the funnel problem which is the reason for the question.

Bill
Forecasting is the last topic covered, and unfortunately the book gives very canned (not data you'd see in the real world) examples to support moving averages and seasonal corrections. That will be a very interesting topic to teach, but at least I do have my Red Bead results to show the fallacies of those techniques on most real world data.

The odd thing about the beer game is even if you at your station realizes what is happening, it is hard to prevent the whip saw effect if everyone else falls for it. You still must meet your incoming orders. I did have one odd session where for some reason the retailer refused to increase her order rate, and by under reacting, the losses in backlogs were incredibly high.

If the order rate at the retailer were indeed "random", then definitely a control chart of customer orders, with sharing of that information all the way to the factory could help keep the system from whipsawing. But in the canned scenario of the Beer Game, you need to measure (maybe on a control chart) some combination of your current inventory, current outflows, and expected inflows from orders currently placed.
 
B

Bill Pflanz

#10
Steve,

If you continue to teach the course and play the game, it would be interesting to control chart some of the results. Maybe if you collected the data each time the game is played, you could develop some control charts to prevent the tampering.

When I was learning forecasting techniques from an operations management consultant we used, I felt there was an opportunity to use control charts. The consultant did use control charts of the variation from forecast but it appeared that all he was doing was demonstrating that they were tampering since he used prior data to forecast the next periods demand when all that was really happening was normal variation.

Maybe there is an opportunity to tie this game to your systems thinking article and control charting. Keep us informed of the game and the students' essays on their results.

Bill
 
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