What is the Beer Game?
The article below describes the default Beer Game scenario, rules and learnings. Note that several parameters can be customized, such as stage names, costs, etc. to align the experience with your own context and objectives.
In this article:
The Beer Game is a learning simulation. It simulates a Beer Supply Chain composed of 4 stages. Each participants (or group of participant) is playing as one of them.
The game is played in several turns, representing weeks.
- Has its own stock of beer cases,
- Has a supplier from which it receives beer cases - and to which it places orders,
- Has a client from which it receives orders (= demand) - and to which it ships beer cases
*The Retailer's client is the end-consumer, played automatically by the computer. The manufacturer doesn't have a supplier but produces beer cases internally.
- For each stage, the lead time between an order and its delivery is 3 weeks.
- The weekly stock calculation happens automatically, the players only have to focus on which quantity to order to their supplier each week.
- No communication is allowed between the different stages. The end-consumer demand is not known in advance, and only seen by the retailer every week.
Watch the video below for more details on how to play our Beer Game simulation:
Each player has to decide how many cases to order every week, in order to have a good amount of stock and be able to fulfill its client orders. But costs will cumulate every week:
- Each case in stock costs $0.5/unit/week.
- Each case in backorder costs $1/unit/week.
Backorders are generated in case there wasn't enough stock to fulfill demand. These quantities are shipped automatically as soon as the role receives stock.
The goal for each player is to keep the sum of both costs as low as possible. It means having enough stock to avoid backorder, but not too much, as it will generate extra costs.
At the end of the game, we are looking at the team result, the sum of the costs of each role in the supply chain.
In its default scenario, the game proposes to focus on a single metric: cost, which combines both Demand fulfillment performance and Stock performance.
When playing, the participants can understand the role and the challenges of a supply chain manager. Typically, they experience the effect of lead time between an order and its delivery, and the difficulty of planning ahead.
The Bullwhip effect:
In the default scenario, the retailer will receive a flat demand of 4pcs/week from the end consumer (played by the computer). Then, after a few weeks, the demand increases slightly to reach 8pcs/week. Confronted with this unexpected increase, players typically over-react, ordering more than needed to their supplier.
This increase in demand generates erratic and amplified orders inside the supply chain. The variability increases as we move upstream in the supply chain from Retailer to the Manufacturer.
Several parameters generate and amplify this effect:
- Lack of information-sharing,
- The supply chain structure, especially high lead times and having many stages,
- Human behavior, which tends to secure their own local situation
The bullwhip effect is a very common behavior, even in today's supply chain. Playing the Beer Game tremendously helps to illustrate and raise awareness among employees, in order to prevent/mitigate its effects.
Learn more about in our article: 5 Key Lessons to Learn from a Beer Game Session