SDM 5001 SYSTEMS ARCHITECTURE

SYSTEMS WORKSHOP – BEER GAME

 Beer Distribution Game The Beer Game
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 Supply Change Management
Upstream Downstream

Raw Factory Beer Beer Retailer

Consumers
Suppliers Brewery Distributor Wholesaler Sales

Information Flows
Cash Flows

Supply Chains are dynamic network systems that require effective

co-ordination of information up and down the supply chain

o Factory - manufactures beer

o Distributor - places large orders with factory and get these deliver to
various locations (eg regional centres)
o Wholesaler - orders from distributor smaller quantities to keep inventory
small, minimize transportation costs (eg shipment by airfreight)
o Retailer - buys from wholesaler and sells to consumer
 Supply Chain Distribution Systems
Supply Chain Management as a Distribution Systems
o A systems comprises system elements, interfaces between
elements, and an external system boundary

Retailer
Beer Orders Beer Cases

Factory Distributor Wholesaler

Beer Consumer Market

o Systems Elements
o Interactions
o Interfaces
o Environment
o Functions
o Processes
o Functional Architecture
o Physical Architecture
 Situation of Beer Game
Demand Forecast
o Beer is a seasonal and demand rises in the hot season and peaks around holidays
o Recent demand has been steady at 4 beer cases per week
o Sales are expected to rise with temperature, public holidays, and a sales
promotion

Characteristics of Supply Chain

o Performance Excellence: Customer satisfaction at the lowest total cost
o Collaboration with Supply Chain Partners: Coordinating operating activities

Performance Goal
o As beer cannot be kept for long periods, the goal is to fulfill customer demand
and to minimize costs
o $0.50 inventory holding cost per case per week
(when you have extra beer you cannot sell)
o $1.00 backorder cost per case per week
(if you do not have enough beer to deliver)
 Basic Game Rules
Game Moves
o Total 40 weeks
o Each complete round is 1 week

Movements
o Orders (with post it pads)
You receive orders and place your orders top row
o Beer cases are plastic chips
You take your delivery and ship your delivery bottom row
o Put your inventory, shipment, and delivery in their respective boxes/containers

Talking is NOT allowed, that is, no interaction among players

Do Not try to “game” the system

o Forget everything about this game, if you have played this game before
o Your report will be more interesting when you play naturally!

Record Keeping
o For each week remember to write down incoming delivery, incoming order, your order (in
white columns)
o Always update your inventory calculation and costs

Terminology
o Shipping is OUT from Inventory to Outside
o Delivery is IN from Outside to Inside
Step by Step
ANIMATED WALK THROUGH
Flowchart of
Game
Movements
 Five Commands in Three Stages

1a Delivery In Chips Movement

1b Shipment Out

2 Orders In
3 Prepare Shipment Internal
4 Check Inventory Management

5a Advance In Orders/Brewery Brew Paper Slips

5b Place Out Orders
 GENERAL BOARD LAYOUT

From Raw
Customers Materials

Customer Orders Incoming Orders Incoming Orders Incoming Orders Production

Orders Placed Orders Placed Orders Placed Orders Placed Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

 INITIAL STARTING LAYOUT

From Raw
Customers Materials

4
Customer
Orders 4
Orders
Placed 4
Incoming
Orders 4
Orders
Placed 4
Incoming
Orders 4
Orders
Placed 4
Incoming
Orders 4 Production
Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

4 Orders Paper Slip

Inventory Chips
 STEP 1 A
Receive Incoming DELIVERY DELIVERY IN
From Raw
Customers Materials

Customer Orders Incoming Orders Incoming Orders Incoming Orders Production

Orders Placed Orders Placed Orders Placed Orders Placed Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

Right Hand move Left

Stock Movement Paper Movements Record Keeping

Move Stock from Your None Record Your New Current
Shipping Delay to Your Inventory
Current Inventory
 STEP 1 B SHIPMENT OUT
Send Outgoing SHIPMENT
From Raw
Customers Materials

Customer Orders Incoming Orders Incoming Orders Incoming Orders Production

Orders Placed Orders Placed Orders Placed Orders Placed Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

Left Hand move Right

Stock Movement Paper Movements Record Keeping

Move Stock from Your None None
Shipping Delay to Left
Hand Neighbour Shipping
Delay
 STEP 2
Check Incoming Orders with Current Inventory ORDERS IN
To Raw
Customers Materials

A
Customer
Orders
Orders
Placed B
Incoming
Orders
Orders
Placed C
Incoming
Orders
Orders
Placed D
Incoming
Orders
Orders
Placed
Production
Delay

? ? ? ?
Current Current Current Current
Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

If Current Inventory > Incoming Order: Ship Orders (Step 3a)

If Current Inventory < Incoming Order: Ship All Current Inventory, and Record Shortfall
as Backorder (Step 3b)

Stock Movement Paper Movements Record Keeping

None Take Incoming Orders and Record Incoming Orders
Check with Current
Inventory Record
 STEP 3 A + STEP 4
Ship ORDERS from Inventory – If Inventory is ENOUGH PREPARE SHIPMENT

To Raw
Customers Materials

Customer Orders Incoming Orders Incoming Orders Incoming Orders Production

Orders Placed Orders Placed Orders Placed Orders Placed Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

Stock Movement Paper Movements Record Keeping (Step 4)

Move exact number of None Record the Current
stock (same as Incoming Inventory after Shipping
Order) from Current
Inventory to Shipping
Delay
STEP 3 B + STEP 4
Record BACKORDER – if Inventory is NOT ENOUGH

If Inventory is not enough to fulfil Incoming Order

o Ship whatever available stock (if there is some stock) in Current Inventory and
record the balance unfilled orders as Backorder
o If your Current Inventory is empty, then record the entire Incoming order as
Backorder
o VERY IMPORTANT: You must ship ALL your Current Inventory, even if you cannot
fulfil the entire Incoming Order.
The remaining Unfulfilled Order is recorded as Backorders.
o VERY IMPORTANT: In following week, you have to ship out the Backorders first
from the new delivery in your Current Inventory. Then you ship your Incoming
Order. Again, if your Current Inventory is not enough, then you record this as your
new Backorder.
Stock Movement Paper Movements Record Keeping (Step 4)
Move all the stock items None Record the Backorder After
from Current Inventory to Shipping
Shipping Delay (New Backorder=Last Week
Backorder + Incoming Order
– Shipment)
 STEP 5 A
Advance ORDERS ORDERS OUT
Raw
New Order from Customer Materials

Brewery
Brews
Customer Orders Incoming Orders Incoming Orders Incoming Orders Production
Orders Placed Orders Placed Orders Placed Orders Placed Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

Stock Movement Paper Movements Record Keeping

None for retailer, Move LHS Neighbor Orders None
wholesaler and distributor; Placed into Your Incoming
For factory, check the new Orders
order and brewery brews.
 STEP 5 B
Place ORDERS New ORDERS

Customer
Orders A
Orders
Placed
Incoming
Orders B
Orders
Placed
Incoming
Orders C
Orders
Placed
Incoming
Orders D Production
Delay

Current Current Current Current

Inventory Inventory Inventory Inventory

Shipping Shipping Shipping Shipping Shipping Shipping Production

Delay Delay Delay Delay Delay Delay Delay

RETAILER WHOLESALER DISTRIBUTOR FACTORY

End Round in Current Week

Stock Movement Paper Movements Record Keeping

None Write Down Your New Record Your New Orders
Orders and Put these in
Orders Placed
 Record Keeping 1
Record Record Record
this Item this Item this Item

Calculate Costs
Holding Costs of Excess Inventory $0.50 per case
Backorder Costs of Out of Stock $1.00 per case

Notation:
o Incoming Delivery = Shipping Delay 1 (RHS small box)
o Your Delivery = Shipping Delay 2 (LHS small box)

Important:
o Color Cells are Locked - These contain Formulas!
o EXCEL worksheet provide automatic calculations to avoid errors
 Record Keeping 2

Example 1: Enough Inventory to fulfill Incoming Orders

Example 2: Not Enough Inventory to fulfill Incoming Orders

17 inventory not enough for 20 orders. Therefore, deliver only 17 and backorder (owing 3)

5 inventory enough for 0 orders. Therefore, deliver only 4 (previous week backorder) and no backorder (owing 0)
Note: Unfilled Backorders have to be cleared first before there is excess Inventory
 Record Keeping 3
Example 2: Not Enough Inventory to fulfill Incoming Orders

17 inventory not enough for 20 orders. Therefore, deliver only 17 and backorder (owing 3)

Example 3: How to Clear Backorders

5 inventory enough for 0 orders. Therefore, deliver only 4 (previous week backorder) and no backorder (owing 0)

Note: Unfilled Backorders have to be cleared first before there is excess Inventory
Enough Inventory NOT Enough Inventory

Backlog - No Inventory
 Homework - Data Analysis
1. Supplier of each Group copies raw data of the Group onto the first worksheet in “Consolidated Data
Sheet EXCEL File”

2. Analyse the following from the Output in the rest of worksheets

o Plot the orders for every supply chain role in one graph
(x-axis: weeks, y-axis: orders, all four roles in one graph)
o Plot the inventory
(backorder is negative inventory - x-axis: weeks, y-axis: inventory/backorder, all four roles in
one graph)
o Plot the cumulative costs
(x-axis: weeks, y-axis: cost, all four roles in one graph)
o Calculate for each Player in the “Summary Data Worksheet” in Consolidated Data Sheet
EXCEL file
a) Inventory (Minimum, Maximum, Average, Variance);
b) Backorder (Minimum, Maximum, Average, Variance);
c) Orders (Minimum, Maximum, Average, Variance);
d) Delivery (Minimum, Maximum, Average, Variance)

3. Supplier submits the results of your Group in Step 2 to IVLE Workbin by week 5
I will check your data and give you my feedback

4. Details of the requirements in Group Report will be announced after Recess break
Senge, P. (2006). The Fifth Discipline: The Art & Practice
of The Learning Organization (Revised & Updated
edition.). New York: Doubleday. Chapter 3

Simichi-Levi, D; Kaminsky,P; Simichi-Levi, E (2008)

Designing and Managing the Supply Chain-Concepts
Strategies and Case Studies 3rd Edition. New York,
McGraw Hill