Indian Institute of Management Kozhikode

The Beer Game

Group XII

ASHOK PRASAD K PGP/14/268

MAHTAAB KAJLA PGP/14/280

SACHIN KUMAR PGP/14/294

SUJA BARUA PGP/14/306

VARDHAN SINGH PGP/14/311

Agenda

Introduction

Trends of Entities

Cost Summary

Our Strategy

Observations

Reasons for substantial variation among other groups

Sales & Distribution Management | Beer Game

The Beer Game

Players

Retailer, Wholesaler, Distributor and Manufacturer. Minimize system-wide (chain) long-run average cost.

Goal

No information sharing among the players. Lead-time:

2 weeks for the factory 4 weeks for other supply chain players

Sales & Distribution Management | Beer Game

Retailers Trend

The order placed follows the customers order 1-1 policy followed initially -order whatever amount is ordered from your customer. Towards the end the strategy was to keep the current inventory minimum(17-22 week) Zero level inventory(22-30 week) No backorders observed Total cost = 0.5*254+ 0 =127

Sales & Distribution Management | Beer Game

Wholesalers Trend

1-1 policy followed -order whatever amount is ordered from your retailer No backorders observed Reduction in the levels of inventory(21-30 week) Total cost = 0.5*322+0 =161

Sales & Distribution Management | Beer Game

Distributors Trend

1-1 policy followed -order whatever amount is ordered from your wholesaler No backorders observed Total cost = 0.5*340+0 =170

Sales & Distribution Management | Beer Game

Factorys Trend

1-1 policy followed -order whatever amount is ordered from your distributor No backorders observed Total cost = 0.5*356+0 = 178

Sales & Distribution Management | Beer Game

Comparison of different stakeholders in the distribution channel

Sales & Distribution Management | Beer Game

Cost Summary
Cost Calculation Enitity Retailer Wholesaler Distributor Total Inventory 254 322 340 Total Backlog 0 0 0 Total Cost 127 161 170

Factory & R/M Channel Cost

356

178 636

Sales & Distribution Management | Beer Game

Our Strategy

Initially, retailer followed a 1:1 strategy. When the demand changed for second time, Retailer decided to minimize his inventory thus reduction in costs for retailer.

4 weeks lead time Achieving zero inventory level

Other intermediaries followed a 1:1 strategy

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Sales & Distribution Management | Beer Game

Observations

Presence of buffer stock helped in reduction of inventory costs in cases of demand volatility

No backlogs observed

No Bullwhip effect was observed as 1-1 policy was followed Rational behavior of intermediaries helped minimize information distortion

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Sales & Distribution Management | Beer Game

Reasons for substantial variation among other groups

Inability to forecast demand efficiently

High demand uncertainty and variability Players individual perception and mistrust Each player tried to minimize his inventory without considering the other intermediaries Resulted in backlogs Failure to foresee that orders once placed would come back after 4 weeks

Information distortion

Lack of team play among intermediaries

Irrational behaviour of intermediaries

Small variations amplify in the supply chain

12 Sales & Distribution Management | Beer Game

Q&A

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Sales & Distribution Management | The Beer Game