When it comes to Saint Patrick’s Day traditions and supply chain lessons, none may be more prized than beer.
St. Patrick’s Day is one of the most celebrated holidays around the world, and especially in GAINS’ hometown of Chicago, where beer is an integral part of the celebrations. As per WalletHub, beer sales increase by 174% on St. Patrick’s Day compared to the rest of the year, leading to total spending of almost $7 billion on holiday celebrations. In Chicago, near GAINS HQ on every St. Patrick’s day since 1962, Chicago has colored its river green to mark the holiday. Irish and non-Irish alike commonly participate in the “wearing of the green”—sporting an item of green clothing or a shamrock, the Irish national plant, and even beer is sometimes dyed green to celebrate the day. Most people don’t realize that beer, beyond making the holiday celebrations a bit more fun, also plays a crucial role supply chain.
Studying Dynamic Systems by Playing the Beer Distribution Game
To practice effective supply chain management, supply chain professionals and students have been using the Beer Distribution Game, created by Jay Wright Forrester at the MIT Sloan School of Management, since 1960. The Beer Game’s supply chain does a good job of illustrating a “classic” supply chain problem. The Beer Supply chain begins with farms growing hops and barley, making its way to your distributor and then retailer’s fridge before eventually ending up in your hand. It requires a lot of planning and logistics before revelers can finally raise their glasses.
Retailers, wholesalers, distributors, and breweries are all key players in the beer supply chain. Even when using a supply chain plan which accounts for seasonality, supply chain challenges, risks, and unintended consequences are always present. For example, an unexpected rise or drop in demand may result in the appearance of that old supply chain nemesis: the bullwhip effect.
What the beer game teaches us
Everyone from corporate leaders to university professors have embraced this game in their efforts to teach effective supply chain management. The game exists now in the public domain and is easily available in multiple forms: a traditional board game, a tabletop version, a hybrid version with laptops and spreadsheets, and single/multi-player software simulations.
If you have not previously, we suggest you give it a try. Beergame.org includes diagrams for what the tabletop and board game version looks like, You can also watch this video showing students playing the tabletop version. Take risks. Get burned. It’s a simulation. Arguably, the most important part of the game is having players discuss their experiences afterward.
It’s important to mention upfront (to avoid possible disappointment) that this is not a “drinking game.” Like Monopoly money, the beer in this game is entirely fictional. MIT suggests younger players refer to it as the “Root Beer Distribution Game.” All that is critical is providing participants with a straightforward product sold in whole units (1, 5, 9, etc.).
Players assume the role of one of four links in the supply chain:
- Factory
- Distributor
- Wholesaler
- Retailer
The game proceeds through a series of rounds in which, supply chain members place orders and make deliveries to their vendor and customer. For example, in one round, the distributor places an order with the factory and makes a delivery to the wholesaler. This is done by participants passing slips of paper with numbers of stock units written on them. The retailer’s customer demand, say five units of beer per round, is determined in advance.
Wait, though! There is a catch.
Get Ready for the Bullwhip Effect
In the standard mode of play, the ONLY communication which occurs between players is the number of beer units being ordered or delivered. The Beer Distribution Game’s supply chain is non-coordinated. (Unfortunately the game predates GAINS and therefore players can’t benefit from the advanced algorithms of our demand planning software.)
A non-coordinated supply chain guarantees players will experience the bullwhip effect. Adding to the drama, after a few rounds of static demand, there is a spike—just like the real-world. Lastly, no matter what the customer demand, the game locks all players into a standard two-week lead time from order to fulfillment. Pretty soon, players find themselves sending and receiving partial shipments with resulting backorders. A perfect storm for the bullwhip effect!
Inventory Isn’t Just Fun And Games
When it comes to board games, some of us prefer the ones where all we do is roll the dice and behave accordingly. Others prefer complex games like chess or monopoly, which offer players great discretion and risk-taking. Somewhere in between is the Beer Distribution game offering supply chain pros and students a handy way to experience system dynamics, and helping to realize the human feelings and impulses that can affect them. As in real life, The Beer Distribution Game intentionally places participants in a frustrating nearly unwinnable situation. For seasoned pros playing the game expect an all too relatable anxiety-inducing sense of losing control, an impulse to blame other supply chain members, along with experiencing the annoying phenomenon of unintended consequences. Hopefully this situation does not sound too much like your day-to-day.
Beyond the Beer
For supply chain professionals or students interested in taking a deep dive into the underlying theory behind the Beer Distribution Game there is a through article that explains that even seemingly simple systems can produce complex dynamics. It suggests that “the integration of multiple analytical tools provides the best strategies for developing robust solutions in complex systems that involve multiple decision makers, particularly for decisions and games that involve uncertainty, variability, and time.” A founding concept of GAINS solutions.
Key Take Aways
We wish each of you a safe and happy Saint Patrick’s Day and as we toast our friends this holiday weekend, let us not forget the important lessons that beer can teach us about supply chain management. The Beer Distribution Game has been a valuable tool for professionals and students to learn about the challenges and risks involved in supply chain planning and execution. By experiencing the pain of the bullwhip effect and unintended consequences, without real-life impact players can gain a deeper understanding of system dynamics and the importance of coordination in the supply chain. As we continue to face complex supply chain challenges, let us keep in mind the lessons learned from this simple yet powerful game and strive to develop robust solutions with the help of advanced analytical tools like GAINS.
If you’d like to lean more about how you can use the GAINS solution to combat the bullwhip effect and build an agile supply chain that lasts Click here to contact one of our GAINS experts and see a demo today!