Contents

Introduction..................................................................................................................................................2
Premise....................................................................................................................................................2
Applied Strategy.......................................................................................................................................2
Theory and Analysis.....................................................................................................................................2
Bull Whip Effect........................................................................................................................................2
Inventory Theory.......................................................................................................................................4
Discussion & Learning.................................................................................................................................5
As Wholesaler..........................................................................................................................................5
As Retailer................................................................................................................................................5
Overall Supply Chain................................................................................................................................6
Beer Game Results......................................................................................................................................6
Recommendation.........................................................................................................................................7
Reference.....................................................................................................................................................8
Introduction
The Beer Game is a multiplayer, simulation game that allows the players to experience and
understand various supply chain issues[CITATION Kai19 \l 3081 ]. It demonstrates ordering
patterns and reactive behaviour to changing orders. The Beer Game was developed to
highlight the differences in coordinated and uncoordinated supply chains.

Premise
In this version of the Beer Game, the premise specified that backorder cost is greater than
inventory storage cost by double. We primarily focused on minimizing backorders
throughout the game. We also considered that the game was to for 35 weeks/round and
took this as a timeline.

Applied Strategy
We devised a strategy of ordering more stock so that minimal backorders occurred during
the first 20 weeks/rounds, ensuring that we always had enough stock to fulfil incoming
orders. After week 20, we aimed to moving towards a leaner Supply Chain, by employing
more controlled ordering and slowly lowering stock levels.

Theory and Analysis

Bull Whip Effect
Bullwhip Effect is the phenomenon seen in the progressive increase in orders seen when
moving up through the supply chain[CITATION Cro06 \l 3081 ]. When looked at separately, the
order quantities between each partnership in the supply chain appear rational. However, as
this adds up, inventory in the whole chain become disproportionate.

700

600 Bullwhip Effect

500

400

300
U n it s

200

100

Time in Weeks

Figure 1: Bullwhip Effect in the Beer Game as played by Group 5

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Looking at the Beer Game as played by our group, we can see the ordering patterns
between the players are not overly conservative or excessive. The orders placed by the
retailer allowed for some additional inventory after fulfilling the customer demand. A similar
pattern can be observed across the supply chain players in the orders placed between
them.
However, the difference between the customer order (shown in orange in Figure 2) and the
other players of the game is quite high initially. This is bullwhip effect of the uncollaborated
supply chain.

Inventory Theory
The importance of information sharing, and proper communication is highlighted in the
Inventory theory [ CITATION Zot17 \l 3081 ].
While the Beer Game uses the uncoordinated supply chain as a basis, the very lack of
communication emphasises the issues that can arise due to incorrect ordering. This also
brings forward the concept of inventory positioning, which can be done through forecasting
and sales analysis, throughout the supply chain. If forecasting had been achieved, the
inventory levels would have been more manageable and resultant holding costs would be
I n v e n t o ry L e v e l/ O rd e rs in U n it s

lower.

Orders vs Inventory
20000

15000

10000

5000

-5000

-10000

Inventory Factory Distributor

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Time in Weeks
Discussion & Learning
As Wholesaler
While playing as a wholesaler, I stayed with the previously discussed strategy of ensuring
enough on-hand stock. This was achieved by ordering on average more stock than was
I n v e n t o r y in U n i t s

requested by the Retailer. As a result of this, no backorders occurred, and all orders were
delivered in full.

300

250 Wholesaler Ordering Pattern

200

150

100

500

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time in Weeks

Figure 4: Wholesaler Ordering Patterns in Week 1-20

As Retailer
In the position of Retailer, the aim was to minimize stock on-hand as we got closer to the
I n v e n t o ry L e v e l/ O rd e rs in U n it s

end of the game. As a result, in these rounds, I placed minimum orders and only order
additional stock if needed. As a result of this, an unexpected high customer order in Week
32 resulted in a backorder. On the other hand, the on-hand stock at the end of the game
was very low, as targeted.

Retailer Ordering and Inventory Holding

Pattern
-5000
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Retailer Inventory Retailer

Customer

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Time in Weeks
Figure 5: Retailer Ordering and Inventory Holding Pattern in Week 21-35
 Overall Supply Chain
On the whole, all players aimed to have inventory throughout the first half of the game and
ensure Zero Backorders. This is evident in the ordering and stock holding patterns
throughout the Week/Round 1-20. Furthermore, stock levels were more restricted, and
ordering minimized in the following rounds. The Wholesaler orders should have been more
constrained in the second half of the game to allow the inventory to lessen.

Total Inventory/Backorder
6000
Inventory Level

4000
2000
0
-2000 1 4 7 10 13 16 19 22 25 28 31 34
-4000
-6000
Time in Weeks

Figure 6: Inventory/Backorder Patterns in Beer Game as played by Group 5

Beer Game Results

The result achieved in the end of the
game was average, and better than
our result in practice runs.
We were able to have almost no
backorders after Week 4, and
avoided the cost associated with it.
Order placed in the first half of the
game were higher than necessary,
allowing for a buffer when customer
orders became erratic and higher
than usual. This was particularly Figure 7: Success and Issues in Beer Game as played
by Group 5

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aided by the manufacturer producing a high level of stock at the start of the game. Order
Figureplacers
placed by other 2: Individual
wereordering comparisons
also high, allowingbetween
for the the fourtoplayers
stock of the supply
be distributed chainthe
among
supply chain.
On the other hand, this also resulted in having too much stock across the supply chain at
the end of the game, and we incurred the holding cost for this stock.
Additionally, order placement was erratic and often reactive, which resulted in uncertainty in
information flow upward in the supply chain. For example, sudden Zero orders and
unexpected high orders, caused reactive decision making in the supply chain. If instead of 0
orders, we had continued building towards an estimated average, ordering may have been
more consistent.
This would have also allowed for a lower spike or orders when customer orders increased
suddenly. On the other hand, it is difficult to know whether this change of ordering would
have resulted in even higher final inventory.
Overall, I feel that our final inventory and cost was not entirely bad but could have been
better with higher attention to inventory levels.

Recommendation
After analysis our ordering and behaviour patterns in the Beer Game, we felt that the most
important points in need of improvement was bringing consistency in our ordering and
improving our inventory management.
By ordering even a small quantity instead of placing a Zero Order, the overall stock levels
would be more consistent and stable. We would need to order less to cover sudden high
orders, and thus minimize the bullwhip effect from the resulting high order. I felt that we
should avoid all Zero orders, until at least the last 10 rounds.
Additionally, we need to place higher importance on monitoring inventory levels and take
this into regard when placing orders for each round. We should have also been more
stringent on orders placed towards the end of the game.

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Reference
Zotteri, G. & Alfieri, A., 2017, ‘Inventory theory and the Beer Game’, International Journal of Logistics
Research and Applications, 20(4), pp. 381-404.

Croson, R. & Donohue, K., 2006, ‘Behavioral Causes of the Bullwhip Effect and the Observed Value of
Inventory Information’, The Institute for Operations Research and the Management Sciences, vol. 52, no.
3, viewed 1 September 2019, <https://pubsonline.informs.org/doi/abs/10.1287/mnsc.1050.0436>

Riemer, K., 2019. Beer Game, blog, viewed 29 August 2019, <https://beergame.org/the-game>

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