ORDNANCE COLLEGE

MALIR CANTT, KARACHI

INVENTORY MANAGEMENT
ASSINGMENT NO. 03

 Submitted To: - Sir Rana Touqeer

 Submitted By: - Bisma Sabir Lodhi

BEER GAME CONCEPT IN

INVENTORY MANAGEMENT
Definition:
The Beer Game is a simulation game designed to
teach players about the complexities of supply chain
management. Participants take on the role of
participants in a four-stage supply chain and work to
meet the demand for beer while balancing inventory
and avoiding excess costs. the Beer Game is also
simulation game that is often used in the field of
operations management to illustrate the challenges
of inventory management and supply chain
dynamics.

Why it is called Beer Game?

The name is derived from a classic role-playing
game developed at MIT (Massachusetts Institute of
Technology) in the 1960s. Professors at the time
found that they could grab university students'
attention more effectively by calling it the Beer
Distribution Game
The game involves a simple supply chain consisting
of four stages: a retailer, a wholesaler, a distributor,
and a factory. Players in each stage are responsible
for placing orders and managing inventory levels
based on customer demand. The goal is to meet
customer demand while minimizing costs and
avoiding stock outs or excessive inventory

Purpose:
The purpose of the Beer Game is to experience
systemic effects and to introduce the need for supply
chain and network management. Specifically it
shows:
 How single parts in a system influence each
other.
 How individual thinking differs from systemic
thinking (network thinking).
Role of Beer Game:
The Beer Game has some role in inventory
management:

Bullwhip Effect: The game demonstrates the

bullwhip effect, which refers to the amplification of
demand fluctuations as they move upstream in the
supply chain.

Demand Forecasting: The game emphasizes the

importance of accurate demand forecasting. Each
player must make decisions based on their
perception of future demand..

Inventory Holding Costs: Players experience the

costs associated with holding excess inventory.
These costs include warehousing, storage,
depreciation, obsolescence, and capital tied up in
inventory.

Lead Time: The game underscores the impact of

lead time—the time it takes for an order to be
fulfilled—on inventory management..
Coordination and Collaboration: The Beer Game
highlights the importance of coordination and
collaboration among supply chain partners.

Importance of Beer Game:

The Beer Game holds significant importance in the

field of inventory management for several reasons:

Experiential Learning: The game provides

participants with a hands-on, interactive experience
of managing inventory in a supply chain. This
experiential learning approach helps individuals
better understand the complexities and challenges
associated with inventory management.

Illustration of Supply Chain Dynamics: The game

effectively demonstrates the dynamics and
intricacies of supply chain operations. It showcases
how small fluctuations in demand can lead to
significant variations in inventory levels and order
quantities throughout the supply chain..
Decision-Making Skills Development: By
participating in the Beer Game, individuals enhance
their decision-making skills in inventory
management. They learn to analyze demand
patterns, forecast future demand, determine order
quantities, and manage inventory levels effectively.

Risk and Uncertainty Management: Inventory

management involves dealing with uncertainties and
risks. The Beer Game allows participants to
experience the consequences of inaccurate demand
forecasting, lead time variability, and supply
disruptions