Operations Management for MBAs, 5th Edition

CHAPTER 7 SUPPLEMENT A

The Beer Game¹

The Beer Game has become a staple of the operations management course in MBA programs across the country. In effect, the game simulates material and information flows in a simplified supply chain. As shown in Figure 7SA.1, the supply chain consists of four stages. Moving from the factory downstream, the supply chain consists of a factory, wholesaler, distributor, and retailer. Accordingly, each stage in the supply chain is required to manage its inventory levels given the receipt of orders from its downstream customer through the placement of orders with its upstream supplier. The only exceptions to this are that the retailer's demand comes from the final consumer and the factory schedules production requests as opposed to placing an order from an upstream supplier.

There is a two-week delay between the retailer, wholesaler, and distributor. Thus, orders from the retailer to the wholesaler in a given week arrive two weeks after the wholesaler ships them. Likewise, orders from the wholesaler to the distributor in a particular week arrive two weeks after the distributor ships it. Production orders at the factory are available to ship three weeks after the production requests.

Your objective in playing the game is to minimize the sum of your total weekly costs. Weekly costs consist of two components: an inventory cost and a backlog cost. More ...