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Course Coordinator - Dr.

Parikshit Charan

The Beer Distribution Game: Notes and Instructions


I strongly urge each one of you to carefully study this game instruction in advance and
familiarize yourself with the game prior to playing.

The purpose of playing this game is to provide the participant with hands on experience on the
challenges in managing supply chains. The beer distribution game (or simply known as “the Beer
Game”) is a role-playing game, which simulate chaos, complexities, and structural problems in
the supply chains. Of course, there is no beer in the beer game, and the game does not promote
drinking.

1. Overview of the supply chain system

ƒ There are two versions of supply chain (SC), with 10 students in each version of
SC.

ƒ In each SC, there are four positions (teams): retailers, wholesaler, distributor, and
factory.

ƒ Each position (team) is almost identical in its activity.

ƒ Each keeps an inventory of beer.

ƒ Each receives orders from and ships beer to the sector downstream.

ƒ Each places orders of beer with the sector upstream.

ƒ There are shipping delays moving downstream and order delays moving
upstream.

ƒ Time: Game continues for 45~50 weeks

ƒ Decision period: decisions are made at each position at the beginning of each
week.

2. Basic rules

ƒ Objective: The objective is to minimize total costs for your team. The team with
the lowest cost wins the game.

ƒ Costs are computed in the following way:

Inventory holding cost:$0.50 per case/week

Shortage (backlog) cost:$1.00 per case/week

Course - Supply Chain Management  1 

 
Course Coordinator - Dr. Parikshit Charan

ƒ The cost at each position for each week will be added up for the total length of the
game to determine the total cost (please see the game worksheet on the last page).

ƒ No communication between position: The retailer should not talk to anyone else,
same for the wholesales, the distributor, and the factory. The only communication
between positions should be through the passing of orders and receiving of beer.

ƒ The retailer is the only one who knows the customers actually order. They should
NOT reveal this information to anyone else, until after the post-game discussion.

ƒ Supply of raw material from external source to the factory is assumed to be


infinite.

ƒ Initialization: There will be 12 poker chips representing 12 cases of on hand


inventory of beer in each position. Each chip represents one case of beer. There
should also be 4 chips in each shipping delay and production delay.

Course - Supply Chain Management  2 

 
Course Coordinator - Dr. Parikshit Charan

3. Steps of the game

ƒ Advance shipping delays.

ƒ Look at incoming orders from downstream.

ƒ Fill orders + backorders if any (i.e. satisfy demand as much as you can).

ƒ Advance order slips.

ƒ Place orders with your upstream position.

ƒ Record demand observed, your current inventory, shipping delay amounts,


backlog, orders placed.

4. Tips

Some critical factors in the management of such systems are demand patterns,
information lags represented by delays, and the degree of (or lack of information
exchange among the players. Again, players are not permitted to exchange information
for this game. The only prerequisite, besides your counting skills, is that none of the
players have played the game before, or else agree not to reveal the details of the game.
Again, I strongly urge you to carefully study this game instruction in advance and
familiarize yourself with the game prior to playing.

5. Post-game Assignment

The success of this experiment is in your hands as it requires your active participation.
You (or your team) will NOT be graded or judged by any performance measures (e.g.
total cost), even though total cost minimization is your ultimate goal as you play the
game.

Short presentation (four teams will be selected) of what you have found using excel
charts (overhead transparencies) of the following over the whole game period:

ƒ Observed demand (at beginning of each period)

ƒ Order quantity per period (orders you placed at end of each period)

ƒ On hand inventory (at the end of each period)


Course - Supply Chain Management  3 

 
Course Coordinator - Dr. Parikshit Charan

ƒ Backorder amount (at the end of each period)

Turn in a written discussion (one paper per team) of your results/ observations/
frustrations/ suggestions for your performance improvement from the Beer game (max.
2 page). Specifically, include the following in your discussion.

ƒ What happened at your station? Any why?

ƒ Did you use any ordering policy? If yes, what was your ordering policy?

ƒ If you have experienced dramatic fluctuation in your demand/orders, what was the
reason? Could those fluctuations be mitigated? How?

ƒ For stations other than the retailer: What do you think th final demand
(observed by the retailer) looked like?

ƒ What was your total cost? Add chart as appendix.

Groups Retailers (2) Wholesalers (3) Distributors (3) Factory (2)

Supply Chain___

Course - Supply Chain Management  4 

 
Course Coordinator - Dr. Parikshit Charan

Beer Distribution Game Worksheet

Circle your position: Retailer Wholesaler Distributor Factory

End of Incoming Current Shipping Shipping Backorder Last Current


week order inventory Delay #1 Delay #2 Order Order

10

11

12

13

14

15

16

17

18

19

20

Course - Supply Chain Management  5 

 
Course Coordinator - Dr. Parikshit Charan

End of Incoming Current Shipping Shipping Backorder Last Current


week order inventory Delay #1 Delay #2 Order Order

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

Course - Supply Chain Management  6 

 
Course Coordinator - Dr. Parikshit Charan

End of Incoming Current Shipping Shipping Backorder Last Current


week order inventory Delay #1 Delay #2 Order Order

43

44

45

46

47

48

48

Total INVI1 BO1

Total Cost = (INV1)*$0.50 + BO1

Course - Supply Chain Management  7