How is it played?
The beergame simulates a four stage supply chain (retailer, wholesaler, distributer and factory). Each stage is played by one or better two or three players.
A supply chain is typically played by 8 to 12 people; more than one supply chain can be administered in one class at the same time.
The task of each supply chain is to produce and deliver units of beer: the factory produces and the other three stages deliver the beer units until it reaches the external customer at the downstream end of the supply chain.
The aim of the players is rather simple: each sub group has to fulfil the incoming orders of beer.
Orders flow upstream, while deliveries flow downstream in the supply chain (as illustrated in the figure).
An important structural aspect is delay (i.e. time lag) in order to account for logistics and production time. Each delivery (and production order) requires two rounds until they are finally delivered to the next stage.
In the structural setup this is represented by two shipping delay fields located in between the supply chain stages as well as at the production end.
Playing the game
The game is played in rounds, which simulates weeks.
Using the materials provided on the table (see figure below), players have to carry out the following steps in each round:
- receive incoming orders
- receive incoming deliveries
- update play sheets (outstanding deliveries and inventory)
- send out deliveries, and finally
- decide on the amount to be ordered
Deciding on each round’s order amount is effectively the only decision that players are able to make throughout the game.
Every order has to be fulfilled, either directly (should the players’ inventory be large enough) or later in subsequent rounds.
Inventory and backlog incur cost – each item in stock costs EUR 0.50 per week, while each item on backlog costs EUR 1.00. Consequently, the primary aim of each subgroup is to keep their costs low.
Hence, the optimal strategy for the players is to run their business with as little stock as possible without being forced to “move into backorder”.
Players are not allowed to communicate. The only information they are allowed to exchange is the order amount; there is no transparency as to what stock levels or actual customer demand is; only the retailer knows the external demand .
The external demand is predetermined and usually does not vary greatly.
In the beginning, the supply chain is pre-initialised with inventory levels (e.g. 15 units), orders (e.g. 5 units) and beer units in the shipping delay fields (e.g. 5 units).
In order to induce the bullwhip effect, the external demand remains stable for a few rounds (e.g. 5 units for 5 rounds) before it suddenly shows one steep increase (jumps to 9 units) before it remains stable again at this higher level for the remainder of the game (usually 40 to 50 rounds in total).
The one increase in external demand inevitably leads to the creation of the bullwhip effect and to a destabilisation of ordering patterns throughout the supply chain.