The Beer Distribution Game

Purpose : To introduce to the participants the concept of supply chain

and the effects decisions along the chain have on inventory levels and
costs.
Introduction : In this game the retailer sells cases of beer to a
consumer and orders cases of beer from the wholesaler;
the
wholesaler sells cases of beer to the retailer and orders cases of beer
from the factory depot; and the factory depot sells cases of beer to the
wholesaler and orders beer from the factory (brewery). The factory
brews the beer. For each week of play, every participant follows the
same cycle in this order and concurrently:
1.
2.
3.
4.
5.

Receive shipments and advance shipping delays.

Receive orders from your customer.
Ship cases of beer according to new orders and backlog,
subject to inventory availability.
Count inventory of cases of beer.
Place orders for (or brew) more beer.

There are only two costs involved in this simplified version of a logistics
supply chain: inventory holding costs (Rs.500/case/week) and
backorder costs (Rs.1000/case/week).
Each participant keeps track of his or her own costs. At the end of the
game, the total game cost for the distribution system is the sum of the
four individual participants, total costs (retailer cost + wholesaler cost
+ factory depot cost + factory cost).
Participants :
Four positions (or entities)
Factory (brewery), factory depot, wholesaler, and retailer.
position may be played by one or a group of participants.
In addition to these four positions there is a consumer.

Each

Action :
The game begins with a fully-loaded pipeline of material and order:
There are 8 cases of beer as current on-hand inventory for each entity.
In addition, each entity has 8 cases of beer in the pipeline. Of these, 4
cases of beer will be received in the 1 st week and the balance 4 cases
will arrive in the 2nd week. Moreover, each entity has placed an order
of 4 cases of beer on its supplier in the previous week.

The game is played for 40 weeks.

The ordering delay is one week. The shipping (production) delay
between any two participants is two weeks. For example, if the
wholesaler places an order of 14 cases of beer on the 10 th week, then
the factory depot receives the order on the eleventh week. If the
factory depot has on-hand inventory of at least 14 cases of beer on
that week then the wholesaler will receive the shipment at the
beginning of the 13th week.
However, if the factory depot has less
than 14 cases of beer (say, 8 cases) then 8 cases are immediately
shipped. The balance 6 cases are backlogged, to be satisfied later.
IMPORTANT : Each position can communicate orders in written
form only. No other form of communication is allowed between
positions. Communication is carried out between successive
stages only.
The Game :
All participants follow the five-step cycle.
1.

Receive your incoming inventory from your supplier (or the

brewery)l, and advance shipping delays.

2.

Receive orders from your customer.

3.

Fill (ship) orders: If your inventory is insufficient, fill as many

orders as you can and add the remaining unfilled order
amount to your backlog. You may not ship more beer than
what is ordered from you plus what is in your backlog.

4.

Count and record status -- current inventory and backlog.

You will never have cases in both current inventory and
backlog.

5.

Place orders.

6.

Go to Step 1.

End of Play : Construct a graph of (a) Net Inventory (InventoryBacklog) versus time and (b) Orders placed versus time.

The Beer Distribution Game

Week

Order Recd
from
Customer

On-Hand
Inventor
y

Backlog

Orders
placed on
supplier

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