Supply Chain Management

Prof. Larry Navarre presents a topic on the supply chain management and the Beer Game. He intends to help the supply chain team to understand the systematic issues experience in the supply chain and apply the learning from the beer game to improve the effectiveness of their supply chain. The beer game is a simulation for the roles played in the supply chain and it lest the participants experience the desired coordination issues of the supply chain. 

The first thing I understand from the beer game presented by Navarre is that it is designed to capture several challenges in supporting the dynamics of the chain practices. It challenges the participants to balance the supply and demand, handle the human factors crucial to the supply chain, address the bullwhip effect, facilitate communications, and meet the difficulties of the forecasting demand.

The other thing I understood from the clip is that the beer game helps in the forecasting. I also understand that even small changes by the consumer can mean large changes in the supply chain.  When these changes take place, a firm can move swiftly to counter the negative impacts these can have on the entire supply chain. The firm’s economic activity, as well as the prediction of the future events and their effects on the company or the supply chain, is possible when applying the beer game (Forkmann et al., 2012). However, according to Navarre, the most difficult thing to forecast is high technology innovations with this game being 80% wrong.

I also understand that the beer game, when used in the supply chain management can prepare the managers for the expectations of failure via the lead time and reduction of variations. While the supply chain managers, executives, and staffs learn of the failures in advance, their can set the stage to improve the supply chain performance and arrest the anticipated issues (Chaharsooghi,  Heydari, & Zegordi, 2008). The just-in-time management of the supply chain requires that all the participants in the chain act proactively to the issues detected so that they can have a competitive advantage over their rivals. The beer game can help in the earlier detection of any issues.

In the beer game, the participants “crack the whip.” The game begins with a steady demand, then the generation of an increase in demand, that in turn induces variations in the system. The supply chain participants attempt to compensate, and errors are amplified in the process. According to the bullwhip effect, the managers who act in isolation with a little amount of information make decisions that are in turn magnified upstream leading to stockouts as well as overstocking throughout the chain (Paik & Bagchi, 2007). I also got to understand the factors leading to bullwhip effect including the lead time effect on the supply chain, the effect of batch ordering, the magnification of the impacts of inflated orders, the demand forecasting inaccuracy, and information and decision isolation.

This video clip was also helpful in helping me understand the strategies for mitigating the bullwhip. These include the reduction of uncertainty, reduction of variability, reduction of lead time, and collaboration. There has to be a good collaboration with the customers and suppliers, improved forecast accuracy, quick decisions with visibility and understanding, and reduction of delays in the chain. Also, according to Seuring and Müller (2008), the keys to effective supply chain management includes visibility, open communication as well as quick access to the desired information and insight. They continue to say that, with these attributes in place, the supply chain is more effective and the risk of excess inventory ad inventory shortages can be minimized.

References

Chaharsooghi, S. K., Heydari, J., & Zegordi, S. H. (2008). A reinforcement learning model for supply chain ordering management: An application to the beer game. Decision Support Systems, 45(4), 949-959.

Forkmann, S., Wang, D., Henneberg, S. C., Naudé, P., & Sutcliffe, A. (2012). Strategic decision making in business relationships: A dyadic agent-based simulation approach. Industrial Marketing Management, 41(5), 816-830.

Kettering University (2012, June 5). Supply Chain Management: The Beer Game. 

Paik, S. K., & Bagchi, P. K. (2007). Understanding the causes of the bullwhip effect in a supply chain. International Journal of Retail & Distribution Management, 35(4), 308-324.

Seuring, S., & Müller, M. (2008). From a literature review to a conceptual framework for sustainable supply chain management. Journal of cleaner production, 16(15), 1699-1710.

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