Beer Game

The Beer Game Copyright by Professor John Sterman, MIT October 1984 Sources:http://www. sol-ne. org/pra/tool/beer. html The Fifth Discipline: Pg 27-54 Why play the ‘Beer Game’? Instructions for running the game Steps of the Game Outline for post-game discussion and tasks Supplies Checklist & Mock-up of the Game Board Bibliography CHARTS AND TABLES TO PRINT OUT: [only issue Table 1 and 2 at the onset of the game. Chart 1-3 to be distributed at the end of the game and before post-game discussion. ] Table 1:Record Sheet: Cost of Inventory and Backlog Table 2:Computation of cumulative inventory backlog

Graph 1:Inventory and Backlog Graph 2:Orders Graph 3:Perceived order by Customers Slide 1:Facilitator Slides Slide 2:Facilitator Slides Slide 3:Facilitator Slides Slide 4:Facilitator Slides Slide 5:Facilitator Slides Slide 6:Facilitator Slides Slide 7:Facilitator Slides Slide 8:Facilitator Slides Contact Point for loan of Beer Game Set: If you or your unit is interested in playing this game and need assistance, please contact any of the 1Y LO participants, including the webmaster: Ms Sheila Damodaran at [email protected] gov. sg. The game sets are kept at TRACOM’s Resource Centre (SIRC, TRACOM).

Contact: 3594241. Why play the Beer Game? The Fifth Discipline, pg 27 [Prisoners of the System, or Prisoners of our Thinking] This game was developed by Professor John Sterman of MIT to introduce people to fundamental concepts of systems dynamics. Participants experience the pressure of playing a role in a complex system, and come to understand first hand a key principle of systems thinking that structure produces behavior. The Beer Game is a simulation exercise – like a laboratory experiment, where one is able to see: ? The consequences of your decisions play out more clearly in real organisations; In effect it presents a microcosm of how a real organization functions. ? Shift in prevailing assumption of what is required of us for creating fundamentally different organisations; from a perspective of “the system we are trying to change is out there and we (as change agents) are trying to fix it” to “we and the system are inextricably linked together”. It was first developed in the 1960s at the Massachusetts Institute of Technology’s Sloan School of Management. Because it is a “laboratory replica” of a real setting (rather than reality itself), we can: Isolate the disabilities, and; ? Their causes more sharply than is possible in real organisations. Often this reveals that the problems originate in basic ways of thinking and interacting, more than in peculiarities of organisations and policy. Instructions for Running The Beer Distribution Game John Sterman October 1984 This document outlines the protocol for the beer distribution game developed to introduce people to concepts of system dynamics. The game can be played by as few as four and as many as 60 people (assistance is required for larger groups).

The only prerequisite, besides basic math skills, is that none of the participants have played the game before, or else agree not to reveal the “trick” of the game. 1. State purpose of Game: a) Introduce people to the key principle “structure produces behavior” b) Experience the pressures of playing a role in a complex system 2. Provide overview of production-distribution system: a) The game is played on a board, which portrays the production and distribution of beer (show board game). [pic] b) Orders for and cases of beer are represented by chips, which are manipulated by the players.

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The players at each position are completely free to make any decision that seems prudent. Their only goal is to manage their positions as best as they can to maximise profits. c) Each brewery consists of four sectors: retailer, wholesaler, distributor and factory. One person manages each sector. d) A deck of cards represents customer demand. Each week, customers demand beer from the retailer, who ships the beer requested out of inventory. The retailer in turn orders beer from the wholesaler, who ships the beer requested out of the wholesaler’s inventory.

Likewise, the wholesaler orders and receives beer from the distributor, who in turn orders and receives beer from the factory. The factory produces the beer. At each stage there are shipping delays and order receiving delays. These represent the time required to receive, process, ship and deliver orders, and as well be seen play a crucial role in the dynamics. e) If your participants are not familiar with the concept of manufacturing, shipping, and distribution, consider presenting these concepts initially before proceeding. Call the participants together at one board and demonstrate each step of the way carefully.

Often it is the lack of this information that causes the initial confusion of the game. You could say something like: “The Beer Game immerses us in a type of organization that is widely prevalent in all industrial countries: a system for producing and distributing a single brand of beer. There are four main characters in the story – a retailer, a wholesaler, a distributor and the Marketing Director of a brewery … f) The players at each position are completely free to make any decision that seems prudent. All they have to do is meet customer demand and order enough from your own supplier while avoiding costly backlogs.

They should manage their positions as best as they can to maximise profits. 3. State Basic rules: a) Have each team pick a name for their brewery (e. g. the name of a real beer). Have them label their record sheets with the name of their brewery and their position, e. g. retailer, wholesaler, etc. b) Have each person ante up $1. 00, or an appropriate amount, which will go to the winning team, winner take all (optional). c) The object of the game is to minimize total costs for your team. The team with the lowest total costs wins. Costs are computed in the following way: ? The carrying costs of inventory are $. 0 per case per week ? Out-of-stock costs, or backlog costs, are $1. 00 per case per week ? The costs of each stage (retailer, wholesaler, distributor, factory) for each week, added up for the total length of the game, determine the total cost. d) No communication between sectors. Retailers should not talk to anyone else, same for wholesalers, distributors, and factories. The reason for this is that in real life there may be five factories, several dozen distributors, thousands of wholesalers, and tens of thousands of retailers, and each one cannot find out what the total activity of all the others is.

The only communication between sectors should be through the passing of orders and the receiving of beer. e) Retailers are the only ones who know what the customers actually order. They should not reveal this information to anyone else. f) All incoming orders must be filled. If your inventory is insufficient to fill incoming orders plus backlog, fill as many orders as you can and add the remaining orders to your backlog. 4. Steps of the Game. a) Issue only Table 1 and Table 2 to all the participants. b) The game Facilitator should call out the steps as the game progresses. ) The first few times when the system is still in equilibrium the facilitator should go through the steps very slowly to make sure people have the mechanics down. d) Notice that of the six steps of the game, only the fifth, placing orders, involves a decision. e) The remaining five steps only involve moving inventory of beer or order slips or recording your position, and are purely mechanical. For the first few weeks the facilitator should tell everyone to order four units to keep the system in equilibrium. 5. Initialization of the boards: ) There should be twelve pennies or chips representing twelve cases of beer in each inventory. Each chip or penny represents one case. There should be four pennies in each shipping box and production delay. b) There should be order slips with “4” written on them, face down in each incoming and outgoing order box (orders and production requests). A supply of blank order slips should be available at each sector, as well as a supply of pennies or chips. c) The deck of cards with the customer demand should not be revealed in advance.

The pattern of customer demand that is most effective for first-time players is a pattern of (…. To be revealed after the game/debrief by the Game Leader). d) Each order deck should have fifty weeks’ worth of cards, and the players should be told that the game will be fifty weeks long. Typically it’s only necessary to run the game thirty-five weeks or so in order to see the pattern of fluctuation, but telling the players it will be fifty weeks prevents horizon effects, where they run their inventories down because they feel the end of the game is coming. 6. Tips for Facilitators: ) It’s very helpful if the game facilitator makes sure that each team stays in step so that you can quickly glance around the room and see that everyone is at the right place. Remind the participants to follow the steps in order to keep pace of the game. b) The game facilitator should write the current week on the blackboard as the steps for that week are called out. c) In about the eighth or ninth week the retailer will run out of inventory and have a backlog for the first time. People do not understand the meaning of backlogs, or the cumulative nature of the backlog.

It is necessary to stop the game at this point, ask everyone to pay attention, and explain how backlog accounting works. Explain that: The backlog represents orders you’ve received, but have not yet filled, and which you must fill in the future, and d) The backlog is cumulative. “Next week you have to fulfill the incoming orders that you receive, plus whatever is in your backlog, if possible. If it not possible to fulfill the incoming orders, then the amount left over is added to the existing backlog and must be filled in later weeks. ” (see Table 2). ) Emphasize at this point that backlog costs twice as much as inventory. You may need to do this one or two more times, and should be careful to check and be sure that they do in fact fill their backlog. It is helpful to write the following equation on the blackboard to help with backlog accounting (see below). Orders to fill = New orders + Backlog this week + last week + … f) The game can be played in as little as one and a half hours if the facilitator maintains a very brisk pace. The debriefing usually requires at least 40 minutes and can be expanded substantially. g) Consider having 2 persons to play each role.

One person is responsible for taking the decision and advancing the chips and order slips and the other person to maintain the figures and filling up Tables 1 and 2. The pair may switch their roles mid-way during the game. 7. End of game a) Halt the game after about 36 weeks (but play the game, up to that point as if it is going on to 50 weeks, to avoid unusual end-of-game moves). b) Ask each position on each team to calculate their total cost: c) Cost = Total inventory x $0. 50 + Total Backlog x $1 and to mark the total cost on the Record Sheet for the position d) Pass out Orders graph sheets – one to each position.

Ask each position to graph their own orders, week by week. Clarify to Factory that they will graph their Production Requests. e) Pass out Effective Inventory graph sheets – one to each position. Ask each position to graph the inventory week by week, showing any backlog as negative inventory. f) Team name and position must be indicated on all sheets. Once the graph is complete, have the players connect the dots with a bold magic marker (colour coded – Retailer = black, Wholesaler = blue, Distributor = green and Factory = red – to the board) for ease of viewing by the group. ) Pass out the Customer Order graph sheets to everyone except Retailers. Ask each person to sketch what he or she thinks the customer order rate looked like over time. Ask each to indicate a simple scale or maximum value. ? Ask retailers not to discuss anything about customer orders until after the debrief of the game. h) Collect all the sheets, and send players off for a break. i) During break: ? Calculate team costs to determine the winner and compute the average team cost. ? Tape sheets together (as shown below) and hang up team graphs.

Effective Inventory Team 1Team 2Team 3 |Retailer | |Retailer | |Retailer | | |Wholesaler | |Wholesaler | |Wholesaler | | |Distributor | |Distributor | |Distributor | | |Factory | |Factory | |Factory | |

Orders/Production Requests Team 1Team 2Team 3 |Retailer | |Retailer | |Retailer | | |Wholesaler | |Wholesaler | |Wholesaler | | |Distributor | |Distributor | |Distributor | | |Factory | |Factory | |Factory | |

STEPS OF THE GAME (Adapted) |Step # |General instructions |Specific Instruction to players playing the roles| | | |of Factory/ Retailer | | |Receive inventory (move chips from shipping delay 2 into current |Factory advance from production delay 1 to | | |inventory) and advance the shipping (from shipping delay 1 to |production delay 2. | |shipping delay 2). | | | |Use both hands to slide the chips over from respective boxes. | | | |Caution players not to move all chips into one box]. | | | |Look at incoming orders (check the order slip placed in your |Retailer draws consumer card. Follow | | |inbox) |instructions as in adjacent set. ] | | |Fulfill orders from your stock (your current inventory only). | | | |Move chips out into shipping delay 1 of the player downstream. | | | |All incoming orders must be filled. Facilitator to re-mention | | | |this step when the team has entered week 6/8) If your inventory | | | |is insufficient to fill incoming orders plus backlog, fill as | | | |many orders as you can and add the remaining orders to your | | | |backlog (use Table 2 to work out your cumulative backlog). | | |Record your balance inventory and/or cumulative backlog (in the | | | |latter case your balance inventory would have been reduced to | | | |zero) on Table 1. | | | |Advance the rder slips that you placed in the previous week from|Factory introduces production requests from | | |your outbox into the inbox of the player upstream. |previous week into production delay 1. | | |Take decision on the orders you wish to place for the upcoming | | | |week. Place your order slips in your outbox. | | | |Record your orders on Table 1. | FOLLOW-UP TASKS AND OUTLINE FOR POST-GAME DISCUSSION (Adapted) |Step # |Tasks and outline |Group Task | | |Remind participants of the objective |Emphasize that although they played the game to minimize cost, that’s | | |of the game. |not the real purpose of the game. | | | | | | |The game is designed to: | | | |give players an experience of playing a role in a system | | | |show them how “structure produces behavior” | | |Request players tabulate total current|None. | |inventory, cumulative inventory on | | | |Table 1. | | | |Accounting: |None. | | |Record penalty of $0. 50 per item in | | | |inventory (at each stage). | | | |Record penalty of $1. 0 per item | | | |ordered but not filled. | | | |Plot inventory versus time (Chart 1) |Place charts at front of classroom for everyone to see (see typical | | |and unfilled orders (on Chart 1 also) |chart below). | | |versus time for your stage and for | | | |your company overall. | | | | | | |Plot order versus time (Chart 2) for |Place charts at front of classroom for everyone to see (see typical | | |your stage and for your company |chart below). | | |overall. | | | | | | | | | | | | | | | | | | | | | | |Ask participants: |Each of the players had the best possible intentions: to serve his | | |What’s going through the minds of the |customers well, to keep the product moving smoothly through the system, | | |players? |and to avoid penalties. Each participant made well-motivated, clearly | | |What problems arose during the game |defensible judgments based on reasonable guesses about what might | | |playing? |happen.

Still there was a crisis- built into the structure of the | | | |system. | | | | | | | |Most people try to explain reality by showing how one set of events | | | |cause another or, if they’ve studied a problem in more depth, by showing| | | |how a particular set of events are part of a longer term historical | | | |process. | | | | | | |Have the participants illustrate this for themselves by looking at their| | | |own “explanations” for events during the game. | | | | | | | |Take a particular incident in the game, for example a large surge in | | | |production requests at the factory, and ask the person responsible why | | | |they did that. | | | | | | |Their answer will invariably relate their decision to some prior | | | |decision of the person they supply or who supplies them. Then turn to | | | |that person and ask them why they did that. Continue this until people | | | |see that one can continue to relate one event to earlier events | | | |indefinitely. | | | | | | |Wholesaler/Distributor may say: “I am ordering four/fives times my usual| | | |order. Maybe the retailer is ordering so much because they can’t get | | | |any of the beer from me. Either way I have to keep up. I am dismayed | | | |the brewery had just stepped up production. How could they be slow? | | | |What if I can’t get any of the beer and they go to one my competitors? | | |The backlog costs due. I am afraid to tell the accountant what to | | | |expect. ” | | | | | | | |Retailer may say: “I ordered more just to be safe and to keep up with | | | |the sales. I don’t want to get a reputation for being out of stock of | | | |popular beers.

By the time I call my backlogged customers, I am sold | | | |out before I can sell a single new case. What is that wholesaler doing | | | |to me? Doesn’t he know what a ravenous market we have down here? I | | | |think of all the lost potato chip sales” | | | | | | | |Brewery may say: “Even after Week 14 I had not caught up with the | | | |backlogs.

At Week 16 I have finally caught up but the distributors had | | | |not asked for any more beer at all? Why did the order mushroom and then| | | |die? ” | | | | | | | |“The orders have finally arrived but what’s wrong with the retailers? | | | |Why have they stopped ordering? ” | | | | | |Briefly describe what strategy you |After a few minutes (about 10) of discussion, look at the graphs of the | | |developed during the game for making |results. Ask them, “What commonalities do you see in the graphs for the| | |ordering decisions. |different teams? ” | | | | | | | |Participants should see common pattern of overshoot and oscillation. | | | |This should be most evident in the effective inventory graph. | | | | | | |Get them to really see for themselves that different people in the same | | | |structure produce qualitatively similar results. Even though they acted | | | |very differently as individuals in ordering inventory result (there was | | | |free will), still the overall patterns (qualitative pattern) of behavior| | | |are similar. | | | | | | |This is a very important point–take as long as necessary to have them | | | |see it for themselves. | | | | | | | |Obviously at the factory, the Marketing Director will be blamed for any | | | |layoffs or plant closings that come out of this crisis – just as the | | | |wholesaler blamed the retailer and the retailer blamed the wholesaler | | | |and oth wanted to blame the factory. | | | | | | | |You might reflect at this point on what happens in the real world when | | | |such performance target oscillations are generated. The typical | | | |organizational response is to find the “person responsible” (the guy | | | |placing the orders or the inventory manager) and blame him. | | | | | | |The game clearly demonstrates how inappropriate this response | | | |is–different people following different decision rules for ordering a | | | |generated oscillation. | | |Plot what you think was the customer |After having had them all see the extent to which different people | | |order over time (Chart 3) during the |produce similar results in a common structure, you then need to move on | | |game. |to what is usually the most powerful point made by the game: that | | | |internal structure not external events cause system behavior. | | | | | | |The way to make this point is to ask the following question: | | | | | | | |”All of you who were not retailers, or who otherwise have not found out | | | |what the pattern of customer orders was, what do you think the customers| | | |were doing? ” | | | | | | | |Most people usually believe that customer demand was fluctuating because| | | |they believe that the system fluctuations must have been externally | | | |driven. Most draw a curve which rises and falls, just as their orders | | | |rose and fell. | | | | | | |Get each of them (other than retailers) to see that they assumed | | | |fluctuating customer orders. | | |Retailer in your team to plot actual |Draw in each order rate graph the actual customer ordering pattern. The| | |customer order on the same chart. |small step from 4 to 8 orders should make a strong visual impression in | | | |contrast to the order rate fluctuations which often have amplitude of | | | |20- to 40-orders per week.

Moreover, the sustained oscillations | | | |generated by the system contrast sharply to the absolutely flat customer| | | |order rate after the step at week 5. | | | | | | | |The Retailer may respond with: “The demand never mushroomed. And it | | | |never died out. We still sell eight cases of beer – week after week. | | | |But you didn’t send us the beer we wanted. So we had to keep ordering, | | | |just to make sure we had enough to keep up with our customers”. | | | | | | | | | | | | | | |This simple exercise of getting them to see how, contrary to their | | | |expectations, the internal system structure is completely capable of | | | |generating fluctuating behavior is the most profound lesson they can | | |Are the oscillations due to external |learn from the game. | | |or internal reasons? | | | |It is important that they see this for themselves, as a demonstration or| | | |an experimental result, which they did, not as an idea of which you’re | | | |trying to convince them. In fact, the game is an experiment in very true| | | |sense. The result of oscillating behavior was not predetermined. | | | | | | | |The assumption that the system’s problems are caused by the customer | | | |stems from our deeply felt need to find someone or something to blame | | | |where there are problems. | | | | | | |Initially after the game is over, many believe that the culprits are the| | | |players in the other positions. This belief is shattered by seeing that| | | |the same problems arise in all plays of the game, regardless of who is | | | |manning the different positio ns. Many then direct their search for a | | | |scapegoat toward the consumer. | | | | | | |But when their guesses are compared with the flat customer orders, this | | | |theory is shot down too. This has a devastating effect on some players. | | |In the last 20 years, the beer game |If literally thousands of players all generate the same qualitative | | |has been played thousands of times in |behaviour pattern the causes of the behaviour must lie beyond the | | |classes and management training |individuals. The causes of the behaviour must lie in the structure of | | |seminars. It has been played on five |the game itself. | |continents, among people of all ages, | | | |nationalities, cultural origins and |When placed in the same system, people however different, tend to | | |vastly varied business backgrounds. |produce similar results. | | |Some had never heard of a production/ | | | |distribution system before; others had|In system dynamics we take an alternative viewpoint—that the internal | | |spent a good portion of their lives |structure of a system is more important than external events in | | |working in such businesses. |generating qualitative patterns of behavior. | | | |A system causes its own behaviour. In the game.

The structure that | | |Yet every time the game is played the |caused wild swings involved the multi-stage supply chain and the delays | | |same crises ensue. First there is |intervening between different stages (refer Tools on ST), the limited | | |growing demand that can’t be met. |information available (refer Tools on TL) at each stage in the system, | | |Orders build throughout the system. |and the goals, costs, perceptions and fears (refer Tools on MM) that | | |Inventories are depleted. Backlogs |influenced individuals’ orders for beer. | | |grow. Then the beers arrive enmasse | | | |while incoming orders decline. |These an be illustrated by this diagram: | | | | | | |By the end of the experiment, almost | | | |all players are sitting with large |Events | | |inventories they cannot unload –e. g. |(e. g. inventory backlogs and surges) | | |it is not unusual to find brewery and | | | |distribution inventory levels in the | | | |hundreds over hanging orders from | | | |wholesalers for 8-12 cases per week. Patterns | | | |(Panic behaviours / oscillations) | | | | | | | | | | | | | | | |Structure | | | |(only form of communication is through order slips, the use performance | | | |measures by inventory and order sizes and the effect of delays – from | | | |upstream) | | | | | | | |But also remember the nature of structure in a human system is subtle | | | |because we are a part of it and this means we often have the power to | | | |alter structures, which we are operating. | | | | | | | |How can such controlling structures be recognised? | | | | | | | |Characteristic pattern of order buildup and decline at each position, | | | |amplified in intensity as you move upstream from retailers to breweries. | | | | | | |Each position goes through an inventory-backlog cycle: first there is | | | |insufficient inventory and then there is too much. | | | | | | | |Assumptions of an external cause (e. g. the other players or the | | |Think of examples in your |customer) are characteristics of non-systemic thinking. | |organisations where you can apply | | | |these principles. When we feel: |How would such knowledge help us to be more successful in a complex | | |Too much work? |system – redefining your scope of influence? | | |Not enough information? | | | |Too many changes? |Each player adopts the simplest ordering policy possible – simply place | | |Not able to manage changes? |new orders equal to orders he received. When this strategy is followed | | |Someone is unfair to you? unswervingly by all the players, all positions settle into stability by | | |Customers are demanding? |Week 11. The strategy may generate persistent backlogs (may not be | | | |practical in real life as it invites competitors to enter the market) | | | |but it eliminates the buildup and collapse in ordering and the | | | |associated wild-swings in inventories. In 75% of teams that play the | | | |game, the “no strategy” position have a lower total cost. | | |Most players see their job as “managing their position” in isolation | | | |from the rest of the system. What is required is to see how their | | | |position interacts with the larger system – your influence is broader | | | |than simply of your own position. | | | |You pay close attention to own inventory, costs, backlog, orders, etc. | | | |(events).

You respond to new orders by shipping out beer. What this | | | |view misses, is the ways that your order influences your supplier’s | | | |behaviour. Which in turn might influence yet another supplier’s | | | |behaviour. For example, if they place a large number of orders, they | | | |can wipe out their supplier’s inventory, thereby causing their | | | |supplier’s delivery delay to increase.

If they then respond by placing | | | |still more orders, they create a “vicious cycle” that increases problems| | | |throughout the system (see below). Players that share the systems | | | |viewpoint tends to win – in order for you to succeed others must succeed| | | |as well. | | | | | | | |Causal Diagram of effect of systemic structure downstream & delays | | | |upstream | | | | | | | | | | |(see overleaf) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |What do you believe to be the causes |This is a good point to introduce learning disabilities and our ways of | | |of these problems? thinking in an organization: | | | | | | | |Fixation on events – Each player focuses on events giving very little | | | |power to alter the course of events at a structural or strategic levels. | | | |I am my position – because they “became their positions”, people do not | | | |see how their own actions affect the other positions. | | |The enemy is out there – The game reveals the problems originate in | | | |basic ways of our thinking and interacting, more than in peculiarities | | | |of organisations and policy. Often when problems arise, people quickly | | | |blame each other – “the enemy” becomes the players at the other | | | |positions, or even the organization structure and polices and/or | | | |customers. | | |The illusion of taking charge – when they get “proactive” and place more| | | |orders, they make matters worse. | | | |The parable of the boiled frog – because their overordering builds up | | | |gradually, they don’t realise the direness of their situation until its | | | |too late. | | | |Delusion of learning from experience – by and large they don’t learn | | | |from their experiences because the most important consequences of their | | |actions occur elsewhere in the system, eventually coming back to create | | | |the very problems they blame on others. | | | |The Myth of the Management Team – the teams running the different | | | |positions become consumed with blaming the other players for their | | | |problems, precluding any opportunity to learn from each others’ | | | |experience. | | |What could we do to potentially change|Analysis using Levels of Perspective tool: | | |the behaviour observed in the game? Espoused Vision: Everybody working as a team | | | |Vision-in-Use: I am my position | | |Check-up the Vision-Deployment Matrix. |Systemic Structure-in-use: No communications, minimising losses for | | | |one’s position and overanticipating the orders | | | |Patterns-in-use: Are not able to meet orders in time and having to deal | | | |with delayed productions and over-doers in the long-run. | | | |Events: Is constantly reacting leading to frustrations and burnouts in | | | |the long-run. | | |Desired Systemic Structure: First, wait patiently for the beer that you | | | |have ordered but because of the delay, it has not yet arrived. Second, | | | |don’t panic. It takes discipline to contain the overwhelming urge to | | | |order more when backlogs are building and your customers are screaming. | | | |Without the discipline, you and everyone will suffer. Third, assume a | | | |”No strategy” approach can actually work. | | |Shift in prevailing assumption of what is required of us for creating | | | |fundamentally different organisations; from: | | | |Firstly, a perspective of “the system we are trying to change is out | | | |there and we (as change agents) are trying to fix it” to “we and the | | | |system are inextricably linked together”. | | | |Secondly, a perspective of serving the team rather than the “individual”| | | |is who counts here; watch out for Number One! | SUPPLIES CHECKLIST PER TEAM: |3 TEAMS |4 TEAMS |5 TEAMS |6 TEAMS | |Game Board |3 |4 |5 |6 | |Single Chips |600 |840 |960 |1200 | |Ten Chips |90 |120 |150 |150 | |Customer Deck (1) |3 |4 |5 |6 | |Order Slips (200) |600 |800 |1000 |1200 | |Graphs (4) |12 |16 |20 |25 | |Record Sheets (4) |12 |16 |20 |25 | |Pencils (4) |12 |16 |20 |25 | |Calculators (4) |12 |16 |20 |24 | |PER SESSION: |Masking Tape | |Four-color markers per team | |Magic Markers | |Debriefing Book | |Flip Charts | |Either white board to hold charts for each organization or space on a blank wall | |Previous game graphs | |Table set ups | [B]- Items are not available with the game set. Please provide required sets. [I]- Items are not available with the game set. Please make required number of copies. MOCK GAME BOARD [pic] Table 1: Cost of Inventory and Backlog Team Name: _______________________ Circle your position:WholesalerRetailerDistributorFactory Wk | | |INV 1 = | |This week’s order from customer: _____ |This week’s order from customer: _____ | |last week’s backlog: + _____ |last week’s backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ |this week’s shipments: – _____ |this week’s shipments: – _____ | |this week’s backlog: = _____ |this week’s backlog: = _____ | |This week’s order from customer: _____ |This week’s order from customer: _____ | |last week’s backlog: + _____ |last week’s backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week’s shipments: – _____ |this week’s shipments: – _____ | |this week’s backlog: = _____ |this week’s backlog: = _____ | |This week’s order from customer: _____ |This week’s order from customer: _____ | |last week’s backlog: + _____ |last week’s backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week’s shipments: – _____ |this week’s shipments: – _____ | |this week’s backlog: = _____ |this week’s backlog: = _____ | |This week’s order from customer: _____ |This week’s order from customer: _____ | |last week’s backlog: + _____ |last week’s backlog: + _____ | |total orders to ship: = _____ |total orders to ship: = _____ | |this week’s shipments: – _____ |this week’s shipments: – _____ | |this week’s backlog: = _____ |this week’s backlog: = _____ | Graph 1: My Inventory (including Backlog) Team Name: _______________________ [pic] Graph 2: My Orders Team Name: _______________________ [pic] Graph 3: My perception of orders by customer Team Name: _______________________ [pic] The Beer Distribution Game An Annotated Bibliography Covering its History and Use in Education and Research Prepared by John D. Sterman Sloan School of Management Massachusetts Institute of Technology Cambridge, MA 02139 (617) 253-1951 (voice); (617) 253-6466 (fax); [email protected] edu (email) April 1992; revised July 1992 The Beer Distribution Game dates to the earliest days of system dynamics.

The game has been used for three decades as an introduction to systems thinking, dynamics, cumputer simulation, and management. It has been played by thousands of people, all over the world, from high-school students to CEOs of major corporations. The references below provide useful information for those who want to follow up the experience of the game. These works describe the history of the game, the equations for simulating the game on a computer, the success of organizational change efforts based on the original model embodied in the game, the psychological processes people use when playing, and even how these processes can produce chaos. * ? Forrester, J. W. (1958) Industrial Dynamics: A Major Breakthrough for Decision Makers.

Harvard Business Review, 36(4), July/August, 37-66. The first asrticle in the field of system dynamics. Presents the production-distribution system as an example of dymanic analysis of a business problem. Reprinted in Roberts (1978). ? Forrester, J. W. (1961) Industrial Dynamics. Cambridge, MA: MIT Press. Contains a description of an early version of the Beer Distribution Game ? MacNeil-Lehrer Report, (1989) Risky Business – Business Cycles, Video, Public Broadcasting System, aired 23 October 1989. Videotape showing students in John Sterman’s Systems Dymanics course at MIT playing and discussing the Beer Game. Relates the game to boom and bust cycles in the real world.

Excellent in debriefing the game, and helpful to those seeking to learn how to run the game. Copies available from System Dynamics Group, E60-383, MIT, Cambridge MA 02139. ? Mosekilde, E. , E. R. Larsen & J. D. Sterman (1991). Coping with complexity: Deterministic Choas in human decision making bahavior. In J. L. Casti & A. Karlqvist (Eds. ), Beyond Belief: Randomness, Prediction, and Explanation in Science, 199-229. Boston:CRC Press Shows how simple and reasonable decision rules for playing the Beer Game may produce strange nonlinear phenomena, including deterministic chaos. ? Radzicki, M. (1991). Computer-based beer game boards. Worcester Polytechnic Institute, Dept. f Soc Sci and Policy Studies, Worcester, Ma 01609-2280 Beer game boards in PICT format for Macintosh computers available on disk for $5. 00; all proceeds go to the System Dynamics Society. ? Thomsen, J. S. , E. Mosekilde, & J. D. Sterman (1992). Hyperchaotic Phenomena in Dynamic Decision Making. Systems Analysis and Modelling Simulation, forthcoming. Extends earlier papers by Moskilde, Sterman, et al. to examine hyperchaotic modes in which the behavior of the beer distribution system may switch chaotically among several different chaotic attractors (for afficionados, “hyperchaos” exists when a dynamical system contains multiple positive Lyapunov exponents). ? Roberts, E. B. , ed. (1978) Managerial Applications of System Dynamics.

Cambridge, MA: Productivity Press. Excellent anthology of early-applied system dynamics work in organizations, including analysis of efforts to implement the results of the model which led to the Beer Game. ? Senge, P. (1990) The Fifth Discipline. New York: Doubleday. Excellent non-technical discussion of the Beer Game, and systems thinking principles generally. ? Sterman, J. D. (1984). Instructions for Running the Beer Distribution Game. D-3679, System Dynamics Group, MIT, E60-383, Cambridge, MA 02139. Explains how to run and debrief the Beer Game, including layout of boards, set up, play, and discussion. Incorporates debriefing notes by Peter Senge.

Some people have found this document, in conjunction with the MacNeil/Lehrer video and plenty of practice, is sufficient to enable them to lead the game successfully. ? Sterman, J. D. (1988). Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiemnt. Management Science, 35(3), 321-339. Detailed analysis of Beer Game results. Examines why people do so poorly in the Beer Game. Proposes and tests a model of the decision making processes people use when playing the game and shows why they do so badly. Additional information on systems dynamics, including publications, simulation games, management flight simulators, journals, etc. is available from John Sterman at the address above. *If you know of additional publications which discuss aspects of the game not ncluded in this bibliography please send a copy to John Sterman at the address above so they can be incorporated in future releases of this bibliography. ———————– [1] Order fulfilled Cost Storage] Total Inventory Balance(w=t) = Inventory Balance(w=t-1) + New Inventory Received(w=t) [2] Balance Inventory After fulfilling Order(w=t) = Total Inventory Balance (w=t) – Order Fulfilled (w=t) [3] Cumm Backlog (w=t) = New Backlog (w=t) + Unfulfilled Cumm Backlog(w=t-1) ———————– Reta

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