1 THE BEER GAME DEBRIEFING

2 The Blame Game How did you feel? Who did you blame?

3 Summary of Each Team’s Orders, Inventories, & Total Cost Go to Excel Workbook

4 CHARACTERISTICS OF THE GRAPHS OF WEEK-BY-WEEK ORDERS AND INVENTORY  Oscillation “Peaks” and “Valleys”  Amplification of Orders Placed As R  W  D  F, there are higher and higher peaks and lower and lower valleys.  Phase Lag As R  W  D  F, the start of an increase to a peak or a decrease to a valley occurs later and later.

5 A FINANCIAL NEWS REPORT “On Wall Street today, news of lower interest rates sent the stock market up, but then the expectation that these rates would be inflationary sent the market down, until the realization that lower rates might stimulate the sluggish economy pushed the market up, before it ultimately went down on fears that an overheated economy would lead to a reimposition of higher interest rates.” From a cartoon by Mankoff (October 12, 1981).

6 MOTOROLA ARTICLE From Business Week, March 6, 1995.

7 U.S. ECONOMY

8 HOW CAN WE IMPROVE PERFORMACE? Understand how the game’s structure influences the behavior of the players. Supply Chain Management

9 “Take two aspirin and wait!” “If you have a headache and need to take aspirin, you don’t keep taking aspirin every five minutes until your headache goes away. You wait patiently for the aspirin to take effect, because you know that aspirin operates with a delay.” From The Fifth Discipline, by Peter M. Senge, 1990.

10 Panic!!! (Order Placed) = (Recent Incoming Order)-(Inventory)+(Backlog) (NOTE: If above quantity is < 0, then reset Order Placed to 0.)

11 1-for-1 Ordering (Order Placed) = (Incoming Order)

12 A “Scientific” Policy For R,W,D: (Order Placed) = 16–(Inventory)+(Backlog)–(Undelivered Orders) For F: (Order Placed) = 12–(Inventory)+(Backlog)–(Undelivered Orders) (NOTE: If above quantity is < 0, then reset Order Placed to 0.)

13 Perfect Information What if it were known in advance that the customers’ week-by-week demand would be …?

14 AND THE WINNER IS … ???