1. 1 THE BEER GAME

2. 2 THE BOARD

3. 3 START-UP 1.Pick a name for your team’s beer. 4.Everyone contributes CHF 2 to the “pot”. Winning team takes all! 2.Decide which team members will play the positions of Retailer, Wholesaler, Distributor, and Factory. 3.Write on your Recording Form the name of your team and your position.

4. 4 START-UP (continued) 5.The object of the game is to minimize the team’s total costs. At the end of each week, costs are incurred in the following two ways: For each case of beer in inventory, there is a carrying cost of $1. For each case of backlogged beer, there is a stock-out cost of $2.

5. 5 START-UP (continued) 6.No communication is permitted between the Retailer, Wholesaler, Distributor, and Factory. 8.The game will continue week-by-week for 50 weeks. 7.During each week, the Retailer is the only one to see the customers’ actual demand. The Retailer is prohibited from telling the demand to the Wholesaler, Distributor, and Factory.

6. STEPS OF THE “BEER GAME” STEP 1: “Advance Delays and receive Inventory.” Advance the beer in the two Delays to your right, adding incoming beer (if any) to your Inventory. STEP 2: “Look at Incoming Order, and fill Backlog & Order.” Look at the Incoming Order and, to the extent possible, fill the Backlog first and then the Incoming Order. STEP 3: “Record Inventory or Backlog.” On your form, record new Inventory or Backlog. STEP 4: “Advance Order Slips, and Factory brew beer.” Retailer: Place Incoming Order Card face-down in the pile of Used Order Cards. Wholesaler & Distributor: Discard the Incoming Order Slip and advance your successor’s Order Placed Slip to your Incoming Order. Factory: Discard the Incoming Order Slip and advance your successor’s Order Placed Slip to your Incoming Order. Also, brew new beer by placing the quantity on the Production Order Slip into the right-most Production Delay, and then discard the Slip. STEP 5: “Place and record your Order.” Retailer, Wholesaler, & Distributor: Write your next order on a new Order Placed Slip, place it face-down in the Order Placed Box, and record the quantity on your form. Factory: Write your next order on a new Production Order Slip, place it face-down in the Production Order Box, and record the quantity on your form.

7. 7 Step 2: Example #1 STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then ( Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped)

8. 8 Step 2: Example #2 STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then ( Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped)

9. 9 Step 2: Example #3 STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then ( Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped)

10. 10 Step 2: Example #4 STEP 2: “Look at Incoming Order, and fill Backlog & Order.” (Orders to Fill) = (Current Backlog) + (Incoming Order) If (Current Inventory) >= (Orders to Fill), then ( Quantity Shipped) = (Orders to Fill) (New Inventory) = (Old Inventory) - (Quantity Shipped) (New Backlog) = 0 If (Current Inventory) < (Orders to Fill), then (Quantity Shipped) = (Current Inventory) (New Inventory) = 0 (New Backlog) = (Orders to Fill) - (Quantity Shipped)

11. 11 YOUR GUESS OF WEEK-BY-WEEK DEMAND Graph your guess of the customers’ week-by-week demand.

12. 12 ACTUAL WEEK-BY-WEEK DEMAND