The Beer Game and the Bullwhip Effect Experienced

KdibisGlobal Bullwhip Game

Bullwhip Game – Scenario

The KdibisGlobal Bullwhip Game is an extended form of the Beer Distribution Game (Beer Game).

Four companies, Alpha Kdibis, Green Kdibis, Royal Kdibis, and Wild Horse Kdibis, have identical 5-stage supply chains. The task is to meet the beverage demand of four retail groups, from Material to Retailer, while minimizing inventory costs and ensuring delivery to all business units. The Material business unit produces the beverages and manages an unreliable raw-material supplier. The Production unit is the bottler.

Bullwhip Game – Playing Field

Team members take charge of the business units. Each business unit is a profit center. They must make their decisions based on customer orders, incoming deliveries, and their inventory levels.

Team members only see their own business area and do not have an overview of the entire supply chain. There is no forecast and no inventory management and no communication between the business units.

Bullwhip Game – Rules

26 weeks are played. There are weekly orders with a 2-week delivery cycle. The raw materials are ordered in kg for beer and soft drinks. Beer: 20kg/hl, soft drinks: 6kg/hl. The delivery delay for raw materials is 1 week. Unannounced delivery delays from the raw materials supplier may occur.

Each division receives orders from the business units as customers: Retailer from the four retail groups, Distributor from Retailer, Wholesaler from Distributor, Production from Wholesaler, and Material from Production.
Each division receives deliveries from each business unit as suppliers: Production from Material, Wholesaler from Production, Distributor from Wholesaler, Retailer from Distributor, based on previous orders.
The current order is placed in the outbound delivery based on the current inventory.
Based on the current inventory level and any backorders, the division heads decide what quantity they place as an order. This is provided with a delay of 2-week cycles through the respective supplier, as far as inventory is available.
The respective order is placed.

Bullwhip Game – Sequence

In week w, the order is placed.
In week w+1, the order will be received by the supplier business unit and will be placed in the outbound delivery accordingly.
In week w+2, the order from week w arrives at the ordering business unit.
As soon as all orders have been placed, the system switches to the next week.
The last entry is made in week 26. Then the game is over.

Bullwhip Game – Beer Market and Business Model

The Kdibisglobal Bullwhip game is played in the virtual country of Kadibisia. Kadibisia is about half the size of Switzerland. The size of the beer market corresponds to half the annual beer consumption in Switzerland. The proportional distribution of market participants has been adopted from Switzerland and is comparable with many other countries. The market is dominated by two large breweries with a share of 50%. More than 1,000 small and microbreweries have a 4 % market share. The virtual companies Alpha, Green, Royal, and Wild Horse share the remaining 46 % of the Kadibisia beer market equally. This results in an annual demand of 247,250 hectoliters for each of the four companies. The beer market is saturated and stagnating.

Each company’s business units are structured as profit centers. Each division buys beer from its upstream division and sells it to its downstream division at a 30% markup on the purchase price. This results in a final selling price of 320 credits per hectoliter, which is solely responsible for the company’s bottom line.

Bullwhip Game – Supply Chain Principles

This video demonstrates the principles of the supply chain and the typical behaviors of participants in the bullwhip game, which result in extremely high inventory costs, in addition to the costs induced by the bullwhip effect.