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With most aspects of life it is frequently the failures, as opposed to successes, from which we learn the most indelible lessons. With this approach in mind, The Beer Game to a large extent serves as the very antithesis of a properly functioning supply chain. In other words, the exercise demonstrates how NOT to manage a logistic operation. Hopefully, an examination of the pitfalls and shortcomings of a worst case scenario and avoiding the same types of mistakes will lend insight how to correctly manage a supply chain. What otherwise appears as a simple classroom exercise actually represents a powerful training tool with enduring lessons directly transferable to real world application.
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
Another lesson of the game materialized gradually at first, but steadily became more and more evident with each round of play. This lesson was the demonstration of the overwhelming ineffectiveness and utter futility of approaching logistics from the position of total ignorance. With no forecast or sales history to serve as a guide or predictive tool, the participating supply elements simply had nothing to base their projected order quantities upon other than pure conjecture. Operating in a vacuum relative to the other players of the supply chain was nothing less than counterproductive. Closely related was the development of a subdued, but underlying, sense of hostility within the supply chain as orders were placed that didn’t correspond with anticipated amounts. When this type of communication breakdown exists in the real world, an irritation between supply elements invariably manifests itself. Additionally, the resulting waste of time, material, storing of inventory and other resources expenses further fuel the fires of frustration and discord between supply elements.
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In my opinion, the most striking lesson garnered from playing The Beer Game was a validation of the axiom, “the whole is greater than the sum of its parts”. In business terms, this maxim can be interpreted to suggest that regardless how well any component or subgroup of an organization may function individually, unless the organization integrates all elements into a harmonious and cohesive effort the end result will prove less than optimal. As I stated previously, The Beer Game provides this lesson and others by serving as the very epitome of an ineffective supply system. This assertion is further evidenced by the scoring methodology and strategy of the game. The fact that the game is ultimately won by the team accumulating the lowest score directly implies an absence of communication between the individual elements of the supply chain all but guarantees failure. The winner of the game in actuality is the team that loses by the least amount. This approach is clearly a poor strategy for success in business.
Several correlations can be readily found when comparing the lessons of The Beer Game and the concepts illustrated in Baker’s Scoring A Whole In One. I believe the most powerful connection between the two sources stems from the strong case Baker makes in stressing the importance and value of the synergistic benefits of an organization working towards a common objective as a cohesive unit. A single component’s accomplishments, although possibly exceptionally positive when gauged against that individual element’s performance goals, become completely irrelevant if the organization fails as a whole. This premise is the very cornerstone of The Beer Game. The more closely the players of the game are able to anticipate and respond to the actions and requirements of the other team players the more successful the team’s results and vice versa. However, departing from most real world scenarios, the game forces players to arbitrarily guess what the needs are rather than relying upon any factual or statistical information for reference.
A second connection can be drawn from Baker’s point that a system operates over time and space. It is not possible for any one component of the system to be immediately aware of the actions and needs of all other organizational components. True to this argument, the participants of the game remained in a state of continuously trying to catch up because they were unaware of the order and fill quantities of the other players each round until after they had placed and filled their own orders. All subgroups quickly responded to increased order quantities with knee jerk reaction, hastily stepping up their order volumes. The consequence of this rash behavior was a huge delayed ripple effect of inbound product at all levels.
Furthermore, despite the players being restricted from speaking to each other, every participant maintained unobstructed observation of the game board. In short order all players came to recognize as the end use customer orders significantly dropped that entirely too much product had been ordered and was now moving through the supply chain. With the game’s built in shipping and processing delays, it was akin to watching a car accident in slow motion. All could see what was going to happen, but were helpless in stopping it. This readily supports Baker’s position that systems operate over time and space. The acts of changing direction, speeding up, slowing down or stopping all take time between decision and end result; few things are accomplished instantly.
A third relationship between the game and Baker’s book ties in closely with the connection outlined above. Baker’s statement that there is no accounting for the effects of provincialism was validated with an exclamation point the more the game progressed. The links in the supply chain shifted more and more into a self interested protection mode with each round. No group was more negatively impacted than the production element. After the team collectively recognized the folly of dramatically increased supply orders, production players stopped producing cases as order volume dropped to zero.
In the sterile environment of the classroom, production players simply stopped retrieving chips from the cup representing production. In the real world, this chain of events would have likely resulted in one of two outcomes: 1) product would be made beyond the already overestimated orders to keep equipment and labor from becoming idle or 2) a partial or complete layoff/shutdown would occur at the production plant to keep inventory levels from spiraling out of control. Neither of these options is favorable and they serve to represent the very point Baker outlined.