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Topic:

Coordination Across Functions

Essay Instructions:

As you know, we are using a common basic format for the project assignments in all modules—that is, simulations.

Now we'll try the Root Beer Game. This one is a doozy (to use a technical term).

Bullwhips and Root Beer:
Why Supply Chain Management Is So Difficult

By Michael Bean

The basic concept behind supply chain management is simple: customers order products from you; you keep track of what you're selling; and you order enough raw materials from your suppliers to meet your customers' demand. So why is it that, in a recent article, the Economist claimed that "managing a supply chain is becoming a bit like rocket science"?

The problem turns out to be one of coordination. Suppliers, manufacturers, salespeople, and customers have their own, often incomplete, understanding of what real demand is. Each group has control over only a part of the supply chain, but each group can influence the entire chain by ordering too much or too little. Furthermore, each group is influenced by decisions that others are making.

This lack of coordination coupled with the ability to influence while being influenced by others leads to what Stanford's Hau Lee refers to as the Bullwhip Effect. Decisions made by groups along the supply chain actually worsen shortages and overstocks.

The bullwhip effect is illustrated by a story Professor Lee tells about how Volvo found itself with extra inventories of green cars. To get them off the dealers' lots, Volvo's sales department offered special deals, so demand for green cars increased. Production, unaware of the promotion, saw the increase in sales and ramped up production of green cars.

Cisco faced a similar problem last year that resulted in a $2.2 billion inventory write-down. Only a few months before the write-down, Cisco wasn't able to get its products to customers quickly enough. Quoting a supplier to Cisco interviewed in CIO Magazine, "People see a shortage and intuitively they forecast higher. Salespeople don't want to be caught without supply, so they make sure they have supply by forecasting more sales than they expect. Procurement needs 100 of a part, but they know if they ask for 100, they'll get 80. So they ask for 120 to get 100."

Delays Wreak Havoc

But coordination isn't just about communication. Even in supply chains where communication is perfect, manufacturing and procurement delays can wreak havoc. That's because while customers are asking for increased orders, backlogs are building, and it is oh-so-easy to confuse backlogged orders with increases in demand.

Thousands have felt the frustration of supply chain management in a simulation developed at MIT's Sloan School of Management called the beer game. The simulation is run as a board game [with] teams playing the roles of retailers, wholesalers, distributors, and brewers of beer. As the backlog for orders increases, players order too much inventory, forcing their teammates into severe backlogs further down the supply chain. The game can be emotionally intense. John Sterman, Director of MIT's System Dynamics Group writes, "During the game emotions run high. Many players report feelings of frustration and helplessness. Many blame their teammates for their problems; occasionally heated arguments break out."

As before:

Try the Root Beer Game simulation firsthand.

Here are instructions for running the Root Beer Game simulation:

  1. Go to http://forio(dot)com/simulation/harvard-business-school-root-beer-game-demo/#page=summary.
  2. Review the Simulation Summary, Your Role, and How to Play sections under the Prepare tab.
  3. Then go to the Analyze tab to run the simulation.
  4. Submit your weekly order in the Order field.
  5. When finished with each turn, review your performance under the Dashboard Overview, Inventory and Shipments, Orders and Backlog, and Cost Detail tabs.
  6. Plan and play your next turn. Spend a maximum of one hour working with it—no more. See how far you can get with it.

All of this sounds easy right? Try it out and see how well you can get beer to the customers while keeping your inventory and costs low. See if you can control the bullwhip oscillations of stock-outs followed by over-supply.

When you’re done with the active play, think about it in conjunction with this module's readings for perhaps another 15-20 minutes. Then, in 2-3 pages, address the following questions:

  • Describe what you did in the simulation. What activities did you engage in? What did you learn about what's going on?
  • Briefly describe what you believe you learned about operations management from your participation in this simulation, if anything.
  • Briefly describe any ideas that occur to you as a result of thinking about the simulation in relation to the module topic and readings.
  • What do you now think of computer-based simulations in general as a learning mechanism? Of this one in particular?

SLP Assignment Expectations

Your paper should be two to three pages in length and reflect your personal experiences with this issue. The important part of the project assignments is to carefully assess your own experiences with the topic, and then reflect critically on what you have learned about yourself and about situations through this assessment process.

Your grade is not dependent on your "winning" the simulation or even doing particularly well; if there are reasons why you can't get into it, just explain them and do as much as you can. Obviously, your learning will be greater the more you are able to accomplish; but the major factor in grading the project will be the work that you invest in it and the energy that you apply to learning from the experience.

If there are reasons why the entire exercise is impractical for you to undertake at all, explain the situation to your instructor as early in the module as possible, so that an alternative assignment can be arranged.

Your paper will be evaluated on the following criteria:

  • Precision: Carry out the exercise as assigned, or carefully explain the limitations that might have prevented your completing some parts. (Running out of time isn’t generally considered an adequate limitation.)
  • Clarity: Provide clear answers that show good understanding of the topic.
  • Breadth and depth: Make the scope of your paper relate directly to the questions of the assignment and the learning outcomes of the module.
  • Critical thinking: Incorporate your reactions, examples, and applications of the material to business in a way that illustrates your reflective judgment and good understanding of the concepts.
  • Overall quality: Turn in a well-written paper whose references, where needed, are properly cited and listed. (Refer to the University guidelines (http://support(dot)trident(dot)edu/files/Well-Written-Paper.pdf if you are uncertain about formats or other issues.)
Essay Sample Content Preview:

COORDINATION ACROSS FUNCTIONS-SLP
Institution
Date
Introduction
Having played the Beer Distributor Game, I was in a position to identify how the game essentially simulates the happenings in a supply chain by exposing the vital dynamics that take place in the business world. The paper, therefore, gives a description of my findings in the Beer Game Simulation.
Activities Engaged in the Simulation
As a player in the game, I had to choose either the role of a retailer, wholesaler, distributor, and the manufacturer. In playing one of the four functions, I had to examine the inventories and anticipate the demand. After that, I would make orders through the process of the supply chain. I had to work on minimizing the inventory carrying costs and, on the other hand, avoid the costly inventory shortages.
As a retailer, I am required to order barrels of beer from the wholesaler and sell the barrels of beer to consumers. The wholesaler has a role to order the barrels from the distributor who orders the barrels from the factory. He wholesaler in turn sells the barrels to the retailer. Each player is linked directly, and beer has to pass through all the processes without skipping any step.
The goal of the game requires that the costs are minimized. Each beer has a price tag or cost and is calculated at the end of the simulation. The needs of the clients have to be meet through the process with minimum expenditure on the inventory and back orders. In the game, I was able to view the stocks of others and see the demands of the customers, then work through meeting those demands (Croson, Donohue, Katok, & Sterman, 2014).
Lessons Learned from the Simulation
The Beer Game in my view is a functional supply chain management approach that demonstrates how to manage a logistical operation. By analyzing the pitfalls and shortcomings in the simulator, one gets the method of correcting and managing a supply chain. Applying this ...
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