Lessons Learned from the Beer Game

At JDA, one of the vehicles we’ve been using to demonstrate the benefits of effective supply planning and collaboration across the supply chain is the Collaborative Flow Planning workshop — AKA, The Beer Game. Most supply chain professionals have played the beer game at some point in their careers. Built by MIT years ago, the game does a great job of showing participants the pitfalls of poor communication, lack of visibility and the bullwhip effect. As part of the Collaborative Flow Planning workshop, we also use the beer game to demonstrate ways in which participants can solve these common and well-known supply chain problems.

In the workshop, we play the game twice. The first time we follow traditional methods, and the second time we utilize JDA Flowcasting to enable more effective supply planning and collaboration. Both games are played with the exact same supply chain constraints. The game results, measured by cost of inventory and back orders, never fail to improve in the Flowcasting-enabled game. The beer game played with Flowcasting’s collaborative support produces on average a 66 percent reduction in costs.

We’ve executed this workshop many times over the last two years. Participants have included C-suite roles from some of the largest and well-known manufacturers and retailers across the globe. This year, we conducted back-to-back workshops at FOCUS 2017, JDA’s annual conference, and then at the annual GMA conference, which was hosted this year in sunny San Diego. After running this workshop about a dozen times, I thought I’d share some parallels between our workshop observations and common themes that emerged from these two major supply chain conferences.

  • The bullwhip effect cannot be ignored – In every single game we’ve played, consumer demand is magnified the further away you get from the retail shelf. There are four simple root causes for this: Lack of visibility, siloed organizations/lack of communication, constraints like lot sizing/batches, and latency of information. Every time the demand forecast reaches our factory role in the game, the demand forecast is 6 to 8 times larger than the consumer demand at the store. Without fail, it happens every time!

At both conferences, we heard presenter after presenter talk about increased costs and the revenue impact due to this phenomenon. With the changing marketplace and ongoing emergence of supply chain digitalization, everyone is being asked to do more, faster, and under conditions of growing uncertainty. This pinnacle of change is making it absolutely mandatory for CEOs to learn more about what drives their businesses. What we’ve learned through countless workshops is that the answer is to get closer to the consumer. In the real world, connection to real-time indicators and social, news, events and weather (SNEW) data are no longer optional. It’s simply not enough to know what happened, you need to know what’s happening.

  • Collaboration at any level makes a big difference – Early in this collaborative journey, the goal was well established: connect the shelf to the factory, and everything else in between improves. However, the idea of connecting the true end-to-end supply chain can be quite daunting. Rarely does an organization see this as a first step; instead, they need to break the process down a little bit. What has been demonstrated is that starting slow and building over time works very well. In fact, connecting any two nodes of the supply chain yields benefits — big benefits! This could be a result of connecting the store to the retailer distribution center (DC), or the manufacturing DC to the retailer DC, or from connecting the manufacturing plant to the supplier. In our game, we hold the supply chain constraints constant; each game is played by the exact same rules. We do allow more communication and collaboration. Without fail, whenever the communication between two roles improve, we see immediate improvement between those two nodes and costs are reduced.

Similarly, a predominant theme of many conference presentations this year was collaboration. Numerous companies have begun to connect across the supply chain in an effort to remove variability and error – thus reducing costs. Retailers are connecting to manufacturers, and manufacturers are connecting to suppliers, sharing information on transportation, warehousing, demand and more. No one is waiting for conditions to be perfect to start, and they aren’t trying to connect everything to everyone. They are simply identifying areas of mutual benefit and working toward increasing visibility so that both parties benefit.

  • Teamwork, trust and value – Supply chains have been managed independently for so long, it’s ingrained in the DNA of many organizations. When we play the Flowcasting-enabled beer game, we open the books, and everyone can see everything. Decision making becomes a joint effort and is no longer done independently. Participants start to make decisions that consider more than a single node of the supply chain. In a game, trust is easy – because it’s just a game.

Many of the conference presentations I attended this spring started by describing the implementation steps. A common first step of those plans was building the team and gaining trust. As part of that step, defining and understanding the data being shared was a key (and at times underestimated) task in these project plans. Defining the success criteria and making sure there was mutual benefit was another. When both parties realize they can deliver mutual joint benefit, the motivation to drive forward will gain momentum.

The Collaborative Flow Planning workshop continues to demonstrate its usefulness by reinforcing not only the challenges companies face today, but it also provides some insight into ways these challenges can be overcome, with the help of some enhanced collaborative capabilities. The problems that pop up in the workshop appear to be the same challenges we heard discussed at the conferences. Is it a stretch to think the answers we develop during the workshop can also provide a roadmap for success? If you look at the work being shared at the last few conferences, then the answer is no, it is not a stretch.

We continue to advance and evolve this workshop. We’ve started to introduce additional enablers beyond collaboration like root-cause analysis and robust what-if capabilities. These will only enhance supply planning in the industry. Our goal is to restructure this workshop and begin to offer it outside of the conference circuit as an educational tool that organizations can use to begin creating their own transformation vision and journey map.

To learn more, visit flowcasting.com, and stay tuned for more information on our next Collaborative Flow Planning workshop.

  1 Comment   Comment

  1. Tom, excellent post and I agree with the lessons learned. As someone who’s implemented Flowcasting in retail, I can also say that internal collaboration improves significantly when everyone in the extended organization is working to a single set of numbers.

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