Whip and game
In this article, I would like to discuss the problem of the bullwhip effect, which has been widely studied in logistics, and also to present to the attention of teachers and specialists in the field of supply management a new modification of the well-known beer game (beer game) for teaching logistics. The beer game in the science of supply chain management is actually a serious topic in the education and practice of logistics. It well describes the uncontrolled process of order volatility and inventory swelling at different stages of the supply chain - the so-called whip effect. Having once encountered difficulties in modeling the effect of a whip, I decided to develop my own simplified version of the beer game (hereinafter referred to as the new game). Knowing how many logistics specialists there are on this site, and also considering that comments on articles on Habr are often more interesting than the articles themselves, I would very much like to listen to readers' comments about the relevance of the whip effect and the beer game.
Real or imagined problem?
I'll start by describing the whip effect. There are tons of scientific studies in logistics that have considered the whip effect as an important result of the interaction of partners in supply chains, which has serious managerial implications. The whip effect is an increase in the variability of orders at the initial stages of the supply chain (upstream), which is one of the main theoretical [1] [2] and experimental results of the beer game [3]. According to the whip effect, demand fluctuations from consumers and orders from retailers at the final stages of the supply chain (downstream) are always lower than those of wholesalers and manufacturers. The effect is of course harmful and leads to frequent changes in orders and production. Mathematically, the whip effect can be described as the ratio of variances or coefficients of variation between stages (echelons) of the supply chain:
BullwhipEffect=VARupstream/VARdownstream
Or (depending on the method of the researcher):
BullwhipEffect=CVupstream/CVdownstream
The whip effect is included in almost all popular foreign supply management textbooks. There is simply a huge amount of research on this topic. The links at the end of the article indicate the most famous works on this effect. Theoretically, the effect is largely due to a lack of information about demand, purchases in large quantities of goods, fears of future shortages and price increases [1]. The reluctance of business partners to share accurate information about customer demand, as well as long delivery times, exacerbate the bullwhip effect [2]. There are also psychological causes of the effect, confirmed in the laboratory [3]. For obvious reasons, there are very few concrete examples of the whip effect - few people want to share data about their orders and stocks, and even throughout the supply chain. There is, however, a clear minority of researchers who consider the whip effect to be exaggerated.
Theoretically, the effect can be smoothed out by substituting goods and switching customers between suppliers in case of shortage [4]. Some empirical evidence supports the notion that the whip effect may be limited in many industries [5]. Manufacturers and retailers often use production smoothing techniques and other tricks to ensure that customer orders do not fluctuate too much. And I wonder: how are things going with the whip effect in Russia and in general in the post-Soviet space? Have readers (especially those involved in inventory analytics and demand forecasting) noticed such a strong effect in real life? Maybe in fact the question of the whip effect is far-fetched and in vain so much time of researchers and students of logistics was spent on it ...
I myself studied the whip effect as a graduate student and while preparing a paper on the beer game for a conference. Later he prepared an electronic version of the beer game to demonstrate the effect of the whip in the classroom. I am going to describe it in more detail below.
These are not your toys...
Spreadsheet modeling is widely used to analyze real business problems. Spreadsheets are also effective in preparing future managers. The bullwhip effect as a well-known area in supply chain management has a particularly long tradition of using simulation in education, a good example of which is the beer game. MIT first introduced the original beer game in the early 1960s, and it soon became a popular tool for explaining supply chain dynamics. The game is a classic example of the System Dynamics model, used not only for educational purposes, but also for decision making in real business situations, as well as for research. The visibility, reproducibility, safety, cost-effectiveness and accessibility of serious computer games provide an alternative to on-the-job training, providing managers with a useful tool in facilitating decision making when conducting experiments in a safe learning environment.
The game has played an important role in modeling for developing business strategies and facilitating decision making. The classic beer game was a board game and required considerable preparation before being played in the classroom. Instructors first had to deal with issues such as complex instructions, settings, and restrictions on game participants. Subsequent versions of the beer game tried to make it easier to use with the help of information technology. Despite significant improvements with each successive version, the complexity of customization and implementation, especially in multiplayer settings, has in many cases prevented the game from being widely applied in business education. A review of the available versions of beer simulation games in supply chain management reveals a lack of readily available and free tools for educators in the field. I wanted a new game called the Supply Chain Competition Game to address this very issue in the first place. From a pedagogical point of view, the new game can be described as a problem-based learning (PBL) tool that combines simulation with role play. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach of the spreadsheet supply chain model solves two major problems in the application of serious games: accessibility and ease of use. This game has been available for download for a couple of years at the following link on the public domain. .
A detailed description in English can be downloaded .
Brief description of the game
Briefly about the stages of the game.
One user in charge of running the game session (hereinafter referred to as the teacher) and at least four users playing the game (hereinafter referred to as the players) together represent the participants in the beer game. The new game models one or two supply chains, each consisting of four stages: Retailer®, Wholesaler (W), Distributor (D), and Factory (F). Real supply chains are of course more complex, but the classic beer game chain is good for learning.
Rice. 1. Structure of the supply chain
Each gaming session includes a total of 12 periods.
Rice. 2. Form of decision making for each player
The cells in the forms have special formatting that makes the input fields visible or invisible to the players depending on the current active period and decision sequence, so that the players can focus on what is most important at the moment. The teacher can control the workflow of the game through the control panel, where the main parameters and performance indicators of each player are tracked. Instantly updated charts on each sheet help you quickly understand key performance indicators for players at any time. Instructors can choose to be either deterministic (including linear and non-linear) or stochastic (including uniform, normal, lognormal, triangular, gamma, and exponential) customer demand.
Further work
The game in this form is still far from perfect - it requires further improvement of the multiplayer game over the network in such a way as to eliminate the need to constantly update and save the corresponding sheets after each action of the players. I would like to read and respond to comments on the following questions:
a) whether the effect of the whip is real in practice;
b) how useful the beer game can be in teaching logistics and how it could be improved.
references
[1] Lee, HL, Padmanabhan, V. and Whang, S., 1997. Information distortion in a supply chain: The bullwhip effect. Management science, 43(4), pp.546-558.
[2] Chen, F., Drezner, Z., Ryan, JK and Simchi-Levi, D., 2000.Quantifying the bullwhip effect in a simple supply chain: The impact of forecasting, lead times, and information.Management science, 46(3), pp.436-443.
[3] Sterman, JD, 1989. Modeling managerial behavior: Misperceptions of feedback in a dynamic decision making experiment. Management science, 35(3), pp.321-339.
[4] Sucky, E., 2009. The bullwhip effect in supply chains - an overestimated problem? International Journal of Production Economics, 118(1), pp.311-322.
[5] Cachon, GP, Randall, T. and Schmidt, GM, 2007. In search of the bullwhip effect. Manufacturing & Service Operations Management, 9(4), pp.457-479.
Source: habr.com