💘 🚮 🧒🏽 Whip effect and beer game: modeling and supply chain management 👃🏼 👨🏾‍🌾 👊🏻

Whip and play

In this article I would like to discuss the bullwhip effect, which has been widely studied in logistics, and also to introduce to the attention of teachers and specialists in the field of supply management a new modification of the well-known 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 describes well the uncontrolled process of order volatility and stock swelling at different stages of the supply chain - the so-called whip effect. Faced once with difficulties in modeling the effect of the whip, I decided to develop my simplified version of the beer game (hereinafter - the new game). Knowing how many logistics specialists are on this site, and also consideringthat 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 and beer game effect.

Real or far-fetched problem?

I'll start by describing the effect of the whip. There are tons of scientific research in logistics, which considered the whip effect as an important result of the interaction of partners in supply chains, which has serious managerial consequences. 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, fluctuations in consumer demand and retailer orders at the final stages of the supply chain (downstream) are always lower than those of wholesalers and manufacturers. The effect, of course, is 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 the stages (levels) of the supply chain:

BullwhipEffect = VARupstream / VARdownstream

Or (depending on the research methodology):

BullwhipEffect = CVupstream / CVdownstream

The whip effect is included in almost all popular foreign supply management textbooks. Just a huge amount of research devoted to 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, the purchase of large quantities of goods, fears of a future shortage and price increases [1]. The unwillingness of business partners to share accurate information about customer demand, as well as long delivery times, enhance the whip effect [2]. There are also psychological causes of the effect, confirmed in laboratory conditions [3]. For obvious reasons, there are very few concrete examples of the whip effect - few will want to share data on their orders and stocks, and even along the entire supply chain. However, there is a clear minority of researchers,considering the whip effect exaggerated.

Theoretically, the effect can be smoothed out by replacing goods and switching customers between suppliers in case of shortage [4]. Some empirical evidence supports the notion that the effect of the whip may be limited in many industries [5]. Manufacturers and sellers often use smoothing methods and other tricks to ensure that the variability of customer orders is not too strong. And interestingly: how are things with the whip effect in Russia and in the post-Soviet space in general? Have readers (especially those involved in stock analytics and demand forecasting) noticed such a strong effect in real life? Maybe, in fact, the question of the effect of the whip is contrived and it was wasted so much time spent by researchers and students of logistics on it ...

I myself studied the effect of the whip as a graduate student and during the preparation of the report on the beer game at the conference. Later he prepared an electronic version of the beer game to demonstrate the effect of the whip in the classroom. I’m going to describe it in more detail later.

This is not a toy for you ...

Spreadsheet modeling is widely used to analyze real business problems. Spreadsheets are also effective in training future managers. The whip effect, as a well-known area in supply chain management, has a particularly long tradition of using modeling 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 a system dynamics model (System Dynamics), used not only for educational purposes, but also for making decisions in real business situations, as well as for research. Visibility, reproducibility, safety,the cost-effectiveness and accessibility of serious computer games is an alternative to on-the-job training, providing managers with a useful tool to facilitate decision making when conducting experiments in a safe learning environment.

The game played an important role in modeling to develop business strategies and facilitate decision making. The classic beer game was a board game and required considerable preparation before playing the game in the classroom. Teachers first had to solve problems such as complex instructions, settings, and restrictions for participants in the game. Subsequent versions of the beer game tried to facilitate its use with the help of information technology. Despite significant improvements with each subsequent version, the complexity of customization and implementation, especially in multi-user settings, in many cases impeded the wide practical application of the game in business education.A review of the available versions of beer games for simulation in supply chain management shows the lack of easily accessible and free tools for teachers in this field. In a new game called Supply Chain Competition Game, I wanted to address this particular problem. From the point of view of pedagogy, the new game can be described as a tool for problem-based learning (PBL), in which the simulator is combined with a role-playing game. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach in the supply chain model in the form of spreadsheets allows us to solve two main 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 publicIn a new game called Supply Chain Competition Game, I wanted to address this particular problem. From the point of view of pedagogy, the new game can be described as a tool for problem-based learning (PBL), in which the simulator is combined with a role-playing game. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach in the supply chain model in the form of spreadsheets allows us to solve two main 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 publicIn a new game called Supply Chain Competition Game, I wanted to address this particular problem. From the point of view of pedagogy, the new game can be described as a tool for problem-based learning (PBL), in which the simulator is combined with a role-playing game. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach in the supply chain model in the form of spreadsheets allows us to solve two main 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 publicThe new game can be described as a tool for problematic learning (PBL), in which the simulator is combined with a role-playing game. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach in the supply chain model in the form of spreadsheets allows us to solve two main 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 publicThe new game can be described as a tool for problematic learning (PBL), in which the simulator is combined with a role-playing game. It is also possible to use the online version of the new game in Google Sheets. The conditional formatting approach in the supply chain model in the form of spreadsheets allows us to solve two main 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 publicThis game has been available for download for a couple of years at the following link on the publicThis game has been available for download for a couple of years at the following link on the publicwebsite .

A detailed description in English can be downloaded here .

Game Summary

Briefly about the stages of the game.

One user responsible for conducting the game session (hereinafter referred to as the teacher) and at least four users playing the game (hereinafter referred to as players) together represent the participants in the beer game. The new game simulates one or two supply chains, each of which consists of four stages: retailer ®, wholesaler (W), distributor (D) and factory (F). Real supply chains are certainly more complicated, but the classic beer game chain is suitable for training.

Fig. 1. Supply chain structure

Each game session includes a total of 12 periods.

Fig. 2. Decision form for each player

The cells in the forms have special formatting, which makes the input fields visible or invisible to players, depending on the current active period and the sequence of decision-making, so that 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 graphs on each sheet help you quickly understand key performance indicators for players at any time. Instructors can choose consumer demand: deterministic (including linear and nonlinear), or stochastic (including uniform, normal, lognormal, triangular, gamma and exponential).

Further work

The game in this form is still far from perfect - it requires further improvement of the multiplayer game on the network in such a way as to eliminate the need for constant updating and saving the corresponding sheets after each action of the players. I would read and respond to comments on the following issues:

a) whether the effect of the whip is real in practice;
b) how useful the beer game can be in training 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.