Beer Game

I was reading an article from the Washington Post about how “The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. The customers who once bought them by the millions have largely vanished, and so the cars continue to pile up.” This reminded of the

Beer Game

we once played at the university. OK, we played many beer drinking games, but this one, The Beer Distribution Game is a simulation game created at MIT Sloan School of Management in early 1960's to demonstrate a number of key principles of supply chain management.

The purpose of the game is to meet customer demand for cases of beer, through a multi-stage supply chain with minimal expenditure on back orders and inventory. Communication is against the rules so feelings of confusion and disappointment are common. There are three players in the game including a retailer, a wholesaler, and a marketing director at the brewery. Each player's goal is to maximize profit.
A truck driver delivers beer once each week to the retailer. Then the retailer places an order with the trucker who returns the order to the wholesaler. There's a four week lag between ordering and receiving the beer – just as there is weeks or months lag between ordering and receiving a car.

The following represents the results of a typical beer game as described by Peter Senge in Chapter 3 of his 1990 classic, The Fifth Discipline: The Art & Practice of The Learning Organization

Lover’s Beer is not very popular sells four cases per week on average at the retailer who attempts to keep twelve cases in the store by ordering four cases every week. On week 2 the retailer's sales of Lover's beer doubles to eight cases, so he orders 8 cases.

From week 3 onwards he weekly sells all the beer in stock (5-8 cases), receives less than ordered and orders extra to be on the safe side.

The wholesaler is the only distributor of Lover's beer and delivers to several retailers. The wholesaler's policy is to keep 12 truckloads in inventory, and he orders 4 truckloads from the brewery each week and receives the beer after a 4 week lag.

From week 6 onward he is out of stock, while the retailers are ordering 3 to 4 times more Lovers' beer than their regular amounts. Also the wholesaler receives less than ordered and orders extra to be on the safe side.

The brewery is small but has a reputation for producing high quality beer. Lover's beer is only one of several products produced at the brewery. Orders begin to increase, but it takes two weeks to brew the beer. Even during week 14 orders continue to come in and the brewery has not been able to catch up on the backlogged orders. The marketing manager begins to wonder how much bonus he will get for increasing sales so dramatically.

The suddenly, on week 16,

• The brewery catches up on the backlog, but orders begin to drop off.


• The wholesaler received zero orders from all retailers – “What is wrong with these people? Four weeks ago, they were screaming at you for beer, now, they don’t even want any.”


• The retailer is receiving the beer he has ordered earlier, but demend is down. The pop song that made the beer popular - Cheap Credit by SubPrime - no longer tops the charts.

At this point all the players blame each other for the excess inventory. Conversations with wholesale and retailer reveal an inventory of 93 cases at the retailer and 220 truckloads at the wholesaler. The brewery marketing manager figures it will take the wholesaler a year to sell the Lover's beer he has in stock.


Car industry used to be the example for supply chain management. But something went terribly wrong. In the game the brewery keeps on sending beer nobody wants, in real life “new cars nobody wants to buy continue to pile up in Baltimore and at ports around the globe. Last month, when space filled up at one Swedish port, Toyota was forced to lease a cargo ship as a sort of floating parking garage for 2,500 unsold cars.”

The problem is an observed phenomenon in forecast-driven distribution channels. Since the oscillating demand magnification upstream a supply chain reminds someone of a cracking whip it became famous as the Bullwhip Effect. The solution for this problem is Lean manufacturing, which Toyota should have mastered.


Beer bubbles photo by Tambako
New cars photo by DennisSylvesterHurd

Advice to a Leader

Originally this was Advice to a King on the book Zen Lessons: The Art of Leadership. The same advice is true for every leader.

”In your daily activities,

vigorously carry out whatever is right
and put a firm stop to whatever is wrong.

You should not change your will on account of difficulty or ease. If because of today's difficulty you shake your head and pay no heed, how can you know that another day it will not be as hard as today?”

This is true for or the hard decisions - dealing with difficult people, dealing with diffidult customers, informing about mistakes, or on personal level dealing with your own bad habits. Delaying difficult decisions normally does not make them any easier.

If more leaders would consentrate on doing the right thing, would we even need Corporate Social Responsibility, Transparency International, SEC, etc.? Shouldn't that all come naturally?

What's Blocking Your Ideas?

I read another interesting post by IdeaChampions. This time about enabling an nurturing innovations. They compare Innovation process to a river - If you want to create a river, you will need two things: flowing water and two river banks. If you want to create a culture of innovation, you will also need two things:

new ideas and the organizational structures to keep those ideas flowing forward.

Like in their Team Reality Check, they had an online poll about What's the Problem (with your innovation process). You can use their survey to identify the challenges, bottlenecks, and weak links of your innovation process.

On a scale of 1-5, "5" meaning "it's a BIG problem," and "1" meaning "it's not a problem at all," please rate the following statements re: your company's attempts to generate, develop, and implement new ideas (both incremental and disruptive) to grow the business.:

1. We have too many ideas.	1	2	3	4	5
2. We don’t have enough breakthrough ideas.	1	2	3	4	5
3. We’re not asking the right questions.	1	2	3	4	5
4. We tend to avoid conflict.	1	2	3	4	5
5. We’re not very good at prioritizing projects.	1	2	3	4	5
6. Follow through is not one of our strengths.	1	2	3	4	5
7. Our brainstorm sessions are poorly facilitated.	1	2	3	4	5
8. Our meetings are poorly facilitated.	1	2	3	4	5
9. We lack the tools and techniques to spark creative thinking.	1	2	3	4	5
10. We don’t have enough time to originate & develop ideas.	1	2	3	4	5
11. We lack a company-wide innovation process.	1	2	3	4	5
12. We have an innovation process, but not everyone understands how it works.	1	2	3	4	5
13. Employees are unclear about our company’s vision and strategy.	1	2	3	4	5
14. Senior leadership is not committed to innovation.	1	2	3	4	5
15. Our decision making process is unclear and takes too long.	1	2	3	4	5
16. We never seem to have enough data to make decisions.	1	2	3	4	5
17. We’re not flexible or agile enough to innovate.	1	2	3	4	5
18. Our middle managers feel burdened by new projects.	1	2	3	4	5
19. We share neither our best practices nor the learnings from our failures.	1	2	3	4	5
Other: _________________________________________________________________

This survey should help your identify the problem areas. Ideas and tools on how to solve them are elsewhere in my blog and in IdeaChampions blog.

Picture by lumaxart

We Are All in This Together

If you are committed to accomplishing extraordinary results, chances are good that you will need to collaborate with others. IdeaChampions posted some weeks ago a

Team Reality Check

Most people's experience of being on a team -- especially those who work in large companies -- is less-than-ideal, filled with frustration, power struggles, and the belief that it's not worth the effort.

OK. Those days are over. No matter how disappointing your experience of teamwork may have been in the past, it's never too late to turn things around. And it all begins with AWARENESS -- tuning into what's actually going on with you and your team.

That awareness can start by taking the IdeaChampions Team Reality Check below or online at their site.

On a scale of 1-5 (with "5" being the highest possible score), please rate the team you work most closely with on each of the following indicators of success:

1. Clear about it’s mission?	1	2	3	4	5
2. Aligned about roles and responsibilities?	1	2	3	4	5
3. Communicating effectively?	1	2	3	4	5
4. Freely sharing information?	1	2	3	4	5
5. Trusting each other?	1	2	3	4	5
6. Making the best use of conference calls?	1	2	3	4	5
7. Enjoying the process of being on a team?	1	2	3	4	5
8. Free of blame-making and gossip?	1	2	3	4	5
9. Going the extra yard?	1	2	3	4	5
10. Free of group think?	1	2	3	4	5
11. Giving and receiving feedback to and from each other?	1	2	3	4	5
12. Keeping its commitments?	1	2	3	4	5
13. Collaborating effectively?	1	2	3	4	5
14. Diverse enough?	1	2	3	4	5
15. Thinking creatively about its goals and challenges?	1	2	3	4	5
16. Celebrating its successes?	1	2	3	4	5
17. Sharing best practices and lessons learned?	1	2	3	4	5
18. Equally accountable for results?	1	2	3	4	5
19. Getting the support it needs?	1	2	3	4	5
20. Aligned about its mission?	1	2	3	4	5
21. Operating under clearly defined agreements?	1	2	3	4	5
22. Able to make wise decisions in a timely way?	1	2	3	4	5
23. Speaking its truth with each other?	1	2	3	4	5
24. Truly motivated?	1	2	3	4	5
25. Learning from mistakes and breakdowns?	1	2	3	4	5
26. Asking for what it needs?	1	2	3	4	5
27. Being strategic? Planning ahead?	1	2	3	4	5
28. Flexible and adaptive?	1	2	3	4	5
29. Making best use of email and online collaboration tools?	1	2	3	4	5
30. Taking full responsibility for creating extraordinary results?	1	2	3	4	5
31. Connecting as human beings, not just “task-doers”?	1	2	3	4	5
32. Making best use of outside resources?	1	2	3	4	5
33. Listening to each other?	1	2	3	4	5
34. Focused on results?	1	2	3	4	5
35. Resolving interpersonal breakdowns in a timely way?	1	2	3	4	5
36. Confident about being able to accomplish it’s mission?	1	2	3	4	5
37. Meeting frequently enough?	1	2	3	4	5
38. Succeeding in its mission?	1	2	3	4	5
39. In sync about how and what it communicates to others?	1	2	3	4	5
40. Committed to a process of becoming a high performing team?	1	2	3	4	5

The questionnaire will help you find the strong areas of your team as well as the areas that need further development. Remember to be honest with answers.

IdeaChampions should soon be posting their results of the online poll, with hints to help you and your team get into deep dialogue about what it will take to really collaborate in 2009. I'll post that link here when it is available.

Picture by lumaxart