beersupply

Beer Supply Chain Simulation Assignment

1. Consider the “Order Behaviour” graph first for all tiers of the supply chain. Provide an analysis

of the trends exhibited in the “Order Behavior” graphs.

The supply chain's four "Order Behavior" graphs include the retailer, distributor, brewery, and

wholesaler. Since two lines moving in the same direction demonstrates a correlating trend, you would

expect an almost perfect correlation between the retailer's orders and the wholesaler's incoming orders.

You would expect this since the retailer places the incoming orders from the wholesaler individually. The

retailer order behavior graph below shows where too much was ordered in the beginning, which caused

a higher inventory later. Then later, not enough was collected.

There was almost perfect congruency between the distributors and the brewer's incoming orders. If

the order placed initially from the retailer fulfills the new demand from the supplier, which it did at the

beginning below, this makes sense. The most significant change of appearance from graph to graph

occurs when the distributor orders 600+ units of beer from the brewery to get in front of the demand.

The distributor could then create a massive bullwhip by thinking it is customary to offset the demand.

Identify all occurrences of the Bullwhip Effect evidenced in the graph by providing the week numbers

identifying where the effect begins and ends. Describe any other trends or correlations of the data

series.

The Bullwhip Effect describes the tiny fluctuations in demand at the retailer level that can

increasingly fluctuate in other markets throughout the distributor, brewery, and wholesaler. Within the

supply chain, this is a volatility and complexity study. When this unforeseen demand is noticed, the

supply chain may want to increase inventory to compensate and fulfill future orders. The future orders

are an assumption of a new direction that has not happened yet. As this happens, and while companies

increase inventory, the market vanishes. Customers are left with the left-over inventory items.

Companies typically must lower prices at this rate to eliminate excessive inventory.

As shown in the graphs below, the retailer's Bullwhip Effect starts in week one and ends in week

twenty-one. It ends in week twenty-one because that is when the target surplus' returns to normal

levels. The Bullwhip Effect for the distributor starts in week one and continues until week twenty-three

because the constant 'high value' whip occurrences are continuous after the initial spike. The Bullwhip

Effect for the brewery starts in week one and continues until week twenty-three of the graph. This can

also be seen by the continuous 'high value' whip that occurs after the initial spike. Lastly, for the

wholesaler, the Bullwhip Effect starts in week two and continues until week twenty-four of the graph.

Once again, this is noticed by the continuous 'high value' occurrence after the initial spike.

2. What are the most interesting issues you observed during the simulation?

After looking at the Retailer Order Behavior graph, I thought the length of recovery time was

attractive. A demand shift occurred during my role as the retailer. I thought it was interesting that as

everyone worked to overcome a singular demand increase, there would be repercussions in the supply

model because of backorder issues. Towards the end of the project, the effects of the charts were

staggering, and some groups still had not yet recovered.

Looking at the Retailer Backorder graph, I thought it was interesting how much more it costs to

maintain inventory as the game continued. It would cost at least an extra dollar every time I had

backorders. As the game continued, the inventory costs began growing exponentially. I realize that this

inventory cost, outside of the expected inventory, would be passed on to the customers in the real

world. This could result in the business going into bankruptcy over a bullwhip.

3. What have you learned from the simulation?

The simulation taught me multiple things. First, the Bullwhip Effect can be stopped by

eliminating intermediaries by shortening the supply chain, accelerating the supply, which reduces the

replenishment time, limiting the order sizes while avoiding wrong incentives, and making the order

status transparent to every participant in the supply chain. If an inexperienced member handles the

supply chain, they are complicated entities that can be highly susceptible to demand spikes.

I learned that a shift, even one simple and single demand shift, has significant reverberating

effects that numerous members of the supply chain feel while filling those demands. In the real world,

and not just the beer game, complex fluctuations always occur. During the weeks that I did not get my

inventory in, I kept ordering more until the period came when I no longer needed more products.

Because of this, there were multiple beer game models where I had a complete inventory early in the

game and had to start over. I have a new appreciation and thought process for supply chains and the

intricacies that occur throughout. This stimulation made me realize the importance of accessible

information flow within the supply chain. I kept wondering, during my initial game runs, what was

keeping me from getting my requested supply limit in.

4. Consider the recent coronavirus event in 2020. Analyze the supply and demand of toilet

paper from the aspect of supply and demand shock. Identify which type of shock occurred

in this scenario. Also, use what you learned about the bullwhip effect to project the toilet

paper market as markets recover.

The coronavirus pandemic in 2020 caused a negative supply shock and a positive demand shock.

The effects of the model were two-fold. A negative supply shock causes the quantity to be quickly

reduced, and until a new equilibrium is reached, the prices increase quickly. Input supplies were not as

readily and speedily available during the pandemic because of trade issues and shutdowns worldwide,

causing the production process to be slowed down. A negative supply shock occurs when the change in

output leads to a toilet paper shortage. A rise in demand sharpened when the upcoming lack increased

and became noticed by the public.

Consumers purchased as much as possible to prepare for the upcoming shortage. Demand

shocks rise because of the change in consumer preferences. They can also be linked to other changing

factors, such as the price of substitutes and complements. In the pandemic's case, this caused a positive

demand shock. A positive demand shock causes more goods to be consumed at a higher price. More

people wanted and needed toilet paper. Therefore, the prices continued to rise because the supply was

less than the demand.

In the 2020 pandemic scenario, there would surely be a Bullwhip Effect. This event occurs along

the supply chain when demand for an item increase. As soon as the news about an upcoming or

potential shortage reached the public, there was an immediate surge in demand as people looked to

stock up on toilet paper. Once those concerned had satisfied their safety net quotas, some reduced their

need to normal levels. This artificial demand would disappear quickly from the supply chain side, and

sales would adjust again. This surge and subsequent drop in order would cause the Bullwhip Effect, as

seen in the beer game simulation.

The beer game is an excellent example of the Bullwhip Effect. Navigating the change in demand

in a classroom illustrates the supply chain's complex relationship. In real life, there are increases and

decreases in demand. The time difference between ordering and the item arriving, even with no delay,

the retailer is tempted to continue to order more until inventory catches up with demand. By that time,

an excess of the item had been collected, and a quantity had been produced. This excess ordering causes

an increase in costs to the entire supply chain due to the storage of excess inventory and a stop in

production of the item. Understanding the "Bullwhip Effect" and knowing how to mitigate it in a real-life

situation would be extremely important.

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