eBeer Simulation Debrief

Question 1

What was the demand like for the simulation and can we blame it for the problems

Answer 1

4 for the first 4 weeks then 8 for the next 32 weeks, No we cannot

Question 2

What caused people to act the way they did, what does it lead to

Answer 2

1. Lack of communication / cooperation
   - leads to guessing of customer demand
   - which then leads to arbitrary ordering decisions (guessing)
   - which results in the bullwhip effect
2. long lead time
   - it was 3 weeks long, 1 for transmitting outgoing order, 1 for filling and packaging order, 1 for shipping the order
   - longer lead time will lead to panic, which is when inventory does not instantly arrive and solve the growing backlog, you panic and order even more

Question 2

what is the bullwhip effect

Answer 2

information (orders) going back through the supply chain is distorted and then amplified

Question 3

what does the bullwhip effect cause

Answer 3

causes members of the supply chain to overreact to changes in demand at the retail level, minor demand changes at the consumer level may result in large ones at the supplier level

Question 4

what are the business implications (what happens because) of the supply chain structure, what do they lead to?

Answer 4

1. Stockouts at times
   - leads to lost profit and potential lost goodwill
2. excess inventory at times
   - holding costs, risk of obsolescence
3. overtime costs
   - 50%-100% increase in labour costs
4. layoffs / re-hiring costs
   - match staffing levels to fluctuating demand
5. expediting
   - rush transportation costs

Question 5

what does high costs in the
supply chain structure lead to

Answer 5

leads to high costs throughout the supply chain, leading to a higher end price for the consumer

Question 6

Example of the bullwhip effect, Tyson Foods Chicken.

Answer 6

incorrectly forecasted demand because of demand increasing greatly after pandemic since people were going back to restaurants more, led to them having to layoff thousands of employees and multiple plants

Question 7

formula for bullwhip, when is the bullwhip effect present (at what measure?)

Answer 7

Formula: Bullwhip = (variance of orders) / (variance of demand)

if the bullwhip measure is greater than 1, bullwhip effect is present

Question 8

Example of a company who did well during the pandemic

Answer 8

Stanley black and decker inc., They saw that retailer’s inventories were selling 30% more since the pandemic caused people to want to do home renovations and yard work, they decided that since the retailers werent putting in orders, they were all going to put panic orders all at once last minute so to meet this demand they built 600 million dollars worth of tools. they also heavily pushed their suppliers to producing more for them

Question 9

how can we improve the supply chain and what do we have to improve within those methods to achieve the goals

Answer 9

1. communication and cooperations
   - actual consumer demand
   - encouragin cooperation and communication
   - forecasting
2. Decrease lead time
   - adminstration (ordering) lead time
   - physical manufacturing lead time
   - transportation lead time

Question 10

how can we know the actual consumer demand

Answer 10

• information technology
• avoid converting fairly constant customer demand into lumpy demand by lot sizes - dont stress your supply chain

Question 11

how can we encourage cooperation and communication

Answer 11

• incentives to share informaiton (lower unit cost for actual data)
• vendor managed inventory (VMI), leads to lower admin costs for retailer and vendor sees actual consumer demand

Question 12

how can we forecast

Answer 12

• collaborative planning forecasting and replenishment (CPFR), this is achieved through sharing forecasts, product and distribution schedules, ideally decision making as well

Question 13

what did Mattel do

Answer 13

she knew the importance of daily demand data in 1955, basically she hired a bunch of employees around the country to keep track of all the stock in the retail stores across the country for her toys which took 6 weeks before she hired these employees. Because she hired them she was getting info in a day, while the competition was 6 weeks behind

Question 14

Collaborative planning forecasting & replenishment example

Answer 14

Canadian tire implemented it, giving suppliers a 26 week planned order stream for each stock keeping unit with weekly regenerations, which allows suppliers to see far in advance the demands for the products that will “pop”

Question 15

how can administration (ordering) lead time improve so that it can lead to less overall lead time

Answer 15

information technology

Question 16

how can physical manufacturing lead time be improved so that it can reduce overall lead time

Answer 16

just-in-time production systems (low setup time), very small batches = faster production completion

Question 17

how can transportation lead time be reduced to help overall lead time

Answer 17

have suppliers geographically close by

Question 18

what is onshoring

Answer 18

when you open a manufacturing plant or source your inventory from within the borders of your country, usually through the least expensive supplier if you are not manufacturing

Question 19

what is offshoring

Answer 19

getting your inventory from you manufacturing facilities outside your country or getting them through suppliers outside your country

Question 20

who are two companies to use as an example of onshoring

Answer 20

Ikea, did it in 2008 by building manufacturing facility in the U.S.. reduced many costs and lead times overall

ford’s chicago assembly plant has a supplier campus less than 1 mile away, takes 90 minutes after some components are made at the campus to go into a vehicle, previously ford sourced from cheaper cost countries (offshoring) and had to wait 8 weeks for lead time

Question 21

what is next shoring and what benefits does it create

Answer 21

local production near demand (‘next to’), it is a growing focus on countering traditional offshoring
- reduces logstics costs, improving environmental performance
- reduces length of lead times
- reduces variability of lead times
- easier to identify local needs
- consumer perception, meaning there is more jobs in the home country

Question 22

what should you do if you cannot change the supply chain structure (usually because you are a small or medium sized enterprise (SME))?

Answer 22

if you have an understanding of your structure you can adapt to it without changing it
- the asprin rule: 10 mins after taking 2 your headache doesnt go away, do you take 2 more? no. This relates to the long lead time, you should be aware of the lead time and not to panic from it
- reasons teams performed well in beer game was because they adapted to the given supply chain structure, they didnt panic and recognized delays, they thought systemically; analyzing how it will impact the supply chain

Question 23

how can we avoid supply chain problems

Answer 23

• Change supply chain structure if possible, done by communication & cooperation, shorter lead times
• if you cant change the structure then adapt and recognize delays and make smarter predictions for ordering impacts
• choose “capable” suppliers (dont just focus on cost), see if the suppliers can adapt to fast temporary demand changes and if they are willing and able to collaborate (share info)

Question 24

what should we take away from the beer game about our supply chain

Answer 24

• smooth your supply chain, implement promotions and discounts

Question 25

what is an ideal selling method for SCM

Answer 25

everyday low prices, give a sale price but with a maximum quantity