THE BEER GAME

Prof. Dazydelian L .Banda

ESAMI.
 PROBLEMS- Oscillations, Variances,
Lag
• The game exhibits oscillations in orders
and inventories.
• Variance of orders increases steadily from
customer ( 4,8) to retailer (8,16,24) to
brewery. The peak order rate at the
brewery is on average more than double
(40)the peak order rate at the retailer(16).
• The order rate peaks later as one moves
from the retailer to the brewery.

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 PROBLEMS- DECLINE IN
INVENTORY
• In all cases, the inventory levels at the retailer
decline ( week 5 page 30- But all are sold..
Leaving you with absolutely zero) and (week 8
page 32-Eagerly… the sixteen (16) cases you
expect….but he brings only five (5)…
• This is followed by a decline in inventory at the
wholesaler ( week 6,page 33- para 2- By week
6 ..shipped all the beer you had in inventory).

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 PROBLEMS- DECLINE IN
INVENTORY
• Next is the decline in inventory at the
Distributor (week 6, page 33- para 2) ,and
• Lastly at the Brewery ( week 7 , page 37
first para -Admittedly… were exhausted
by week 7…)

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EFFECTS-INCREASE IN ORDERS
• As inventory falls, players tend to increase
their orders ( Retailer increases orders in
week 2 from 4 to 8,page 29, from 8 to 12 in
week 3,page 30 first para, from 12 to 16 in
week 4,para2 ,page 30, and another 16 in
week 5, page 30 last para)

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EFFECTS- INCREASE IN ORDERS
• Wholesaler also increases orders as
inventory falls- (from 4 to 20 truckloads in
week 6, page 33 first para, to 40 truckloads
in week10, page 34 para 4, another 40
truckloads in week 11, page 34 para5,
another 60 truckloads in week 12, page 34,
para 6 )

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 EFFECTS - INCREASES IN ORDERS

• Brewery also increases production in

response to increased orders from the
Wholesaler ( from 4 orders to 40 gross per
week in week 6, page 36 para 2, and the
Distribution and Marketing Manager of
the Brewery ordered an increase in brew
batches of 70 gross per week- page 37.para
3).

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 EFFECTS – STOCKOUTS and
BACKLOGS
• Due to lags between orders, both retailer
and wholesaler run out stocks.
• - Retailer receives beers 4 weeks after
ordering( page 28 para 3).
• Wholesaler receives beers 4 weeks after
ordering , (page 32, para 2) and
• Brewery, takes 2 weeks from time they
decide to brew the beer to the time it is
ready for shipment -( pages 36- 37 para1).
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 EFFECTS- BREWERY HIKES
PRODUCTION and SHIPMENTS

• From 30 in week 6 ( page 36 para 2, to 70

in week 7 ,page 37, para 3.)

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 BUT- DEMAND DECLINES?

• RETAILER – by week 8 was very

disappointed and angry “What do you
mean five?....What is that wholesaler
doing to me?....” page 32 ,para2 and 3 .
So Retailer STOPS ORDERING any more
beer from week 8!

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 BUT DEMAND DECLINES?-
• WHOLESALER- by week 16 , wholesaler gets almost all
the beer he ordered. But Retailer has stopped ordering-
“But on form after form.. Zero , zero, zero, zero. What’s
wrong with these people? Four weeks ago they were
screaming… now they don’t even want any”- page 35
para 3.
• So Wholesaler ALSO STOPS ORDERING - “You in turn
order zero truckloads from the brewery…And yet the
brewery continues to deliver beer.. Why does that
brewery have it in for you? When will it ever end?- page
36 ,para 2

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 WHAT HAPPENS TO CUSTOMER
DEMAND ????

• IT ROSE FROM 2 TO 4 CASES IN

WEEK 2
• BUT REMAINED THE SAME AT 8
CASES PER WEEK THEREAFTER !

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 THE TOTAL SUPPLY CHAIN

9
6

2 5
8 3 4
77

10
1
1
0

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 THE 7 LEARNING DISABILITIES
1. I am in my position
2. The enemy is out there
3. The Illusion of taking charge
4. The fixation of events
5. The parable of the boiled frog
6. The delusion of learning from experience,
and
7. The myth of the management team.

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 QUICK REMINDER OF THE
DISABILITIES
1. IAM IN M Y POSITION
 Focusing only on one’s position
 Little sense of responsibility for results
produced when all positions interact
2. THE ENEMY IS OUT THERE
 Assigning blame on others ”I did my
part. It is not my problem.”

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 QUICK REMINDER OF THE
DISABILITIES
3. THE ILLUSION OF TAKING CHARGE
•Taking quick decisions without first
analyzing the nature and causes of the
problem.
4. FIXATION OF EVENTS
•When people’s thinking is dominated by
short term events.
•The opposite of systems thinking.
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 QUICK REMINDER OF THE
DISABILITIES

5. THE PARABLE OF THE BOILLED FROG

•Inability to learn to notice gradual
processes that often pose the greatest
threats.

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 QUICK REMINDER OF THE
DISABILITIES
6. THE DELUSION OF LEARNING FROM
EXPERIENCE
•We learn best from experience but never
directly experience the consequences of our
most important decisions – especially whens
these consequences are in the future.
•‘We will cross the bridge when we get
there”

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 QUICK REMINDER OF THE
DISABILITIES
7. THE MYTH OF THE MANAGEMENT
TEAM
•‘’ Skilled Incompetence” i.e. a team of
people who are incredibly proficient in
keeping themselves from learning because
they avoid confronting serious issues lest
they “rock the boat”

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 LEARNING DISABILITIES
• RETAILER
• DISABILITY # 1 – I AM IN MY POSITON
1. Page 29- week 3 ‘‘`There is no advertising
campaign for the beer- you would have
received a mailing about it…”
2. Page 30- week 4- “You don’t know why
they used that line but your wholesaler
would have told you if there were any new
merchandise deal ”

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 LEARNING DISABILITIES-
RETAILER
• DISABILITY #2- THE ENEMY IS OUT
THERE

• Page 32 para 1 “What is that wholesaler

doing to me, you wonder. Doesn’t he
know what a ravenous market we have
down here? What’s going through his
mind anyway?”

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 REATAILER - LEARNING
DISABILITIES-
• DISABILITY # 4 - FIXATION OF
EVENTS
• Page 29- para 2 - “By now you take the
four case turnover for granted. It’s
inextricably wedded to the image in
your mind of the beer’s performance.
You don’t even articulate it to yourself
when placing the order. ”Oh yeah,”
runs the `litany.” Lover’s Beer. `Four
cases”
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 RETAILER - LEARNING
DISABILITIES-
• DISABILITY # 4 FIXATION OF EVENTS
• Page 29 week 2- “You don’t know why they’ve
sold so much more suddenly. Maybe someone is
having a party”

• Page 30- week 4 “And thanks to this video,

demand might go up even further”

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 RETAILER- LEARNING
DISABILITIES-
• DISABILITY #5- THE PARABLE OF
THE BOILED FROG
• Page 31 week 8 – “By now you are
watching Lover’s beer more closely
than any other product you sell” ( But
in week two, the same retailer had
doubled the orders for Lover’s beer!
Why did he have to wait for 6 weeks to
start monitoring the beer closely?)

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 RETAILER- LEARNING
DISABILITIES-
• DISABILITY #6 DELUSION OF LEARNING
FROM EXPERIENCE
• Page 32 par 1.”Bythe time you call your
backlogged customers, you’ll be sold out
before you can sell a single new case. You
will …You place an order for twenty four
more cases- twice as much as had planned
to order. What is that wholesaler doing to
me, you wonder? Doesn’t he know what a
ravenous market we have down here?”
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 WHOLESALER- LEARNING
DISABILITIES-
• DISABILITY #1 – I AM IN MY POSITION
• Page 32 para 2 “ Mostly, you
communicate with the brewery through
the same method which retailer uses to
reach you. You scribble numbers onto a
form which you hand over to your driver
each week.”

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY #2 THE ENEMY IS OUT THERE
• Page 34 second para week 10, “The brewery
could not simply ramp up production that
fast” ( Yet the wholesaler could have alerted
the brewery in week 2 when the retailer had
doubled his order!)
• Page 34 week 12, “ you sigh with resignation
when you think of how much money you
could make if you only had enough in stock.
How could the brewery have done this to
you? “

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY #2 THE ENEMY IS OUT THERE
• Page 35 week 16 para 2 “Throughout the
week…rolling. What’s wrong with these
people? Four weeks ago they were screaming
at you for the beer, now the don’t even want
any”
• Page 36 week 17, para 1 “ In your brooding
thoughts you consign every retailer to the
darkest corner of hell, the corner reserved for
people who don’t keep their promises”
• Page 36 week 17 para 2 last sentence “Why
does that brewery have it in for you? When
will it ever end? ”

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 WHOLESALER- LEARNING DISABILITIES

• DISABILITY #3 THE ILLUSION OF TAKING

CHARGE
• Page 33, para 2 ” In week 6, after seeing an
article in Brewery Distribution News about
the rock video, you had raised your brewery
order to a dramatic twenty truckloads per
week” NB. This decision was taken hurriedly,
without research

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY #4 FIXATION OF EVENTS

• Page 36, para 1 “Surely, the stores will want

more this week. After all, that video is still
running”

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY # 5 – PARABLE OF THE BOLIED
FROG
• Page 32, para 3 “ By week 8, you had become as
frustrated and angry as your retailers. But after
a few weeks …- in week 4, actually- those orders
had abruptly started rising sharply” ( Yet
retailer had increased orders in week 2 and
wholesaler did not want to investigate reasons
for this!)

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY # 5 PARABLE OF THE BOILED
FROG
• Page 33, para 1 “In week 6 after seeing an article
in Beer Distribution News about the rock video,
you had raised your brewery order still further
to a dramatic twenty truckloads per week” ( yet
in week 2 , retailer had raised his order from 4 to
8 cases and wholesaler did nothing to find out
reasons for the retailer increasing order!).

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY #6 DELUSION OF LEARNING
FROM EXPERIENCE page 34 week 10 para 2
• “The stores…..Either way, you have to keep
up. What if… You order forty truckloads from
the brewery”
• Wholesaler does not care about the
consequences of ordering more beer from the
Brewery… as long as he gets enough to supply
the stores so they do not go to his competitors

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 WHOLESALER- LEARNING
DISABILITIES
• DISABILITY #7 THE MYTH OF THE
MANAGEMENT TEAM
• Page 34 week 11 , second last sentence
• “Some of those backlog costs come due,
and you’re afraid to tell your accountant
what you expect”

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 BREWERY- LEARNING
DISABILITIES
• DISABILITY #1 – I AM IN MY POSITION
• Page 36 para 1 ‘Now clearly you have been doing
something right. Because in only your second month …
new orders had begun to rise dramatically. By the end of
your third month on the job, you felt satisfaction of
getting orders for forty gross of beer per week, up
dramatically from the four when you started”

• Page 37- ‘‘By that time you were a hero within your
company”.( Doing his job- by sending out the orders!)

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 BREWERY- LEARNING DISABILITIES
• DISABILITY #2 THE ENEMY IS OUT
THERE
• Page 38 para 2” Those distributors screwed
us, you say. The retailers didn’t buy enough
beer.. The press and that rock video hyped
up the beer and got everybody sick of it”

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 BREWERY- LEARNING
DISABILITIES
• DISABILITY #2 THE ENEMY IS OUT
THERE
• Page 38 para 2 “At the root is fickle
kids- they have no loyalty whatsoever.
How could they buy hundreds of cases
one month, and nothing at all the
next?”

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 BREWERY- LEARNING
DISABILITIES
• DISABILITY#3 THE ILLUSION OF TAKING CHARGE.

• Page 37- 38 week 19- “You place the phone

You have dreaded making to your boss.’ Better
hold off production for a week or two. We’ve
got…a discontinuity- but I am sure it’s only
temporary” n.b. (yet this instruction is not based
on facts since he had not carried out any
research!)

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 BREWERY- LEARNING DISABILITIES
• DISABILITY #4 FIXATION OF EVENTS
• Page 37, para 1’’ You had lucked out with that
Iconoclasts’ video mentioning the beer”
• Page 37 ,para 2 “ The Plant manager had given
everyone incentives to work double- time, and was
feverishly interviewing for new factory help”.
• NB. The decision to increase production was based
on the “apparent high demand “ for Lovers Beer.
They did not think of increasing production of other
brands of beer as well since the did not carry out any
market research..

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 BREWERY- LEARNING
DISABILITIES
• DISABILITY #5 – THE PARABLE OF THE
BOILED FROG
• Page 37 para 2 “You had learned about the
video in week 3 – from letters written by
teenagers to the brewery. But it had taken until
week 6 to see that translate into higher orders.
(Why did he wait for 3 weeks before taking
action- even just doing research?)

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 BREWERY- LEARNING DISABILITIES
• DISABILITY #7 – THE MYTH OF THE
MANAGEMENT TEAM
• Page 38 “There is silence on the other end of the
phone…” Why the silence? It indicates the Boss was
not questioning decisions made by the Marketing
Director to increase production of Lover’s beer.
• Page 39 ,last para “Then on your trip back, you plan
the wording of your resignation notice (WHY only
him? What has happened to the principle of
“collective responsibility” hence the whole team
members would have accepted blame had they been
taking decisions as a team after thorough analysis ?)

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 LESSONS TO BE LEARNT
1. Lack of Systems Thinking led to Silo Thinking and all
the 7 Learning Disabilities being displayed - I am in
my Position, The Enemy is out there, Illusion of taking
charge, Delusion of learning from experience, Parable
of the Boiled Frog, Fixation of events and the Myth of
the Management Team!

2. No player ever thought they were part of a Total

Supply Chain. Each one had an incomplete
understanding of what the real demand was.

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 LESSON TO BE LEARNT
3. As such , none ever bothered to undertake
research on the increasing orders- from retailer
to wholesaler! In fact apart from customer
demand increasing from 4 cases to 8 cases in
week 2- page 29- para 3- DEMAND REMAINED
CONSTANT ever after- at 8 cases per week!
4. Each player was busy making decisions focusing
only on their piece of the system, trying to
reduce costs- without thinking about the effects
of their decisions on other players- Illusion of
taking charge, I am in my position.

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 LESSONS TO BE LEARNT
5.When the long term effects of each player’s short- sighted
actions hits home, customers( young and fickle) were
blamed for ordering erratically, the supplier/ wholesaler
for supplying late and the brewery for not producing beer
fast enough to keep up with orders.

• How can intelligent people, with seemingly good

intentions create a situation they neither expected nor
wanted?-”This is a tragedy ..who let it happen-I mean
how can we keep it from happening again?-page 39 para
4.

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 LESSONS TO BE LEARNT
• 6.By blaming others, each player exhibited a mental
model closed to learning. Hence Wholesaler and
Brewery wrongly concluding that demand was
fluctuating- when it was always constant after
week 2!. What was needed was mental models that
enabled them to understand the complex dynamics
at play- so they understand that they are part of the
same total supply chain- hence needed to work
more closely together! These players never ever met
personally – until at the very end- week 24!

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 BIG QUESTION…..
• Where all these players,

PRISONERS OF THE SYSTEM OR

PRISONERS OF THEIR OWN
THINKING?

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 ANSWER….

• PRISONERS OF THEIR OWN

THINKING!

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