Decision making in the beer game and supply chain performance

The beer game has been used to emphasize, investigate, and analyze supply chain inefficiencies as well as the effect of decision makers’ biases. This paper investigates the short- and long-run performance in the beer distribution game by analyzing Sterman’s (Manag Sci 35(3): 321–339, 1989 ) model th...

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Bibliographic Details
Published in:Operations management research 2013-12, Vol.6 (3-4), p.119-126
Main Authors: Macdonald, John R., Frommer, Ian D., Karaesmen, Itir Z.
Format: Article
Language:English
Subjects:
Analysis
Beer
Behavior
Business and Management
Chaos theory
Decision making
Decision making models
Engineering Economics
Game theory
Industrial and Production Engineering
Innovation/Technology Management
Inventory
Logistics
Management
Marketing
Operations Management
Operations research
Operations Research/Decision Theory
Organization
Simulation
Studies
Supply chain management
Supply chains
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Summary:The beer game has been used to emphasize, investigate, and analyze supply chain inefficiencies as well as the effect of decision makers’ biases. This paper investigates the short- and long-run performance in the beer distribution game by analyzing Sterman’s (Manag Sci 35(3): 321–339, 1989 ) model that simulates decision-making. In this model, the system may have chaotic behavior depending on the heuristics used by decision makers. We investigate how quickly the system reaches a steady state (if at all). It is known that ignoring supply line (outstanding orders) leads to the bullwhip effect in experimental research. Among other results, we show that the short-term performance of a supply chain is not a predictor of the long-term performance even when decision makers fully recognize outstanding orders. Results of the simulation and practical implications are discussed.
ISSN:1936-9735
1936-9743
DOI:10.1007/s12063-013-0083-4