The Beer Game

A simulation game created to demonstrate some key principles of supply chain management. It was made in the early 1960's by some professors at the MIT Sloan School of Management.

The game is played by 4 to 8 people, who must cooperate despite limited information transfer. Early versions (including the one pictured) used pieces on a board, later refined to paper spreadsheets and then computerized ones. The target is to minimize total costs across the whole team, from factory to distributor to wholesaler to retailer. (With more than 4 players, either multiple players can be assigned to each station or the game can shift to competition between multiple teams.) Each day beer moves forward through the chain, paper order slips move backward, and shortages impose costs. The order slips are the only data each stage has to work with -- no table talk! End customer demand is simulated by a deck of cards, which can be stacked or randomized by the moderator to emulate different market conditions.

The game runs for a specific number of day/rounds, initially 36 at MIT (but the moderator told the players it would be 50 to prevent horizon effects). Invariably the limited information causes "bullwhip effects" that ripple down the chain, which is the main lesson the game teaches.