A few years ago, Procter & Gamble (P&G) identified a peculiar phenomenon in the series of demand for one of its main products: Pampers children's diapers. The company noticed that, although demand for diapers at retail was relatively constant and was predicted with a high degree of accuracy, the orders that came to it from distributors were quite irregular and much more difficult to forecast. When she analyzed the order of adhesive tapes she placed for 3M, she found that the variation in orders was even greater. To this phenomenon, in which the variability of demand increases the farther one is from the final consumer, P&G named bullwhip effect, or, as we know it in Portuguese, the bullwhip effect.
One of the first people to identify this effect was the professor at MIT Jay Forrester while studying the industrial dynamics of supply chains in the United States. Believing it to be easier to demonstrate than to explain it, he created in the late 50's the beer game. In the beer game, as it is also known in Brazil, participants are divided into four links of a traditional supply chain (factory, distributor, reseller and retail) and need to manage stocks of a single product, placing resupply orders to their suppliers and meeting the demand of its customers. The competition takes place between chains and the one with the lowest total cost wins the game (sum of order costs and excess or shortage of products).
Figure 1 – Beer Game application example
Source: ILOS
After years of studies and observations, it was discovered that what generated excessive inventories in certain periods of time, high expenses with overtime, loss of capacity with intense reprogramming of machines and low level of service due to unavailability of products – some of the consequences of bullwhip effect – these were factors such as the use of production batches, promotions and long response times, in addition to behavioral causes such as misperceptions of the times involved in the process and fear regarding the lack of products. To reduce the bullwhip effect, several robust mechanisms and famous acronyms such as VMI, JIT, EDI e ERP. However, the greatest remedy for this phenomenon is achieved through increased integration and synchronized decision-making between the links in the chain, a perception that becomes clear after carrying out the simple, yet powerful, beer game.
Figure 2 – Example of a bullwhip effect observed in a Beer Game application
Source: ILOS
O beer game it provides a great opportunity for professionals from different links in the supply chain, or even from different areas of the company, to assume roles that are different from the usual ones and rethink the relationship between their function and the others. Through the ludic character, participants learn from their mistakes and successes and, after experiencing them, they never forget. This is the secret of beer game which, even 50 years later and revamped by technology, is still a great success at corporate and university events.
References
<http://sloanreview.mit.edu/article/the-bullwhip-effect-in-supply-chains/>
<https://ilos.com.br/web/jogos-de-empresa-e-operacoes-logisticas/>
Fernanda Monteiro
More than 11 years of experience in training and consultancy projects, focusing on Logistics and Supply Chain. In consultancy, he carried out projects such as Transformational Logistics Plan, Diagnosis of logistics operations, Strategy and Calendarization of Transport Operations, Measuring the Cost of Serving, Market Study, Mapping of Inventory Reduction Opportunities, Review of the S&OP Process, Management Plan Training and Implementation of Commercial Processes in companies such as Nestlé, Raia Drogasil, Ipiranga, Lojas Americanas, B2W, Coca-Cola, Andina, Embraco, Martins Atacado, Loja do Mecânico, Santo Antônio Energia, Ecoporto and Silimed. She is currently one of the teachers of the Inventory Management Course taught every six months by ILOS. She worked on the development and management of Online Courses in Logistics and Supply Chain, Supply Processes, Demand Planning, Inventory Management and Industrial Management. Still in the training area, she was responsible for applying ILOS business games in companies such as Raia Drogasil, Fibria, NEC, Novartis and Moove.
