• estebanlizarazo

Reflections learnt from the Beer Game to the Coronavirus Crisis in Colombia

Updated: Mar 22, 2020

I am writing this blog under a national and mandatory quarantine as a countermeasure of the COVID-19 and a week after we played the Beer game at Inalde Business School in Colombia. Right now the Colombian government has reported 196 confirmed cases of Coronavirus (as March 20th 2020) . Covid-19 is spreading exponentially (my calculations 5 days ago were 100 cases, almost half of the terrifying actual data). My intention is to encourage you to behave rationally during this outbreak and moderate your consumption with the lesson taught in my lecture in the MBA course.

The Beer Game

The Beer Game is a simulation of a four-echelon Supply Chain: i. the Factory, ii. the Central Distribution Center, iii. the Distributor and the iv. the Retailer. The game is intended for 52 weeks simulation which in each turn the players define how much should be produced or ordered. The intention of the beer game is to illustrate the bullwhip effect in which small distortions in the retailer's demand create huge effects bottom-up (the Factory). Though the game, we can observe a simplistic panorama of a Supply Chain (1-product, 1-SKU, 1-factory, 1-distributor, 1-retailer, unlimited raw material, unlimited load capacity, no-discounts, fixed-currency, non lead-times deviation) it has been shown to be a powerful and practical academic tool to understand how difficult is to orchestrate the Supply Chain.

According to academics (Disney and Towill, 2001) the Bullwhip effect can be explained by four variables: i. Price fluctuations or the Promotion Effect, ii. Rationing and gaming or the Houlihan Effect, iii. Demand signal processing and non-zero lead-times or the Forrester Effect, and iv. Order batching or the Burbidge Effect. Within the simulation the participants at Inalde experienced the Houlihan Effect and the Forrester effect vividly in which paraphrasing some students: "I didn't have any stock and got some back-orders so I started to increase the orders without following any logical strategy, I just wanted to ensure as much stock as possible". At the end, the worst performances in the game were governed by the "Rule of Fear", the fear of a stock-out. The lower performance results were also enforced by selfish behavior and an only-my-stock position.

Lessons for the Coronavirus Crisis

The beer game urges us to behave rationally in terms of consumption in order to banish a blunt and blunder consequence. We must shed some lights on the fact that we need to continue buying essential goods without being governed by the rule of fear that I explained previously. Please buy on a regular basis and be prudent, don't be selfish, you don't need to stockpile goods. World wide supply chains are collapsing due to restriction on the loads, idle capacity due to the quarantine and the extra demand of some items. In this time we need to be rational as the beer game shows us, otherwise in a couple of weeks we are going to run out of essential goods. Finally, I also enhearten the regulators and retailers, to think about restrictions on the consumption of essential goods (maybe a bottle of foam or cleaning gel per family?). Hopefully this crisis will bring out new ideas, new ventures and entrepreneurship, and enforces new moral behavior. We need to share more, we need to think more as a whole, we need to have a systemic view, maybe that is what Supply Chain can teach us all. Let us work for aiding the healthcare system adopting a collaborative behavior and keep calm, reflect, be generous and act as a member of a the best and great Supply Chain, the Human Kind.

By the way, I don't know what is happening to people with toilet paper, COVID-19 is a respiratory disease not a gastrointestinal virus.

My greetings and gratitude to the MBA's cohort 2019-2021 at Inalde Business School. I will announce briefly the winners of the Excellence Supply Chain Award. A night at Encubo Glamping (Guatavita) for you and your family. Encubo's concept is the cube, one of the many inventions that supply chain brought to the world.

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