How beer helps with lean

By admin • on September 22, 2008

We all love drinking beer, but did you know that is can be used to teach Lean principles?

When you invite the whole world to your party, inevitably someone pees in the beer

- Xeni Jardin

From the ASQ forums: Are you familiar with the “Beer Game” simulation?

It was developed at the Massachusetts Institute of Technology (MIT) in the 1960s, so it pre-dates Lean (though, obviously, it does not pre-date beer!). Even so, it can be used to demonstrate several lean-related concepts.

It is used to demonstrate the advantages of taking an integrated approach to managing the supply chain, especially the value of sharing information across the various supply chain components.

It is useful for explaining several lean-related concepts, especially the “Bullwhip Effect” (aka the “Whiplash Effect“), Kanban, and the advantages of “Just-in-Time” (JIT).

The game is played on a board that represents the production and distribution of beer. Teams of students represent different parts of the supply chain. Players take on the following roles to simulate the supply chain for each brewery:

> the retailer sells cases of beer to a consumer and orders cases of beer from the wholesaler,

> the wholesaler sells cases of beer to the retailer and orders cases of beer from the distributor, and

> the distributor sells cases of beer to the wholesaler and orders beer from the factory.

> the factory brews the beer.

Image by qa.manager via Flickr

Pennies represent cases of beer and are moved between the positions on the board. The object of the game is to minimize two inventory related costs: holding cost ($0.50/case/period) and backordering cost ($1.00/case/period). Costs are assessed each period as the game is played.

During each period the players receive orders, evaluate their inventory position and decide orders and shipments for their echelon. Consumer demand for beer is simulated using a deck of cards according to a predetermined sequence and given to the retailer each period.

A fixed shipping delay of two periods simulates the time required to receive, process, ship and deliver orders. In the case of the factory, a lead time of two periods is required to produce a new beer order. The game starts in equilibrium with 12 cases of beer in inventory at each echelon and 4 cases in each of the delay positions.

Normally, the simulation begins with four weeks of steady demand (4 cases per week) and all the players are directed to order and ship four cases each period, to maintain the initial equilibrium. Following the four-period startup, players are then instructed to order any quantity they wish. At this point, there is an increase in customer demand to eight cases per week. This change in demand induces disequilibrium into the system to which the students must react.

The Beer Game can be a very useful addition to Lean classes (especially those in manufacturing environments that depend on a good supply chain):

Here is the quick Wikipedia explanation of the Beer Game:
http://en.wikipedia.org/wiki/Beer_Distribution_Game

Here is the MIT guide to the Beer Game:
http://beergame.mit.edu/guide.htm

Here is the On-line Beer Game simulator from MIT:
http://beergame.mit.edu/default.htm

Here is information you about supplies you will need if you do the Beer Game:
http://www.solonline.org/pra/tool/beer.html
http://www.solonline.org/pra/tool/bibl.html

And, here is a set of tips from a Professor at Arizona State University in the U.S. who has used the Beer Game for a while:
http://www.public.asu.edu/~kirkwood/sysdyn/BGame/BGame.htm

Here is some additional about the “Bullwhip Effect”:
http://en.wikipedia.org/wiki/Bullwhip_effect