Supply Chian management-The game.ppt

WashingtonStateUniversity2001,1,IBU,IBU,IBU,IBU,IBU,IBU,IBU,IBU,IBU,IBU,RawMaterialSupplier,FinalCustomerBuyer,IndividualBusinessUnits,WorkflowsintotheSystem,WorkflowsoutoftheSystem,WorkflowsthroughtheSystem,RawMaterialsupplierhasinfinitecapacityandinstantaneousdelivery.SellsRMfor$2perunit.Eachunitisrepresentedinthesystembyatoken.FinalCustomerBuyerpurchaseonaverage2.5unitsperperiodatapriceof$22each.Thedemandcurveis:1,0,3,0,5,6(basedonafairdiecounting0toreplacethe2and4sides).Expectedaveragegrosssalesthenis$55perperiod.IndividualBusinessUnitsstartwith5unitsofrawmaterial.Eachperiod,theyproduceaccordingtotherollofafairdie.Theycontrol(negotiatewiththeirsupplier)howmuchinputmaterialtheybuyeachweek.Theysell(negotiatetransferwiththeircustomer)FinishedGoodsataprice$2abovewhattheypaytheirsupplier.InventoryHoldingCostsare$0.50perunitinRawMaterialorinFinishedGoodseachperiod.Iftheaverageproductionis2.5units($5.00)andaverageinventoryis5units($2.50),andperiodicOperatingExpensesare$2,theexpectedprofitwouldbeabout$0.50perperiod.TheTotalSystemthensellseachunitfor$22(finalproductprice).Thecost-of-goods-soldorrawmaterialcostis$2perunit.TheTotalSystempaysInventoryHoldingCostsof$0.50perunitperperiodforallinventoryaslongasitisinthesystem.Thiscoverstheexpenseofwarehousing,transportation,scrapeandloss.ThetotalsystemhasaperiodicOperatingExpenseof$20perperiod(10IndividualBusinessUnits*$2each).Theexpectedaverageprofitforthesystemisnothigh:Averagesalesof2.5perunitsperperiod*$22-$2(grossprofitperunit)-$25(expectedInventoryHoldingCostfor50unitsinthesystem)-$20(OperatingExpenses)=$5.00profitperperiod.Playersneededtoplaythegame:RawMaterialSupplier(1each)Ten(10)IndividualBusinessUnitManagers(eachcanuseanassistantifavailabletokeepthebooks)MarketRepresentative(1each)InventoryControlManager(1each)SystemAccountant(1each)SystemPolicyMaker(1each),WashingtonStateUniversity2001,2,RawMaterialSupplierTheRawMaterialSuppliersellsrawmaterialtothefirstIndividualBusinessUnit(IBU).TheIBUcanpurchaseasmuchRawMaterialastheywantandhaveitinstantaneously.(Therearenotreturns-Allsalesarefinal).Eachperiod,givethefirstIBUonetokenforeachRMunitrequested.Recordsalesforeachperiodonyourworksheet.ReportyourperiodsalestotheInventoryManagerTallyyourRevenuesat$2.00perunit.,PeriodSoldRevenue,WashingtonStateUniversity2001,3,MarketRepresentativeTheMarketRepresentativeactsastheFinalCustomerBuyer.YoubuycompletedunitsfromthelastIndividualBusinessUnit(IBU)for$22perperunit.Thenumberyouwanttobuychangeseachperiodaccordingtotherollofafairdie(exceptifyourolla2or4thenyoudonotorderanythingthatperiod).Onaverage,yourequest2.5unitsperperiod.TheIBUsellsyoutheminimumofwhatyouwanttobuy(yourroll)orwhattheyhavetosell.Therearenobackorders!Ifyoucannotbuywhatyouwant(whentheycantdeliver),youcomplainloudly!Andyourecorda$100CustomerDissatisfactionComplaintforeachunityouwerenotabletobuy.RecordyourRolleachperiod(Marking0eachtimeyourolla2or4).Reportyourperiodpurchases(theminimumofyourrollornumberdelivered)totheInventoryManagerTallyGrossSalesat$22.00perunit.RecordanyCustomerDissatisfactionComplaints($100foreachunitrequestedthatisnotreceived)andcomplainagainloudly!,Inv.,Number,WashingtonStateUniversity2001,4,SystemInventoryControlManagerTheInventoryControlManagertracksthetotalinventoryinthesystemSincetheinventorybetweenandwithinIndividualBusinessUnits(IBUs)constantlychanges,theonlypracticalwayofmanagingthisistotakeaperiodicauditofWhatwasintheSystemlastperiod,WhatcameinthisperiodandWhatleftthisperiod.YoucollectinformationabouttheinventorythatenteredtheSystemfromtheRawMaterialSupplier.YoucollectinformationabouttheinventorythatlefttheSystemfromtheMarketRepresentative(FinalCustomerBuyer).Pleasetryandstaycurrentandbeaccurate!Attheendofeachperiod,RecordtheIncomingInventoryandtheOutgoingInventory.CalculatethenewSystemInventory.ReporttheperiodSalesandthenewSystemInventorytotheSystemAccountant.,PeriodInv.RMInFGOutInv.Level,1,50,+,-,=,2,3,4,5,6,7,8,9,10,EndingInventory,Prior,New,Sales,New,+,-,=,+,-,=,+,-,=,+,-,=,+,-,=,+,-,=,+,-,=,+,-,=,+,-,=,WashingtonStateUniversity2001,5,SystemAccountantTheSystemAccountantisresponsiblefordocumentingtheperformanceoftheSystemasawhole.EachIndividualBusinessUnit(IBU)recordstheirownlocaldata.Yourecordthesummarydataforthewholesystem.SinceitisimpracticaltocommunicatewitheachIBUeachperiod,youbaseyounumbersontheSystemAggregatenumbers.YourecordtheperiodicSystemSales(Revenuetothesystem)andsubtractoutallthecoststothesystemduringthatperiodtodeterminethesystemsperiodcashflow.ThecoststothesystemincludethemoneyspentfornewRawMaterialeachperiod,theperiodInventoryHoldingCostsandtheperiodOperatingExpenses.TheSystemInventoryControlManagerwillgiveyouallthenumbersyouneed.RawMaterialcostsare$2perunitpurchasedduringtheperiodInventoryHoldingCostis$0.50perunitinthesystem(totalofRMandFG)foreachperiod.OperatingExpensesare$2perIBUperperiodor$20totalforthetenIBUs.EachPeriod,recordtheSalesRevenue,RawMaterialPurchased,andInventoryHoldingCost.TheOperatingCostisalreadynoted.CalculatetheCashFlow(Sales-RM-Inv.-OE=CashFlow).ReportyourCashFlowfiguretotheSystemPolicyMakereachperiod.,PeriodSalesRMInv.OECashFlow,1,2,3,4,5,6,7,8,9,10,Total,$,CashflowequalsSaleslessRMlessInv.lessOE,$,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,CashflowequalsSaleslessRMlessInv.lessOE,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,$,$22each,$2each,$0.50each,$20,WashingtonStateUniversity2001,6,IndividualBusinessUnitManagerYoumanageyourIndividualBusinessUnit(IBU).Youaretheonethatmakesthingshappen.YouorderRawMaterial,ProduceProductandDeliverFinishedGoodstothenextIBUorcustomer.Eachperiod,youhavethreedutiesandresponsibilities.Thefirstistoproduce.Thesecondistoorder(negotiate)fornewRawMaterialfromthepreviousIBU(orsupplier)andtoSell(transfer)yourFinishedGoodstothenextIBUorcustomer.ThirdistocalculateyourprofitsProduction:Eachperiod,yourollafairdietodecidehowmuchproductioncapacityyouhaveduringthatperiod.Sometimesits1,sometimesit6andcouldbeanyothernumberonthedie.Theaveragerollis3.5productsperperiod.Youareincontrol.Yougettochoose.Ifyoudonotwanttoproduceanythingafteryourroll,youdonthaveto.Youcanproducetheminimumofthenumberrolledonthedie,theRawMaterialInventoryyouhaveavailable,orsomelessernumberifyouchoose.TheRawMaterialInventoryisyourbufferagainstthevariabilityofthedie.MaterialControl:AfterProductionisover(stillduringthesameperiod)younegotiatewithyoursupplieronthenumberofRawMaterialunitsyouwanttoreceive.ThemaximumRawMaterialyoureceivefromyoursupplieristhenumberyouwantorthenumberthesupplierwantstogiveyou.Also,younegotiatewithyourcustomer.ThemaximumFinishedGoodsyoucanselltoyourcustomeristhemaximumyouhaveproduced(inyourFinishedGoodsInventory)orthemaximumthecustomerwants.YoumustkeepanyFinishedGoodsinventorythatyouproducethatyourcustomerdoesnotwant.CalculateProfit:EachPeriodafteryouproduceproductsandtransferredinventory,youcalculateyourprofit.ProfitcomesfromtheSaleofFinishedGoodstoyourcustomer.Eachproductsellsfor$2eachabovethepriceyoupaidforthepurchase.(Youdonthavetopayanythinginthismodel,justgetgrossrevenueof$2each.Thismakesaccountingeasier.)SubtractfromyourTotalSalesyourInventoryHoldingCostandperiodOperatingExpensetodetermineyourprofit.Costs:YouhavetopayanInventoryHoldingCostof$0.50oneachRawMaterialorFinishedGoodinyourpossessioneachperiod.Youalsohavea$2perperiodOperatingExpense.Again,theperiodProfitsareSaleslessHoldingCostslessOperatingExpenseThePlayintheFirstHalfofthePeriod:RolltheDie.RecordtheProductionCapacity.Determinehowmanyyoucan(wantto)produceandrecordtheproduction.MovetheProducedtokensfromRawMaterialtoFinishedGoods.ThePlayintheSecondHalfofthePeriod:Negotiatewithyoursupplieronthenumberofproducts(tokens)totransferintoyourIBUasadditionalRawMaterial.RecordthenewRawMaterialLevel.NegotiatewithyourcustomeronthenumberofFinishedGoodsyouwillsell(transfer)toyourcustomer.MovethosetokensoutofyourIBUandrecordyournewFinishedGoodslevel.TheLastAct:CalculateyourProfitsfortheperiod.YoumaywanttokeeparunningProfittotalfromperiodtoperiodtoseehowyourprofitsbuildup.Warning!ThisgameusesvaluabletokenstorepresenttheRawMaterialandFinishedGoods.KeepyourRawMaterialandFinishedGoodsseparatebutnearyou(sotheydontbecomestolen).,WashingtonStateUniversity2001,7,WashingtonStateUniversity2001,8,SystemPolicyMakerYouaretheSystemPolicyMaker.YouaretheCEOofthewholeSupplyChainSystem.Itisyourroletooverseethewholesystem.DontgettooinvolvedwiththeperiodicproblemsofIndividualBusinessUnits(IBUs).Keepaglobalview.Fromthisviewpoint,youguidetheSupplyChain.YouguidebyissuingGlobalPolicyStatementsthatyourIBUstrytofollow.CurrentPolicy:TheCurrentpolicyempowerseachIBUtomaketheirowndecisions.TheIBUsdecidehowmuchRawmaterialtoorder.Theydecidehowmuchoftheirproductivecapacitytouse.TheydecideiftheywanttoselltheirFinishedGoodsortoholdthem.EachIBUtriestomakeasmuchprofitaspossible.EachIBUcannegotiatewithotherIBUsforitsownbenefit.ExecutingYourrole:InyourroleasCEO,youshouldmonitortheprofitsandinventoriesofindividualIBUs.Youmayneedto“stronglysuggestimprovements”toanIBUManagerfromtimetotime.TrytokeepethicaloperationsinyourSystem(NoCheating!Else,youwontlearnwhatyouneedtolearn).AsCEO,youshouldscrutinizecarefullythereportoftheSystemAccountant.TryandkeepthesystemprofitablebysecuringapositiveCashFlow.AnoccasionalperiodwithnegativeCashFlowisacceptable.However,ifyoursystemhasthreeperiodsofloses(negativeCashFlow)inarow,youmaybereplaced!TheCEOshouldlistentothefinalcustomeraswell.ItshouldntbetoohardsincetheMarketRepresentativewillcomplainloudlytoeveryoneifyoucantdeliver.Ifsuchacomplaintoccurs,recorda$100lossforeachcomplaint.Ifnecessary,issuenewpoliciestotheIBUs.ThatswhatCEOsdo!Thereisalotofmoneytobemadehere.Ihopeyoucanfindit.DrH,WashingtonStateUniversity2001,9,Havingtroublemanagingthewholesupplychain?AfteryouhaveplayedtheSupplyChainGamefor6to10periodsusingindividualbusinessunitmeasuresfordecisions,itsobviousnoonecancontrolwhatishappeningtothem.ItbecomesveryfrustratingforallIBUsandfortheCEO.Clearly,thebeginningstrategies(policies)arenotworking.So,whatshouldthenewpoliciesbe?Possiblenewonesare:“BalancetheLine”-Makeeveryonemovethelowestroll.“Kanban”-Onlyreplenishwhatwastaken.“Traditional”-Pushasmuchasyoucanthroughthesystem.However,thebestmethodofmanagingasupplychainiswithDrum-Buffer-Rope.Theconstraintinthissystem(Drum)isthemarketthatdemandsonly70%oftheIBUindividualcapacities.ThefinalmarketdemandmustbebufferedbymovingasmanytokensaspossibleasquicklyaspossibletothefinalIBU.TheInventoryinthissy