Such phenomenon has been observed repeatedly and reliably through all types of supply chains. It is therefore appropriate to generalise it and theorise it as a universal 'effect' mode1,through which analysis and simulations can be applied Basically, the bullwhip effect has three key characteristics. The first is oscillation. The demand, orders or inventories move up and down in an alternative pattern. The second is amplification. The magnitude of the alteration and fluctuation increases as it travels to the upstream end of the supply chain. The third is phase lag. The cycle of peaks and troughs of one stage also tends to lag behind the one in the previous stage. Those characteristics can be clearly demonstrated by a supply chain simulation game.
The Beer Game
To illustrate the bullwhip effect in the supply chain dynamics, MIT Sloan School of Management created a so called Beer Distribution Game or just Beer Game. The Beer Gam•e is the most widely played game in business schools around the world. Many modified versions have also been developed and used extensively, but the one shown in this book is the original version. Despite the variation of the games played around world, the key features and the learning points remain largely the same.
The game is a role playing simulation of a supply chain ,originally developed by Jay Forrester in the late 1950s to introduce students of the concept of system dynamics and its management. The game is played on a board portraying atypical supply chain (figure 12). The supply chain distributes beers and has four sectors:retailer, wholesaler, distributor, and factory.One or two persons manage each sector. A deck of cards represents customer demand. Each week, customers demand beers from the retailer; the retailer fills the order out of invent,ory.The retailer in turn orders beer from the wholesaler, who ships the requested beer from the wholesale stocks. Likewise the wholesaler orders and receives beer from the distributor, who in turn orders and receives beer from the factory, and the factory produces beer. At each stage there are order processing and shipping delays. Each link in the supply chain has the same structure.