Re-Oriented

When Ms. Duncan began the LGO program in June, she went through a rigorous orientation program - something called the Universe Within that lasted for a week and ended with a trip to some island in the bay where blindfolds were dispensed and much reflecting on blindfolded activities took place... Or so Ms. Duncan tells me.

When yours truly first went to grad school oh so long ago (2 years) my orientation was about 3 hours and ended with drinking on the roof of the building - but then again I was a lowly liberal arts and sciences students so there was less to orient me toward.

MIT stands firm behind a one week-long orientation per degree policy and as Ms. Duncan is getting two degrees (for those of you who have forgotten - an MBA and an SM in civil and environmental engineering) she was in line for 2 orientations - one in June and one when the Sloanies arrived in late august so that she could get to know her fellow Pacific Oceanites - see previous post (as Ms. Duncan did not deign to inform you, dear reader, it is left to me to deliver the news of the Sloan schools failings at geography - there are 6 Sloan Oceans - Atlantic, Pacific, Indian, Baltic, Caribbean and Mediterranean - somewhere the MIT administration's 4th grade teachers are pulling their hair out).

There was much revelry and blindfolding ... and building of rafts ... and they rode on a boat through the bay and I got to go ...

Having endured that most horrendous of orientations (peace corps training) I adopt the motto of the less that can be said of orientations, the better... so I'll only mention one more thing that was common to both the June and August orientings.

The Beer Game!

Both less and more exciting than it sounds - in a way it corresponds to that historic Homer quote (the simpson, not the greek) - (the) Beer (game) - the solution to and cause of all of life's (read supply chain's) problems. Ms. Duncan didn't actually play the beer game during the august orientation opting instead with some of her LGO colleagues to go and drink actual beer instead of playing at producing it.

But there is much to learn from the game so I'll try to explain it. However, the best way to figure it out is to actually go and play it yourself - which you can do right here.

For a brief overview, the beer game is played with "teams" of 4 (I use the quotes as there is little actual communication between team members) - a retailer, a wholesaler, a distributor and a factory - together comprising a supply chain for cases of beer - hence the Beer Game. Teams are ranked based on combined final amount of money they lost (the less the better, obviously).

Like many academic activities, the Beer Game - much to Ms. Duncan's delight - was created at MIT as a supply chain management education device and is now played throughout the MBA world and the corporate management education world (Ms. Duncan is also a huge fan of the MIT created Little's Law - which has something to with stats or operations engineering - it may be little, but it's a law - so she tells me).

Pretty much all the players do is fill an order (the retailer fills the customer's order, the wholesaler fills the retailer's order ...) and place an order (the factory decides what to produce, the distributor orders from the factory ...). Everybody starts with 12 beers of inventory. You lose money by having inventory and by failing to fill orders. One other thing - the "customer" is a pack of notecards with an order amount written on them - the retailer flips them over before each turn to find out the customer demand.

Simple yes? Go and play and then come back - spoilers are ahead.

In theory the game is fairly simple, but there are delays between the time an order makes it to the person one level up the supply chain and there are delays between the time an order is filled and the time an order arrives - so if the retailer makes an order in week 1, the wholesaler gets the order in week 3 and the goods get delivered to the retailer in week 5 ... or something like that - you get the idea.

Thus much havoc is created through a bull whip effect that leads to huge backlogs in orders and then huge inventory levels. The different players on the team often get into fights ("Why didn't you make more beer!!" so the distributor yelled at Ms. Duncan the factory operator) because of the madness and most people think that the customers are ordering wildly different amounts from turn to turn.

They're not though. They start ordering 4 for a few weeks and then they switch to 8 and they stay at 8 the rest of the time. This switch combined with the delays and the desire to lower inventory leads directly to the bull whip effect.

Pretty much everyone does horrible. People who have played before and thus know that the orders are just going to be 8 for pretty much the entire time - they often do worse.

There is much to be learned from the beer game - I shall ponder it deeply and come down from my academic mountain later and draw silly conclusions.