THE DISTRIBUTION GAME

 

The distribution game was designed by John Muckstadt and Peter Jackson (Muckstadt, J. & Jackson, P., Llenroc Plastics: Market-Driven Integration of Manufacturing and Distribution Systems, Technical Report No. 898, School of Operations Research and Industrial Engineering, Cornell University, 1995) The game can downloaded from Peter Jackson's webpage.

 

The game is a computer simulation of retailers and wholesaler inventory systems. We play the game before we introduce EOQ and safety stock theory. The students soon get a feel for tradeoffs between ordering and inventory costs. We follow this trial and error experiment by a presentation of the theory. Students are then asked to apply the theory to the game's parameters and rerun it. The game captures several issues of inventory management as they relate to cost minimization and service level. These include order quantities, lead time, reorder points and safety stocks. This game can be used effectively to reinforce these concepts. The real strength of the game, however, is that it captures other aspects of inventory management that are typically missing from operations management text books. These are mainly the multiple echelon ordering system and pipeline stock.

 

The game consists of a single supplier, a central warehouse, three retailers and their inventories, and trucks that carry orders with defined lead times. All units are assumed to be part of the same system and hence the objective is to minimize the overall cost. Orders placed at the supplier are received first at the central warehouse. The retailers then replenish their inventories from the warehouse subject to availability. The game parameters are defined in the simulation and include lead times, costs and demand distributions. A player has to place the orders as he decides on order quantities and appropriate reorder points at both levels. (Default values are included in the parameter page.) In Figure 4, the trucks at the lower half carry orders from the warehouse to the retailers. The truck above carries the order from the supplier to the warehouse. The GO button advances the time in days. The game horizon is a total of 200 days. The game is best conducted in a computer lab environment where students have access to their own machines. Possible output includes cost statistics and inventory plots.

 

This game is simple yet extremely engaging. The graphics are truly delightful. It is also a relatively short game (about 10 to 15 minutes.) Usually we play the game first before the class discussion of inventory models. This gives the students a feel for the relationships that define an inventory system. We do this simply by disclosing what we consider to be a good score (cost) and asking them to beat it. Then we give a lecture on inventory models, apply the theory to the game parameters, and play the game again with the calculated order quantities and reorder points. Students are expected to make the following realizations: one, that since the cost of inventories at the warehouse are accounted for once an order is shipped from the supplier, the retailer inventory holding rate is only the difference between the two rates; two, that since its a two level system, the warehouse inventories includes the lower level (retailers) inventories and pipeline stock. The game also includes the option of hiding the retailers' inventories. Playing the game with that option really drives home the importance of keeping track of inventories at lower level echelons.

 

Figure 4 Distribution game screen

 

 

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