The beergame is a role-playing game. It simulates a four-stage supply chain (retailer, wholesaler, distributor and brewery). The task is to produce and deliver crates of beer: The brewery produces and the other three stages deliver the crates of beer until they reach the customer at the downstream end of the chain.
The aim of the players is rather simple: each of the four groups has to fulfil incoming orders of beer by placing orders with their own supplier. Inventory and backlog incur cost – each item in stock costs 1 monetary unit (MU) per week (simulation step) and crate, while each item on backlog costs 2 MU. Consequently, the primary aim of each subgroup is to keep their costs low. Hence, the optimal strategy for the players is to run their business with as little stock as possible without being forced to “move into backorder”.
As the individual parties are not allowed to fully exchange their information, but only communicate with each other via order quantities, each player tries to optimize their own result, with consequence that strong fluctuations and chaos arise within the chain (known as the bullwhip effect).
The beer game was developed around 1960 at the Massachusetts Institute of Technology (MIT; see section Literature) by the System Dynamics Group under the direction of Jay Forrester. In the meantime, the beer game has become a classic in management training.
