Virtual Word Task Assignment: Ordering Kentucky Hooch Brew
Subject: Re: Ordering product for EBBD from the Kentucky Hooch and Beer Company
Now that you have become familiar with EBBD and how we do things here, it is time to put you to work. We have been informed that KHBC is going to begin a new promo and advertising campaign during the next month that will put Kentucky Swamp Brew in the mind of every college student in the Midwest. We currently supply this beer to most of our retail customers. And we think we can expect an increase in orders from them in a few weeks when the ad campaign hits.
If this happens, and there is no reason to believe that it won’t, given the habits of college students, then we need to carefully consider how much we want to order from the KHBC brewery. We expect you to do the ordering for this product over the next 20 to 25 weeks, before, during, and after the KHBC ad campaign for Kentucky Swamp Brew.
At the end of this period, we want you to give us a report on what happened. We are interested in knowing how our retailers responded with their orders, what we did in response, i.e. how much we ordered, and what kind of backlogs there were, if any, in the order levels for the retailers, and us. And finally, what did our inventory and stocking levels look like? Did we overstock?
Let me know if you have any questions.
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Learning Wizard: Learning Assignment & Assistance
Running the simulation: Go the simulation at http://forio.com/simulate/jelson/excellentbeerdistrib
You should have already experimented with this simulation as indicated on the Background page.
Read the scenario on Page 1 and go to Page 2. On Page 2, choose the KHBC Ad Campaign Scenario-2. Based on the weekly orders from your Retail Customers, you need to determine the weekly amount to order from KHBC. Enter the order and Advance (1 week). You can review the running status of orders and inventory in the table provided. Your goal is to minimize your backlog and your Retail Customers backlog, as well keep your inventories at a minimum. And avoid the Bull-whip effect. You may want to experiment a bit with your ordering strategy.
During the simulation (the one that you are going to use in your report), you should keep track of the highest levels of Customer Backlogs, EBBD Order Backlog, and levels of EBBD inventory.
When the simulation run has ended, copy the data from the Graph to Excel.
First, download this Excel file. EBBD-ResultsData-Case1.
After running the simulation, while you are in the simulation, select the Graph tab. then with the mouse right-click on the graph and select copy data. Then paste it into the Excel Worksheet (put the cursor in the designated cell, and do a paste), and save it . You will see that the Graph is done for you automatically. You will also see a copy of the graph from the Background Reading by Padmanabhan, H.L.L and Whang, S. (1997), The Bullwhip Effect In Supply Chains; Sloan Management Review,v38.
Assignment, Part 1: Analyze the data you saved in the Excel file. Write your report about the situation and explain the results, including the levels of order backlogs and EBBD inventory. Also explain your ordering strategy and logic.
Assignment Part 2: After you have completed your report to Management at EBBD, you need to add a section to articulate your learning and knowledge gained. You should identify the causes of the Bull-whip Effect. Discuss your results and how they compare with the historical Bull Whip affect. Compare your graph of your decisions to the graph of the historical bull whip. Explain your strategy and how you determined it. Explain why your results are the same or different from the historical bull whip results. Were you able to avoid
Background Information
Virtual Word Background: Excellent Beverage & Beer Distributors
To: You
From: Danny Wilco
Subject: Ordering product for EBBD from the Kentucky Hooch and Beer Company
I want to give some important information regarding the ordering process that you will be working with. First, there are about 20 Retailers to which we are currently distributing the Kentucky Swamp Brew. They send in their orders on Monday, which we aggregate into a total order amount. Then on Tuesday we send in our orders to KHBC. And of course KHBC processes these orders into its order queue and determines what to ship to us. I assume the amount that KHBC ships is based on some decision formula they have for the orders from all of their distributors and how much of the product they have available to ship any particular week. We usually get our shipments from KHBC on Wednesdays ‘ I think they actually start the shipment on Fridays or Mondays and it takes a few days to get to us. Then we unload the beer into our warehouse, create the delivery lists for each of our customers, load the product on our trucks, and deliver it to our retail customer, either Thursday or Friday.
We want our customers to get their beer so they are stocked up for the weekend. After all, they can’t sell what they don’t have.
One other thing: I don’t know if this is true or not, but we have heard that KHBC may have a capacity problem with producing enough beer. They are becoming more popular, especially in this region ‘ they cater to the college crowd and 20 to 30 year old group. I just wanted to pass this on to you.
Let me know if you have any questions.
~DW, VP LogOps.
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Learning Wizard:
Beer Distribution is big business in the US and worldwide. Brewers need to get their brews to the people who want to drink it. Carryouts, grocery stores, bars, and pubs all provide the product in bottles, cans, and kegs at the retail level. But it is the distributor who handles it between the brewer and the consumer. Read here about the beer distribution system in the US.
What is a Beer Distributor? (2006). National Beer Wholesalers Association. Retrieved from http://nbwa.org/about/what-is-a-beer-distributor
System Dynamics
The movement of material is the most fundamental aspect of logistics. And this creates inventory, which is the accumulation of material in batches or in queues. This inventory has a cost associated with it, both from the cost of the material to cost of holding it as inventory. There are also costs of moving the material as well as processing it if that is part of the operations as in manufacturing.
This fundamental aspect of logistics, inventory, can be modeled using system dynamics concepts. So first, you should become familiar with the basic concepts of system dynamics: flows (and rates of flow), and levels.
This is Ch. 2, A Modeling Approach, from Arizona State University’s (ASU) System Dynamics Methods: A Quick Introduction page, which is part of its System Dynamics Resources. This chapter explains the concepts of stocks and flows. Chapter 1 gives you an overview of system dynamics cause and effect modeling using Causal Loop diagrams. But Ch. 2 is the basic fundamentals of systems. Please feel free to read deeper into any of these resources.
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