Massachusetts Institute of Technology in the 1960s, established the bullwhip effect by creating a make-to-stock supply chain with four tiers. The game has four players with the following roles: retailer, wholesaler, distributor, and factory. All of them are on the same linear chain.
Contributors of the beer distribution, an end customers places orders at the retailer of the supply chain. The retailer is asked for four units during the first five and for eight units during the following periods of the recreation (Simchi-Levi, Simchi-Levi, Kaminsky, & Shankar, 2008, pp-
486-488). The manufacturer receive orders from their customers and decide how much to order from their supplier for replacement. Thus, information is passed on up the supply chain with a delay of one period of time at each stage. Than items is forwarded in the other direction down the supply chain. There will be a delay as material has to be transported and it have to pass items receiving. Thus it take two periods until items received from a supplier can be delivered to a customer from to each manufacturer. By doing this the objective is to minimize the over-all logistics and bullwhip costs of the established supply chain. Factory: on the basis of the first orders, the factory tries to create a warehouse able to meet the market demand, and afterwards, to create a strategy that supports reducing stock levels.
Wholesaler: firstly implements the excess strategy supporting the stock levels able to successfully meet the estimated maximum market demand then, once the wholesaler has reached stock levels equal to 10, they send orders to wholesaler no. 2 which are equal to the orders received by the distributor (Simchi-Levi et al., 2008, p.489). Wholesaler no. 2 uses a balanced strategy in order to have a low-cost warehouse and, mean while, to meet the market demand and avoid build up (Williamson, 2008, pp. 548-577). Retailer: on the basis of the first orders, the retailer attempts to create a warehouse able to meet the market demand and, afterwards, to establish a strategy that supports reducing stock levels. Beer game factory no 2: by adjusting a strategy with a cautious attitude to risk, the factory aims to have unsold stock levels capable of satisfying demand from the two middlemen, without running the risk of building up an excess.
Wholesaler no 1: by adopting a balanced strategy, aims to keep stocks not particularly high but always capable of serving orders, minimize costs and avoid build up. Beer game factory no 2.1: at first, the factory helps at creating a warehouse able to meet the demand of the two middlemen, both of whom are risk subjects. Then, the factory considers the most appropriate strategies to reduce unsold stock (Simchi-Levi et al., 2008, p.490-494).
High risk wholesaler: originally, the high risk wholesaler aspires at keeping the warehouse at primary levels and then, on the basis of orders received, plans to reduce stock levels and meeting orders received. Low risk wholesaler:…