Recently I had the opportunity to go to LLamasoft headquarters in Ann Arbor, Michigan to play the game they have programmed for Supply Chain Insights around supply chain strategies and inside-out versus outside-in processes, SCI IMPACT! The game is a simple simulation of a supply chain where each month decisions are made by players and results are calculated in the game.
This was one of the first tests of the game, and as Lora mentioned in a post the other day, there were a few bugs that still needed to be worked out.
Even though we only were able to test 2 rounds of the game, we were still able to get a feel for the key concepts and learnings that this game teaches.
In groups of 5, each team member is given a different role: Finance, Sales, Marketing, Production, and Procurement. Throughout the game, each role receives various notifications that affect their function which they must then discuss with the rest of the team members to determine how to proceed. Examples of the notifications include leadership mandates for inventory reduction and pending union strikes.
The choices that must be made by the end of each round (where each round represents one month of play) include how much of each finished good to produce and how much of each raw materials to purchase at the various manufacturing sites.
The calculations done by the game between rounds reveal the effect of the choices made on not only unfulfilled orders, but also: Return on Assets, Market Capital, Operating Margin, Inventory Turns, Cost of Goods Sold, Revenue and Growth.
Figure 1. Screenshot of SCI IMPACT! Results Example
You’ve probably played the beer game and are wondering how this game compares. The beer game requires purchasing, manufacturing, and distribution quantities to be set with no communication amongst the people assigned to the functions, aside from an order quantity. The order quantities are pushed through the supply chain, and the result is unfulfilled orders and high costs of inventory. The game teaches the concept of the bullwhip effect quite successfully, and the effect of supply chain decisions on inventory and service levels.
Like the beer game, SCI IMPACT! also demonstrates the bullwhip effect on service and inventory levels through decisions made at the production and procurement levels based on demand forecasts, but in addition SCI IMPACT! teaches:
- the importance of communication between functions including Finance, Sales, and Marketing in the daily workings of the Supply Chain,
- the effect of supply chain decisions on key financial metrics (operating margin, inventory turns) and overall market capitalization,
- the value that can be gained from implementing outside-in processes (where the information and process flows start with the market demand and flow backwards all the way to the suppliers) instead of inside-out processes (where information and process flows are based on order quantities)
- the importance of making decisions based on a strategy
Even in the short time we played the game, the competitiveness was starting to come out amongst the teams. The short amount of time given to make decisions in each round gets to be stressful for some. This is where having a strategy becomes key. Our group determined that we should stock up heavily on the low cost raw materials as future demand was uncertain. For the high cost materials, we were more careful with our inventory levels. In terms of production strategy, we focused on the items that increased revenue (this was something that was shown easily in the game in the form of a pie chart). What a unique idea! Paying attention to revenue in the supply chain! This gave us high results for operating margin.
I can tell you that the engagement and the level of excitement in the room was quite high. What a cool concept to be able to see how supply chain decisions affect not just service and inventory levels, but also business results! As Lora has said many times, supply chain employees need to be able to speak the language of the business to gain the attention, resources, and buy-in for improvement projects and strategies.
The big reveal at the end, as companies see how their market cap compares to other companies, is that the demand forecasts given were split into two groups. One group received forecasts from market, point of sale data (real data from Retail Velocity), and the other group of teams had demand forecasts based on orders, as is typically seen in supply chains.
Guess which groups will have a higher revenue and higher market capitalization at the end of the game?
Interested in playing? We’ll be playing the game at our Summit in September, and would love for you to join!