How's my Luck now?

Reflections, views and descriptions during my stay at IIM Lucknow from July 2004 to March 2006

Location: India

Thursday, August 26, 2004

Distribution game

There was an interesting event conducted by the Operations Interest Group today, in which I and a friend took part. This was a Distribution Game, a software game developed by two professors of Cornell University to model and simulate a simple distribution chain. The aim is to manage the distribution chain for a set number of days in order to maximize profit.

Some details of the game:

Aim of the game: Maximize net profit from sale of goods (sales - cost of goods sold - order cost - inventory holding costs) at the end of a set number of days

Situation: You, the player, are a manufacturer of a particular kind of good. You have one supplier of raw material from whom you can order. There is one central warehouse where your finished products go after manufacturing. There are three retailers who get the products from the warehouse. Demand arises at the outlets of the three retailers in a random fashion, and this has to be met.

Opening position: The game opens with a fixed inventory in the warehouse and at each of the retailers. Revenue from sales is zero and raw material stock at the factory is zero.

Parameters of the game: Some things which are held constant throughout the game and which must be kept in mind to play the game effectively are:
  • Demand distribution - the demand figures are taken to follow one of two probability distributions: uniform or negative binomial
  • Transit times - fixed number of days it takes for goods to travel from factory to warehouse (15 days) and from the warehouse to the retailer (5 days)
  • Fixed order costs - for orders from supplier to warehouse and from warehouse to retailers
  • Inventory holding cost per unit - at the warehouse (less) and at the retailers' outlets (more)

Thus, for each day, you have to look the demand at each of the retailers' outlets, the inventories at the outlets and at the warehouse and accordingly place orders to the warehouse or to the supplier. The game automatically calculates the costs, sales and net profit for each day.

The game was played in the Computer Centre with 40 teams, each playing 5 rounds of 50 days each. It was very enjoyable trying to predict the demand (knowing its distribution) and then placing orders keeping in mind the transit times and the order and holding costs. We didn't do too well but enjoyed the whole thing.


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