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How much to brew? Ask these future MBAs

It's called The Beer Game, but don't let the title fool you. It's actually a business exercise in "lean" management.

By Robert Trigaux, Times Business Editor
Published March 19, 2007

It's not every day I rise in St. Petersburg and fight the early morning Howard Frankland traffic to reach Tampa's sprawling University of South Florida campus for an 8 a.m. business class. But last Wednesday, 26 young MBA students gathered to play The Beer Game.

With a name like that, who could resist showing up?

Truth be told, there was no actual beer. I stayed anyway. The students and this observer soon got a humbling lesson in business inefficiency and human behavior.

The Beer Game is deceptively simple. The MBA students were divided into four rows. In each row were four groups representing a brewery, wholesaler, distributor and retailer. Over the course of 30 weeks, "customers" would buy a certain amount of beer represented by poker chips from the retailer, who would then reorder beer for his store shelves from the distributor. In turn, the distributor would reorder supplies from the wholesaler, who would make similar orders to the brewery.

The point of the game is to meet customer demand without getting stuck with too much or too little beer.

Easier said than done.

The Beer Game is a creation of the Massachusetts Institute of Technology. This past week - spring break at USF, I might add - these stalwart MBA'ers signed up for a five-day course in "lean" management put on by a partnership of USF and MIT. USF is the first Florida university and only the fifth in the nation to offer such "lean" training outside of MIT.

Why should we care? Because many U.S. businesses are still too fat and sloppy in how they manage resources, says USF management professor Jerry W. Koehler, one of the program's teachers. Businesses in other countries - those that U.S. firms must increasingly compete against - often operate leaner.

In fact, the phrase "The Toyota Way" was mentioned repeatedly Wednesday. It refers to Toyota's status as the global gold standard for consistently making high-quality cars with few defects while using fewer man-hours, less on-hand inventory, and half the floor space of its competitors.

In The Beer Game, only the retailer knows the actual amount of beer purchased each week by consumers. The distributor, wholesaler and brewery can respond only to the up-and-down demand for new orders that come up the line. It took little time for each competing row to look vastly different. While one suffered from a glut of beer production, another waited to fill orders at its overwhelmed brewery.

This Tampa program is just one of the early innovations promoted by the USF College of Business Administration's recently arrived dean, Robert Forsythe. Look for The Beer Game to be offered to area business managers in the near future. Another hot button of the dean: making his business students better communicators. It's a nationwide complaint he hears from hiring companies.

So what's The Beer Game trick?

Turns out the demand from "consumers" in each row was identical. But misinformation, speculation and exaggerated forecasting of future demand along the entire supply chain, from brewery to customer, generated big swings in inventory, spurred inefficiencies and drove up costs.

Teaching the next generation of managers how to run leaner just might become The USF Way.

Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

[Last modified March 16, 2007, 17:53:11]