Oil SCM Game- The Theory Behind It

Introduction

It has been years since the Beer Distribution Game was introduced and still now it is being acknowledged as one of the best known model of supply-chain. A Supply Chain is a virtual network of different stages of logistics activities such as supply, wholesale, retail, customer purchase etc. Beer Distribution Game exemplifies gaming mode simulation of supply-chain management with simplicity and elegance. There are many versions of this game available, mostly stressing on the Bullwhip effect of supply chain. A typical schematic diagram of a supply chain is shown below:

The speciality, or rather the simplicity of the model is it's linearity. It is assumed, there is only one supplier, one wholesaler, one retailer and one customer i.e. the effects of all the suppliers are combined into one supplier and so on. Obviously the model overlooks the interaction effects between same level players, or for that matter, even interlevel interactions between individuals.

Model Of The Game

To make the model more realistic and to take into account some of the complexities mentioned earlier, it has been modified in the following way. Consider a situation where the oil market is shared between four companies (though not equally). Each is having a storage point and a depot. The refineries and retail outlets are not under their control. Storage points give orders to any of the refineries according to their convenience and so do the depots. A schematic diagram of the scene is shown below:

R : Refinery, SP : Storage Point, D : Depot, RO : Retail Outlet

The game will be played by 8 players, at four storage points and four depots. The demand at retail outlets (i.e. customer demand) and supply at refineries will be controlled by the computer.

Details of the Game

All the players are to take the following decisions:

• Amount of order.
• Order from which place.
• Amount to supply.
• Supply to which place.

The following informations will be available to all the players:

• Order backlog from different places.
• Inventory at hand.
• Total cost incurred.

Objective of a player: To minimise total cost.