Students plot their global strategy, seeking to dominate the hi-tech market in a 90-minute supply chain game.
VisiCalc opened the door in 1979 for businesses to play "what if" games with data and easily model different scenarios and outcomes. On March 27, 2007, a new revolution in business simulation took place as the University of Maryland's Robert H Smith School of Business (College Park, Md. www.rhsmith.umd.edu), Delft University of Technology (Delft, the Netherlands www.tudelft.nl) and Sun Microsystems Inc. (Santa Clara, Calif. www.sun.com) launched a global supply chain game.
The Global Supply Chain Competition pitted 12 teams of business students from around the world in a real-time simulation of supply chain management. Each team of three students developed its own market and sourcing strategies and then went to market with a portfolio of four products. They responded to bids from virtual customers, set pricing, arranged deliveries and fought for profit and market share against the other teams.
Students and professors tinkered with the game for 18 months prior to the competition in conjunction with classroom instruction on supply chain concepts. As students learned about inventory strategies, sourcing, transportation, marketing and procurement, they were able to see how these functions come into play when operating a real business. The March 27th competition was the first global event that put each team in direct competition.
With a portfolio of four high-tech products, each having a rapid depreciation rate, each team had to decide on a go-to-market strategy. Would they concentrate on the laptop product line, laptops and multi-media systems, or all of the products? Would they sell locally or globally? And, would they source locally or globally?
The virtual suppliers available locally or offshore were preset to offer various parameters on quality, reliability and price. Some basic assumptions were built in relative to transportation mode and average times for transport, processing (including customs clearance on imports), etc. But the game didn't stick to a fixed set of parameters. Delays and disruptions along the way simulated real-life supply chains. A news ticker even advised the game's supply chain managers of world events such as an earthquake that could affect suppliers or demand for certain products. And, as if the game didn't offer enough challenges, one of the Asian teams had a computer virus that knocked it off the network for a couple of "virtual days," disrupting their business in an unscripted and very real example of business life.
In classroom use, professionals in the executive masters of business administration (MBA) program at the Smith Business School reportedly commented after playing the game that it was as intense if not more intense than their actual jobs. They could feel the time pressure, competitiveness and demands as though they were in a real business situation, said Dr. Sandor Boyson, research professor and co-director of the Supply Chain Management Center.
Linked by voice over Internet protocol (VoIP) to each of the teams, Delft's Alexander Verbraeck, chair of the Department of Systems Engineering Faculty, took on the role of a sportscaster giving updates on the progress of the teams throughout the morning competition. When the game was stopped after the appointed 90 minutes, he observed that some strategies had worked better than others in a competitive market. Some players sustained a moderate strategy and position throughout the competition, achieving consistent performance while some of the bolder teams took more risk.
Attempts to capture market share through aggressive pricing initially pushed some teams to the bottom of the list on their equity position but, in some cases, resulted in those teams receiving most of the orders for their principal product in a particular market. If they balanced their inventory and cash positions well, they quickly rose through the equity ranks as other competitors were unable to gain market share. Admitting that the duration of the game was short, Bill DeWitt, professor of logistics, transportation and supply chain management at the Smith School of Business, pointed out that some of the strategies could have paid off in the long run. Knowing when the game was scheduled to end also influenced individual strategies, he added. Recounting one of his own experiences with the game, he said he was caught with large inventories and low orders; a position that would have resolved itself if the simulation he participated in had continued.
So, after virtual weeks of activity compressed into 90 minutes, where did the teams rank in the competition? The team in Enschede, the Netherlands, ended with the best equity position, followed by the Soochow, Taiwan, team and the Nankai, China, team.
During the short debriefing of the top teams, Verbraeck asked about their strategies. The top-ranked University of Groningen team invested in inventory early and sold at or below market price in the two product lines it elected to sell. It sourced globally and aimed to end with low inventory levels. It retained market share throughout the competition because others couldn't take orders away. When Verbraeck asked how many of the orders it was able to win, the Dutch team laughed and said, "most of them."
The Soochow University team focused on selling all four products and sourced globally, saying that it was difficult to get the quality and timeliness from local suppliers. Third-place Nankai University said that in an earlier game the team dumped products early to grab market share and then attempted to raise prices. That was a difficult position to maintain, so for the global competition it started with a higher price and a more sustainable position.
As for the home team, the University of Maryland team had maintained a high ranking during much of the competition but ended with a difficult inventory position as orders were too far in the future to balance its equity position when the clock ran out. One of the team members admitted that, while they were focused on sourcing and orders, they had neglected to watch their cash position and had found themselves in a negative cash situation.
Perhaps more interesting than the outcome of the game are the insights on how the teams operated. Speaking to members of the Maryland team, they said they had not worked together before the competition. Each had logged time with the game itself, and each brought skills from their classroom experiences and internships (one was an undergraduate and two were MBA students). How did they organize their team? Decisions were made jointly and agreed upon by all three. All of the team members participated in the full operation, they did not select areas to specialize and focus their efforts. Did the need for the team to agree on decisions hamper the ability to act? No, they were all informed of what was happening in their virtual market and with access to the full range of information, decisions were easy.
Meike Reimers, one of the Maryland team members, said that her experience during an internship exposed her to the silo mentality that is regularly attacked by consultants and academics. People didn't communicate and data didn't flow easily across functional lines, she said. It was clear to her how ineffective that was. She and her teammates, Marjorie Brooks and Lily Hou, clearly saw how challenging it was to manage a business when all of the team worked together and communicated, even without coaching to attack and tear down the silos in organizations. Perhaps their greater professional challenge as they move into the workforce will be to maximize results in organizations that are weighed down by those ineffective structures.
As gaming systems like the Distributor Game developed by the Smith Business School, Delft University of Technology and Sun Microsystems evolve, those lessons of collaboration, communication and cooperation will be repeatedly reenforced with business students. Even beyond its role as a teaching tool for supply chain management concepts, gaming could provide the impetus for an organic revolution in business practice by quickly and visibly showing the weaknesses of an organizational structure that doesn't communicate.
Boyson says some major companies have expressed interest in using the Distributor Game as a training tool. The game can be adapted to a number of configurations, he says. Professor Rajesh K. Pillania of India's Management Development Institute is working with a multinational team of developers to model agricultural products and markets to address scenarios that are important for India. The game can also be configured so that a company and its suppliers can model games that help them understand their own supply chain relationship and the impact of various strategies and actions.
Some of the business students using the game admitted they are not "gamers," but they became totally engaged and absorbed. These kinds of high-level simulation tools may be reaching a level of sophistication as technology continues its relentless advance that they will be the current generation's must-have tool, just like VisiCalc and successive generations of spreadsheet-based tools have become integrated into the daily business lives of the managers and executives who will ultimately be hiring today's graduates.
