From the HBD Archive
From: ony@spss.com (Tony Babinec)
Subject: The Beer Game
Date: 1992-04-14 16:19:05 GMT

Are you thinking of opening a brewery? Think again. This is the
sobering advice from Professor John Sterman of MIT, who has created
the Beer game. The game is designed to illustrate how and why
managers invariably go wrong in making decisions in the corporate
world. Excerpts follow from a brief mention in the April 1992
OR/MS today:

The result of scientific analyses of thousands of real firms by MIT
computers, the Beer game mimics the way companies operate based on
a simulated example, in this case a beer factory, distributor and
retailer. A member of TIMS (The Institute of Management Science),
Sterman and the Beer game were featured in the lead story of the
Jan. 18, 1992 business section of The Atlanta Journal and
Constitution.

The game can be played as a board game or on a computer. An
analysis of thousands of games indicates that all "players" tend to
overreact at approximately the same time, either by ordering too
much or too little inventory.

"People who run businesses--whether geniuses or morons--tend to
make the same kinds of mistakes when faced with similar decisions
in similar circumstances. Put another way, of the 85,000-odd firms
that went belly-up last year, even a guru like Lee Iacocca probably
couldn't have saved very many"

"Many businesses, perhaps all, are all but predestined to fail.
This is why the average life span of a big corporation is only 40
years, why one-third of 1970's Fortune 500 companies weren't on the
list in 1983, and why three times as many companies as go bankrupt
just close up because owners don't make enough profits."

Quotes are credited to the AJC writer, whose name is listed as
Hendrick.

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