At a certain point in time during the game, the economy starts changing. Several products will have price changes, and as a result the behavior of your customers will change. News messages always introduce these changes, so watch the news closely.
For those products that became cheaper, the clients use the opportunity to place some big orders, putting some extra pressure on the supply chains. In the short term, distributors can get away by tapping from their own inventories to meet the sudden demand surge. However, in the long term, a more structural solution is needed to capture the benefits of this windfall without disrupting the order fulfillment processes. It is also the question how long the beneficial situation will last. For other products, the market might collapse, and you may be left with a large inventory of products that quickly lose their value. For increased sales, the distributor can make a number of choices such as immediately ramping up inventory with help from key manufacturers, obtaining additional supplies from non-key manufacturers, or analyze the nature of the surge. For decreased sales, it might be important to sell the stock on hand quickly, for instance by selling to markets further away.
Goal of the game
The goal of the game is to show you the complexities of global sourcing in a complex market with products that quickly lose their value. There are many trade-offs to manage: do I source where it is cheap, but possibly farther away? What do I know about suppliers that are far away? Will they deliver on time? Especially when the number of possible suppliers grows, it becomes harder to manage the information about the quality and reputation of your suppliers. The same holds for the markets. When you operate on the global market, you also have to see on which requests for quote you react. Do you operate on the global market, or are you going to focus on your local market only?
Stimulating good behavior of the actors
The game has several incentives for correct behavior built in. This holds both for the suppliers and for you as one of the distributors. The following fines are built into the game for incorrect behavior. When an shipment for an order is delivered after the promised delivery date, the supplier has to pay a fine. The fine is based on an interest rate of 20% per year for the value of the shipment. When you have not delivered after 30 days, you pay 50% of the agreed price for the order. When you do not pay on time, you also pay a fine of 20% interest rate per year. When you have not paid after 14 days, the bill will be charged to your bank account, even if you did not take action, or if you have a negative balance. By the way, the game is symmetric in the sense that you also get the benefits of a fine for markets that do not deliver on time or do not pay on time.
For the distributors, there are several costs you make during the course of the game. One of the types of costs is fines, which has been explained above. You can avoid fines by delivering and paying on time. The second type is the depreciation of your inventory. As this amounts to 5% per week, make sure you don't keep the computers too long in your inventory. The third type are the fixed costs for personnel, buildings, equipment, etc. This amounts to $ 500.- per day. This sounds like a small amount, but it has been calculated as a percentage of the total operational costs or the distributor, for that part of the distributor organization that deals with these four products. The final type of costs (or benefits) are the interest rates for your bank account. When you have a positive balance, you receive 3% interest per year, but for a negative balance, you pay 8% per year.
Initial product prices
The initial average market prices of the products are as follows:
- DESKTOP: $900.-
- LAPTOP: $1500.-
- LINUX: $1200.-
- MMEDIA: $1700.-
The starting value of your initial stock is as follows:
- DESKTOP value: $40500.0 unit price: $900.-
- LAPTOP value: $48000.0 unit price: $1500.-
- LINUX value: $55200.0 unit price: $1200.-
- MMEDIA value: $20400.0 unit price: $1700.-
The total value of your initial stock is: $164.100.-.
During the game, product prices change as a result of economic or other developments. After a change, your suppliers will offer computers for different prices, and your customers expect other prices as well. By the way, you can make offers above market price, but be aware that your customer will base its choice on price, distance, and promised delivery date. How the customer weighs these three aspects is unknown to you.
The computers lose their value rapidly. Therefore, shipping is done by plane. The shipping costs are $250.- per shipment for handling and taxes, plus $0.0007 per kilometer per kilogram of weight. The weight of a laptop is 6.5 kg, the weight of the other three types of computers is 15 kg. The time it takes to transport a shipment is two days for shipping the goods to and from the airport and to handle the shipment, and for the rest a shipping time based on a speed of 800 km/hr is added to the transportation time. This means that you can get your goods to any place of the world within 4 days. Be aware of the costs for transporting to or from a remote location, however!