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ERP SIMULATIONOperations Management II
Submitted By:
Group 4, Section C
Abhishek Jain (10P122)
Amruteswar Mahapatra (10P127)
Geetu Sehgal (10P139)
Nitesh Bhardwaj (10P156)
Dhaval Shah (10P169)
Simron Sharma (10P174)
Contents
Introduction..........................................................................................................................3
Game design........................................................................................................................5
Reports.................................................................................................................................6
Strategy................................................................................................................................8
Objective..........................................................................................................................8
Quarter1..........................................................................................................................8
Quarter 2.........................................................................................................................9
Quarter 3.........................................................................................................................9
Issues faced........................................................................................................................10
Work allocation.................................................................................................................10
Learning.............................................................................................................................11
Appendix............................................................................................................................12
ERP SIMULATION
IntroductionThe ERP Simulation Game is an innovative “learning-by-doing” approach to understand
ERP concepts. The simulation program was developed to automate
the sales process, so that every firm receives a large number of orders in each
period of the simulation
part of the production process in order to account for production capacity
part of the procurement process to account for delay in delivery and payment.
The objective of the game is to use SAP to manage ordering, advertising and pricing of
these products in the three market zones. The teams had to compete with 20 other
teams in an arena and try to maximize profits.
The simulation game has been designed by HEC Montreal. as a tool to understand the
distribution chain of an organization. The objective of the game was to sell the following
products in three regions. The three products were as follows:
ClearPure,
Spritz
Lemon Spritz
These were available in 2 different kinds of packing:
1liter
500 ml
The products have to be sold in 3 different zones of Germany, namely
– North
– South
– West
Game design
The game is divided into 3 quarters. Each quarter consists of 20 days. With each
succeeding quarter, more functionalities and control are given to the competing teams.
In quarter 1 the team has the control to only manage pricing of products as well as the
marketing while in quarter 2 the team could manage the production process as well.
Planning and procurement were also enabled in quarter 3.
Reports
The inventory report as well as the sales summary report was refreshed on real-time
basis. The prices of the 6 products could be altered as per requirements. Moreover,
every quarter, market reports as well as the financial reports are generated four times
i.e. after day5, day10, day15, and day 20.
The market reports give the detailed report on the demand of each product and the
average market price for the span of five days.
The market report is as follows:
Strategy
ObjectiveMaintain a high profit margin
Quarter1Strategy Followed
The strategy followed in quarter 1 was to monitor the available stock and
maintain competitive prices keeping them much above the current market prices. Since
the demand for products was really high and every team had a fixed amount of stock, it
was evident that we would be able to sell out products at high price once the other
teams would exhaust their resources. Hence initially our products didn’t sell as much
due to the high pricing but in the last eight days, we were able to sell our stocks at a
very high rate as per the market price.
Results
We were able to make huge profits and had the highest profit margin amongst
the 22 teams. We were ranked 2nd on the basis of net income.
Quarter 2
Strategy Followed
The strategy followed during the second quarter was to gain market share. This
could be only possible by competitively pricing our goods. We tried to keep them
At par with the market average to enable us to play on volumes. We had initially
accumulated huge volumes of all the products (2000 of each) and we continuously kept
varying the prices as per the demand. When the demand increased, we increased the
prices while whenever there was a persistent dip in our sales for any product, the prices
were reduced for the same.
Results
We were able to accumulate huge profits and ranked 3rd amongst the teams.
Quarter 3
Strategy Followed
The strategy followed during the third quarter was to clear the inventory that
was carried forward from the second quarter. Since it was difficult to forecast the
demand, we first wanted to study the market before ordering more inventories. Since
demand was comparatively lower in the third quarter, we couldn’t clear the inventory
and hence did not purchase any goods. We lowered our prices as per requirements and
relevant market movements.
Results
We were ranked 8 th in the third quarter with the highest profit margin.
Issues faced
We were faced with a few problems in the second quarter while procuring raw
materials. We received inventory worth 207880 Euros, however our accounts payable
showed an outstanding payment of 415760 Euros. This led to a huge amount of
overdraft which led to decrease in our net income in the third quarter.
We also encountered problem with keeping a track on the inventory in the third quarter
as the inventory report was not getting updated with each sale. As a result we were
unable to effectively price our products.
Work allocation
The team was divided into five subgroups to monitor each aspect of simulation game.
• Sales & Inventory management
• Pricing
• Market data
• Marketing
• Financial Information
We were hence able to keep a good tab on all the functions.
If given a chance to change our strategy in quarter one, we would lower the marketing
expenses as marketing had less impact on the overall sales.
Learning
1. The most important learning from the game was the need for making Dynamic
decision.
2. It’s of prime importance to have clear and definite objectives at the start of the
game and strategize accordingly.
3. Studying the market regularly and making decisions is very crucial inorder to
successfully achieve the targets defined. This also helps to understand market
trends and accurately forecast the demand and the corresponding average
market prices for each product
4. It helps to develop a clear understanding the relative importance of different
functions in the organization - accurately weigh the effect of each component
involved in decision making and take corrective actions
AppendixOur Price v/s Market price
1l clear pure
1L Lemon Spritz
1 L Spritz
500mL ClearPure
500 ml Lemon Spritz
500 ml Clear Pure
Sales by volume
Sales by value