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