drinking wine at 8 am!!!

today we had some interesting classes.  started at 8 am with a class on marketing, and the case study today was on penfolds, an australian brand of wine.  and to kick start this, professor lattin had a wine tasting test.  he bought two bottles of penfolds wine - one cost $9 and the other $29, and asked for volunteers to try and identify them correctly.  each volunteer had three cups and his job was to identify which wine each of them was.

he only had enough for 15 volunteers, and he joked that so far he has never failed to "sell out".  today was no exception.  i did not volunteer as i think i am quite bad at differentiating wines.  first you have to know the difference between two wines, and secondly, you had to know which is the cheaper wine and which is the more expensive one.

and the results?  only 5 out of 15 people got it right.  which was actually above average.  but generally few people can identify wine well.  the point of the exercise was to demonstrate the importance of branding so that you can charge a bit more for what is essentially the same product.  it is just grape juice that has been fermented:)  even if you don't charge a lot more, the brand helps to give people a sense that they are buying a superior product because it is a "known" brand.  and this is especially so if they don't know what to look for.  it is a "safe" choice.  and even more so if you are giving it as a gift.

next we had business process design, and the beer game.  but there was no drinking this time:(  it's just the name of the game.  professor patell is really good and can make the dullest subject interesting - some, not all, of the professors here really remind me how much fun it is to learn something new.  and clearly, it is something they love doing - you have to, if you are going to do it for so many years.  here you see him answering questions before the start of the game, and you will notice he has a whistle because it gets really noisy during the game.

the game was a simulation game (like SIMS), only that there were 4 to a team, and each of us played a different role.  someone was the factory, another was the distributor (me), another was a wholesaler, and the last was the retailer (the person who sells it to the public).  the object of the game was to minimise inventory and backlog.  inventory is how much of the product you keep with you - you try to minimise it because when you keep too much, there are storage costs and also money is tied up.  you pay for the products and because they are sitting in your store, you don't get your money back until the next person wants it.  so the challenge of the game is to maintain a balance between minimising inventory and being able to fulfill orders - backlog is bad because when someone orders your stuff, if you cannot fulfill the order they will go somewhere else.

so the game starts with the professor giving an order to the store, say he wants 4 barrels of beer (we all start with 8 barrels in inventory and another eight in two equal shipments of 4 on the way).  the retailer, who starts with 8, will sell 4, and has 4 left.  he must now decide how much beer he wants to order from the wholesaler.  And the wholesaler must in turn decide how much he wants to order from the distributor, who in turn decides how much to order from the factory.  sounds simple doesn't it?  the chaos starts when demand (the order placed by the professor suddenly goes up - in the exercise, it doubles to 8.  now everyone must make a decision because soon he has no inventory or will fall behind (backlog) if he does not order more.

this is the start of the game so things are still looking good in this picture.  but midway through the game, we were in trouble because i did not order enough and soon had backlogs of 30 or more!  it is a very interesting exercise because it illustrates very clearly the difficulties of supply chain management when there are many parties involved and when as in real life, you need time to produce things and transport them and store them etc.