ERP SIMULATION

Operations 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

Contents...............................................................................................................................2
Introduction..........................................................................................................................3
Game design.........................................................................................................................6
Reports.................................................................................................................................7
Strategy .............................................................................................................................10
Objective........................................................................................................................10
Quarter1........................................................................................................................10
Issues faced........................................................................................................................14
Work allocation..................................................................................................................14
Learning.............................................................................................................................15
Appendix............................................................................................................................16
 ERP SIMULATION

Introduction
The 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

Objective
Maintain a high profit margin

Quarter1
Strategy 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
Appendix
Our 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