How to Manage an Appliances Warehouse
A company with one hundred top managers. That's the number of Master of Science in International Management students involved in an online simulation in the last two weeks. The imaginary company operates as a wholesaler of household appliances and furniture products, and it has a problem. The shift from European to Asiatic suppliers had mixed consequences: a positive trend in the gross margin, an alarming shortage in the warehouse space, a hazardous rise of the net working capital. Students were divided into thirteen competitive groups and asked to identify all the decisions related to the supply chain management and clarify the effects of every decision on the economic and financial results.
The simulation was played during the Global Operations and Supply Chain Management course. "Students used the Stock Management Simulation, that was born out of an SDA Bocconi customized program", says Giuseppe Stabilini, SDA Bocconi Professor of Operations and Technology Management. "Me and my colleague Marco Bettucci created the simulation as an Excel worksheet. The SDA Bocconi Learning Lab then turned it into a sophisticated management simulation. Now it's very easy to use, it has an appealing graphical user interface and it allows us to collect and compare online the results of all the teams".
Two weeks ago, Stabilini described to the students the business scenario and explained to them the managerial problem. They analysed data and set preferred suppliers and inventory policy for every product. They were given the chance to play the simulation four times. At the end of every session (called "run") they tried to understand what went wrong and played it again. After a week they submitted their best run along with a document in which they explained the reasons for their choices. The results were discussed last week during a debriefing. "Stock Management Simulation is a firsthand experience designed to raise awareness about the economic cause-and-effect relations", says Leonardo Caporarello, Director of the Learning Lab. "Our simulation is used in executive classrooms too. Experienced managers frequently end up asking themselves: where did I go wrong? What should I do differently?".
Simple decisions may have a huge effect on the economic, financial and logistics indexes. Trying to find an algorithm to solve the problem is useless, if not harmful. The best thing you can do in such a complex scenario is to select the most relevant cause-and-effect relationships and not try to control every variable. At the start of the simulation Stabilini voluntarily set a general goal: to improve the company's results. Students typically focus on just one. It's a three way goal: you have to keep in balance return on net assets, return on equity and customer satisfaction. "Inductive teaching encourages students to look on their own for formulas, definitions, tools", Stabilini says. "It takes four sessions to teach what students learn in a single simulation".