Playing The Buying Game

Can you purchase toilet paper smarter than a computer?

Objective of the Buying Game:

Your goal is to buy a single type of toilet paper, for a period of time, while maintaining the lowest Total Cost and meeting a service level target of 95%. Total Cost is calculated by adding how much it costs to place all your orders (Order Cost) and how much it costs to carry your inventory in the ‘warehouse’ (Carrying Cost). 

At the end of the game, we will compare how you did versus how a computer algorithm would have bought.

Setup for the Buying Game:

– You will begin the game on the 1st day of Month 1 with a beginning stock on hand of 31 units. Your first opportunity to buy is this day.

– Lead time is two months. If you purchase on the 1st day of Month 1 your toilet paper will arrive on the first day of Month 3.

– Your only opportunity to buy is on the 1st day of each month. If you do not buy on the 1st day of Month 1, your next opportunity will be on the 1st day of Month 2. Since the lead time from the supplier is two months, your Month 2 order will arrive on Month 4.

– You start out with an on-hand of 31 and for the first two months you will have no receipts. The 31 units will get you through the first two months of demand and will not affect your score. Your score will come from all of your purchases. 

– The toilet paper in the game is a steady, ‘flat’ product (not seasonal, so you would not need to anticipate seasonal spikes or drops).

– The previous six months of demand are given to you (the average of these last six months is 9): 8, 12, 6, 7, 13, 8 

– There will not be any forward buy opportunities during the game. 

– There are no minimum purchase requirements.

– Unit cost is $5.00. Order Cost is $2.00 per order. Carrying Cost is 20%. 

– Receipts can be used in the month they are received.

– Backorders are allowed (if you have a Stock Out, it will carry over to the next period).

– Demand for toilet paper will always be accurate and there will be no returns from what is ordered. 

– The supplier will always deliver the toilet paper on time and in the exact quantity you ordered. 

 

 

Simply Put: Buy enough toilet paper to meet your service target, while balancing how much it costs to order versus how much it costs to carry.

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