A Web Based Total Enterprise Simulation 202 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 A WEB BASED TOTAL ENTERPRISE SIMULATION David A. Jordan Geneva College dave@bussim-ed.com   ABSTRACT    This  ‘Games  to  Play’  session  will  provide  the  opportunity  for  attendees  to  play  a  new  web‐ based  total  enterprise  simulation.    The  focus  of  this  simulation  is  on  the  coordination  of  the  functions  in  a  manufacturing  organization.  All  four  functional  areas  are  modeled  with  equal  complexity  so  as  to  provide  a  balanced  assessment of each function’s contribution to the  organization.    The  player  manages  a  single  company  that  is part of a  ten‐company  industry.   The  computer’s  role  is  to  process  the  decisions  and make decisions for the other nine companies.   These decisions are quickly simulated and reports  are  produced  that  show  the  results  of  these  decisions. The goal of this session  is to present a  total enterprise simulation that is web‐based, can  be  played  in  a  reasonable  time  frame  and  includes all functional decision areas.   It  is hoped  that  this  session  will  help  attendees  assess  the  benefits  and  challenges  associated with  using  a  web based total enterprise simulation.    203 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 SHORT DESCRIPTION The focus of this simulation is on the coordination of the functions in a manufacturing organization. Three different products are produced by the manufacturing facility. Twelve quarters of simulated operation are provided with this simulation. The player manages a single company that is part of a ten-company industry. The computer’s role is to process the decisions and make decisions for the other nine companies. These decisions are quickly simulated and reports are produced that show the results of these decisions. The figure below is a display of the opening screen. The simulation begins in Quarter 1 with a capacity of 300,000 units of production. Demand will increase and is seasonally distributed (see ‘Information’ screen). The Decision variables listed below should be changed to reflect player strategies, i.e. high price/high quality, constant production/production that follows demand, etc. Decision values may be changed from their initial values by pressing the up/down arrows in each decision block. The Functional Decisions are optional and only need to be selected if changes are to be made. Decision Variables • Budgeting – Includes expenditure decisions for advertising, promotion, quality, R & D, technology, incentives, training and maintenance. • Marketing – Includes advertising media decisions, distribution channel decisions, pricing decisions and market research decisions.   204 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 • Finance -- Includes source of cash decisions, use of cash decisions and expansion decisions. • Operations -- Includes ordering raw material decisions and resource scheduling decisions. • Human Resource -- Includes compensation decisions, benefit decisions and hiring decisions. The model in this simulation compares demand (desired units) to supply (available units) and determines the units sold, revenue, expenses and resulting profit for each quarter’s operation. Each quarter’s earnings are converted to cash as collections (current and receivables) are received. Inventory can be a big user of cash. If cash goes below zero, a loan will automatically be made to bring cash to zero. Six performance metrics are calculated and displayed on the ‘Performance’ Report. These include financial return, market share, productivity, quality index, share price and a composite (weighted average) performance rating metric. The Performance Rating is the best measure of overall success. Session Goals  • To present an efficient means of planning  for simulation operation.  • To  determine  the  right  mix  of  decision  values to achieve stated objectives.  1. Find  the  best  decision  value  mix  to  maximize profitability.  2. Find  the  best  decision  value  mix  to  maximize the performance rating.  • Explain  the  difference  in  your  decision  processes to accomplish each objective.  • Assess  performance  by  comparing  run  ratings  with  other  participants  and  compare strategies.  Logistics 1. This session requires about 1 hour. 2. A minimum of 2 participants and a maximum of 12 are needed. 3. Each participant should have a laptop computer with Excel available. Connection to the Internet or local network is desirable but not required. A projector is also required in the room to demonstrate the simulation. 205 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 The primary goal of a total enterprise business simulation is to replicate the complexity of today’s dynamic business environment. A greater appreciation of the interconnectedness of topics and the systematic nature of business organizations can be achieved by simultaneously focusing on the variety of decisions a manager must make over a period of time. This simulation seeks to model the decisions made by managers of a small manufacturing business. The focus of this simulation is on the coordination of the functions in the organization. Three different products are produced by the manufacturing facility. Twelve quarters of simulated operation are provided with this simulation. The player manages a single company that is part of a ten-company industry. The computer’s role is to process the decisions and make decisions for the other nine companies. These decisions are quickly simulated and reports are produced that show the results of these decisions. The player is responsible for scheduling all the resources necessary to produce and sell these products. Figure 1 above is a display of the opening screen. SIMULATION PLANNING Planning player decisions is a very important part of the learning experience from a Total Enterprise simulation. The Decision Flow chart in Appendix A presents the ideal flow of decisions that need to occur for effective operation of this simulation. A brief summary showing the order of decisions is provided here. 1. Forecast Demand 2. Consider Productivity 3. Set Production 4. Determine Sales 5. Allocate Cash A Decision Worksheet, formatted in Excel, is displayed in Appendix B. This is a handy tool that does all of the computations needed to make each of the decisions shown A WEB BASED TOTAL ENTERPRISE SIMULATION   Figure 1 Opening Screen   206 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 in the flowchart. The final display in this tool is a Budget Worksheet that converts player decisions into expected profitability. Different player strategies can be investigated using these tools as important guides to effective planning. Simulation without planning is merely game playing and not the prescription for effective learning. ENTERING DECISIONS The Decision variables listed below should be changed to reflect player strategies, i.e. high price/high quality, constant production/production that follows demand, etc. Decision values may be changed from their initial values. A quick description of the effect of changing the budget decisions is presented in Figure 2. The functional decisions are optional and only need to be selected if changes are to be made. The worksheets described in the previous section should be consulted when entering these decisions. • Budgeting – Includes expenditure decisions for advertising, promotion, quality, R & D, technology, incentives, training and maintenance. • Marketing – Includes advertising media decisions, distribution channel decisions, pricing decisions and market research decisions. • Finance -- Includes source of cash decisions, use of cash decisions and expansion decisions. • Operations -- Includes ordering raw material decisions and resource scheduling decisions. • Human Resource -- Includes compensation decisions, benefit decisions and hiring decisions. SIMULATING PERIODS The simulation begins in Quarter 1 with a capacity of 300,000 units of production. Demand will increase and is seasonally distributed (see ‘Information’). The model in this simulation compares demand (desired units) to supply (available units) and determines the units sold, revenue, expenses and resulting profit for each quarter’s operation. Each quarter’s earnings are converted to cash as collections (current and receivables) are received. Inventory can be a big user of cash. If cash goes below zero, a loan will automatically be made to bring cash to zero (see ‘Financials’). To display detailed information on the results of production, marketing and human resource decisions, see the ‘Detail’ report. If research studies were chosen and expensed, reports of these studies will be available by selecting ‘Research Reports’. Six performance metrics are calculated and displayed on the ‘Performance’ Report. These include financial return, market share, productivity, quality index, share price and a composite (weighted average) performance rating metric. The Performance Rating is the best measure of overall success. After simulating a period, the Current Outcomes Window (see Figure 1) is updated and should be used to review the results for the current period. This window displays the current demand, sales, production, inventory, capacity, profit, shares of stock and share price. These outcomes should be used to plan the decisions next quarter. The short term goal of increasing share price is a quick measure of the success of your current decisions because it measures external satisfaction with player profitability. FINAL EVALUATION After 12 quarters have been simulated, a ‘Final’ Report is available for display (see Figure 3). This report provides performance information on each of the 10 teams in the industry. Team 1 on the report displays the results for the current player. This simulation can be played multiple times (see ‘ReSet’) until the desired set of learning outcomes is achieved. Figure 2   Budget Decision Variable Descriptions    Variable  Description  Advertising  Used in determining exposure and sales Promotion  Used in determining sales. Affects convenience quality Quality  Used in determining product quality, demand and production quality control  R & D  Used in determining product quality and demand Technology  Used in determining production standards Incentives  Used in determining productivity. Training  Used in determining productivity. Maintenance  Used in determining the likelihood of break downs   207 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 Figure 3 Final Report   208 Developments in Business Simulations and Experiential Learning, Volume 37, 2010   Appendix A Recommended Decision Flow Process Previous Demand Data Forecast Demand Order Raw Materials Inventory Records DECISION FLOW Production Data Schedule Hours and Workers Sales Financial Statements Set DistributionSet Media Set Price Compensation BenefitsIncentives Hire Workers Productivity Production Allocate Cash Sources of Cash Uses of Cash Expansion Research Studies Human Resource Decisions Operations Decisions Marketing Decisions Finance Decisions Inventory Records Inventory Records START   209 Developments in Business Simulations and Experiential Learning, Volume 37, 2010 Appendix B Excel Planning Worksheets DECISION WORKSHEET Demand 1 2 3 4 OutdoorPak SchoolPak SportPak Total OutdoorPak 170,000 200,000 240,000 180,000 Std Labor $7.00 $4.00 $2.00 SchoolPak 70,000 90,000 150,000 100,000 Std Material $18.00 $8.00 $6.00 SportPak 35,000 50,000 60,000 90,000 Std OH $6.00 $6.00 $6.00 Total 275,000 340,000 450,000 370,000 Variable Cost $31.00 $18.00 $14.00 Forecast 170,000 70,000 35,000 275,000 Production Wholesale Sales 85,000 35,000 17,500 137,500 Capacity 300,000 300,000 300,000 300,000 Retail Sales 51,000 21,000 10,500 82,500 Raw Material Requirements Direct Sales 34,000 14,000 7,000 55,000 Fabric (Rolls) 1,235 1,510 1,980 1,570 Revenue $10,030,000 $1,967,000 $787,500 $12,784,500 Hardware (Packets) 275,000 340,000 450,000 370,000 Tubes 170,000 200,000 240,000 180,000 Inventory 0 0 0 Production 170,000 70,000 35,000 275,000 Scheduling Requirements Workers Hours Hours Hours Hours Direct Labor $1,190,000 $280,000 $70,000 $1,540,000 Fabrication 15 458.3 566.7 750.0 616.7 Direct Materials $3,060,000 $560,000 $210,000 $3,830,000 OutdoorPak Assembly 50 485.7 571.4 685.7 514.3 MOH $1,020,000 $420,000 $210,000 $1,650,000 SchoolPak Assembly 15 466.7 600.0 1,000.0 666.7 Total Direct Exp $7,020,000 SportPak Assembly 7 454.5 649.4 779.2 1,168.8 Technology $100,000 Marketing OutdoorPak SchoolPak SportPak Maintenance $30,000 Product Distribution 60% 30% 10% Inv Carrying $0 Pricing Decisions Total Operations $130,000 MSRP $99.95 $44.95 $39.95 Wholesale $50.00 $25.00 $20.00 Wholesale(Cost/unit) $2.00 Retail $70.00 $32.00 $25.00 Retail(Cost/unit) $10.00 Direct $65.00 $30.00 $25.00 Direct(Cost/unit) $5.00 Wholesale $170,000 $70,000 $35,000 $275,000 Distribution Matrix Retail $510,000 $210,000 $105,000 $825,000 Channel Decisions OutdoorPak SchoolPak SportPak Direct $170,000 $70,000 $35,000 $275,000 Wholesale (%) 50% 30% 15% 5% Sales Exp $1,375,000 Retail (Max 30%) 30% 18% 9% 3% Market Research $50,000 Direct (Max 20%) 20% 12% 6% 2% Advertising $200,000 Promotion $150,000 Media Matrix Quality $150,000 Media Decisions OutdoorPak SchoolPak SportPak R & D $100,000 Television 50% 30% 15% 5% Total Marketing $2,025,000 Print 30% 18% 9% 3% Internet 20% 12% 6% 2% Interest $285,000 Depreciation $420,000 Total Finance $705,000 Training $20,000 Incentives $0 Indirect Payroll $207,000 Benefits $225,000 Total HR $452,000 General & Admin $1,000,000 Total Indirect $4,312,000 Total Expenses $11,332,000 Tax $435,750 Expected Profit $1,016,750 Return on Sales 8.0% Quarter BUDGET WORKSHEET     Table of Contents Volume 37, 2010 A Simulation in Organizational Behavior: Development and Beta Test Simulating Networks: An Experiment Pick Your Group Size: A Better Procedure to Resolve the Free-Rider Problem in a Business Simulation The Impact Of Playing A Marketing Simulation Game On Perceived Decision Making Ability Among Introductory Marketing Students If the Games Work, Why Aren't More Faculty Willing to Play? Modeling Cascading Demand: Accounting for the Effects of Captive Consumer Relationships Issues In Simulation Implementation: Lessons From a Freshman Seminar ENDURANCE: A game for current economic times Simulating Processes: An Application In Supply Chain Management Another Look At The Use Of Forecasting Accuracy On The Assessment Of Management Performance In Business Simulation Games The Effect Of Advertising On Demand In Business Simulations The Relationship Between Learning And Performance In A Total Enterprise Simulation: Revisited And New Data. Is the Gold /Pray Simulation Demand Model Valid and is It Really Robust? Mission Possible - Using Simulation Games For Management Training In A Transition Economy Business Game Modeling For The Negotiation Between General Contractor And Subcontractors The Relationship Between Goal Orientation And Simulation Performance With Attitude Change And Perceived Learning: A Follow-Up Study The Invalidity Of "Natural Market Structure" Pims Validation Of Marketing Games Examining A Beta Test An Experiment On Group Decision-Making Using A Business Game: An International Comparison Of Mba Students In Japan; China; And Russia A Platform for Business Games - From Game Playing to Game Making: The Case of Yokohama National University Checking Financial Balance of Target Brand Portfolio with the Strategic Market Plan Cash Flow Package About Simulations and Bloom's Learning Taxonomy Managing Complexity: Applying the Conscious-Competence Model to Experiential Learning Using Accumulated Profits to Assess Performance in Simulations And Now Let's Really Innovate: The Notion of Perpetual Online Courses Distance Learning: A Game Application Web Based Total Enterprise Simulation Learning Business Administration Using Simulation Software A Review of Experiential Exercises in Absel's Published Proceedings Moving Outside the Classroom: An Experiential Exercise Involving Video Clips Peer To Peer: A New Tool for Student Peer Evaluation Continuing To Assess Project Management: What's Been Done? What's It Means? Looking At New Twists Strategies for Promoting Knowledge Formation and Dissemination in Business Simulation and Experiential Learning Introducing Experiential Exercises To Inexperienced Faculty Members Conveying Concepts Through Cartoons: Preliminary Results From Software Engineers In An Industrial Organization Theory Class Utilizing Institutional Problems as an Experiential Learning Opportunity for Students Considerations in the Design of Vicarious Learning Environments Enhancing Critical Thinking Through Service-Learning As A Consultative Process Encouraging "Established" Faculty to Adopt a "New" Games and Simulations Pedagogy IMA Candy Company: An Experiential Exercise in Managerial Accounting Mustard Seeds as Means for Creative Problem Solving, Ethical Decision Making, Stakeholder Alliance, & Leader Development through Experiential Learning in Management Education Interactive Classroom Technology: Adding a Benefit to the Traditional Classroom Excelling in the Capstone Simulation: An Application of Spreadsheet Technology as a Decision Support Tool GEO: An Entrepreneurship-Oriented Computer-Assisted International Strategy Simulation ERP Simulation Game: A Distribution Game to Teach the Value of Integrated Systems