Business SimulationThe Key to Understanding Business

David A. Jordan, CSI

Assoc Prof of Business and Engineering

Geneva College

• 20% of what is heard

• 40% of what is seen and heard

• 60% of what is done

• 80% of what is done and applied

Retention Statistics

• In Business Simulations (80%+)– Decision making/Analysis Cycle

What is Active Learning?

• Active Learners energetically strive to take a greater responsibility for their own learning.

• Students must engage in such higher-order thinking tasks as analysis, synthesis and evaluation.

• Active learning is fast-paced, fun, supportive and personally engaging.

• Above all students need to ‘do-it’!

BusSim® Family of Simulations

Integrative Case

MarketingHumanResource Operations Finance

Strategy

Introductory Introductory

Analytical

Comprehensive

I

II

III

BusSim Learning Model

DecisionMakerCasebook BusSim

Model

DecisionTools

Instructor

Periodic Decisions

Team Based

Support Materials

• Outdoor Unlimited, Inc. Case– Provides common company environment– Tailored to each module

• Spreadsheet Tools– Aids for data analysis

• Instructor’s Manual– Complete guide to program operation and

setup

Outdoor Limited, Inc. (Case)

• Manufacturing Facility• Functional Divisions

– Production– Marketing– Finance– Human Resources

OUTDOOR LIM ITED INC.

H RS p ec ia lis t

A d m in is tra tiveA ss is tan t

S a les R ep s

S a lesM an ag er

A d vertis in gS p ec ia lis t

V PM arke tin g

F ab rica to rsM a in ten an ceM at H an d le rs

F ab /M H /M a in tS u p erviso r

A ssem b le rs

A ssem b lyS u p erviso r

P rod u c tionM an ag er

V PO p era tion s

B ookkeep er

A ccou n tin gS p ec ia lis t

In fo S ys tem sS p ec ia lis t

V PF in an ce

P res id en tH R M an ag er

Organization Chart

Financial Statements

• Income Statement

• Comparative Balance Sheet

• Cash Flow Statements– Indirect (GAP)– Direct (Non GAP)

BusSim® uses an integrated set of Financial Statements in all the modules. Students need to understand management decisions in light of these statements.

Financial Statements

Simulations focus on presenting results as a set of integrated financial statements.

Outdoor Limited Products

• OutdoorPak

• SchoolPak

• SportPak

FRAMING STRAPPING CUTTING

Straps Cut Pieces

SH

IPP

ING

& R

EC

EIV

ING

Workstations Inventories

Manufacturing Process

Hardware

Fabric

Tubes

Frames

ASSEMBLY

Strategy Class at Geneva

• Capstone with 15 – 30 students

• 3 or 4 person teams (Concentrations)

• Simulation Runs ½ semester

• Annual Board Meetings (4)– Present Mission/Strategies/Function Goals– Results previous year/Plans for next year

• Two days between decisions

Goals for Class (Simulation)

• Enterprise Decision-Making– Budgets

– Long Term Planning

– Resources

• Functional Coordination– Marketing can’t sell what operations doesn’t produce

– Growth can’t occur without cash

• Function Decision-Making– Operational/Tactical Decisions within Enterprise

Example Requirements

• Business Planning (Quantitative)– Annual Plan

• Sales Forecast• Material Requirements• Human Resource Requirements

– Income/Expense Budget– Ratio Analysis– Cash Budget

Example Worksheet

INPUT PARAMETERS:

Average Labor Cost/Mo $1,000Hire Cost/Employee $600Fire Cost/Employee $500Carrying Cost/Unit/Mo $0.20Stockout Cost/Unit/Mo $2.00Average Productivity 1,000

Level

Initial Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Employees 30 30 30 30 30 30 30 30 30 30 30 30 30OvertimeProduction 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 360,000 Demand 24,000 24,000 26,200 28,300 29,400 31,800 37,300 35,900 29,000 28,000 29,000 23,000 345,900 Inventory 6,500 12,500 18,500 22,300 24,000 24,600 22,800 15,500 9,600 10,600 12,600 13,600 20,600

Reg Pay $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $360,000OT Pay $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Hire/Fire $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Inventory $2,500 $3,700 $4,460 $4,800 $4,920 $4,560 $3,100 $1,920 $2,120 $2,520 $2,720 $4,120 $41,440

Total $32,500 $33,700 $34,460 $34,800 $34,920 $34,560 $33,100 $31,920 $32,120 $32,520 $32,720 $34,120 $401,440

Aggregate Planning Tool

This worksheet can be used to go over all production planning before the simulation begins.

Fall Results

Performance Rating

40

60

80

100

120

140

160

1 2 3 4 5 6 7 8 9 10 11 12

Quarter

Team 1

Team 2

Team 3

Team 4

Stand Alone Edition Described

• Nine Computer Teams #2-10– 3 Aggressive– 3 Competitive– 3 Conservative

• Play for up to 12 quarters• Six Different Player Environments• Easy – Intermediate – Hard Options• Reset anytime• Final Results Display

Pricing Options

• Student Editions – Team / Individual– Introductory – $20 / $15– Functional – $25 / $15– Strategy – $40

• Stand Alone Editions– First Scenario -- $20– Additional Scenario -- $10

Assessment (Outcome Statements)

As a result of using this simulation, students should be able to:• Describe a simple business model. • Recognize the effect of basic business decisions on business outcomes. • Analyze Financial Statements and their relationship to the business model. • Formulate a Sales Forecast and a Proforma Income Statement. • Evaluate business decisions in a small manufacturing industry.

Performance Metrics• Perceived Quality • Retained Earnings • Cash Management

Assess Learning

• Successive Testing– Content – Application– Self Evaluation

• Performance Tracking

• Develop Learning Curve