Bike

Stuff, Inc.

BikeStuff: A Simulation

Learning Objective:
This simulation is designed to help you experience the challenges of developing an
efficient work process and then improving that process using information technology.
The goal of the exercise is to see how technology, people, and tasks interact in a
competitive environment, and will help the class explore and practice many of the skills
we will cover in this course -- including change management, teamwork, and leadership.

Background:
BikeStuff is a small retail store in Natick, Massachusetts, USA specializing in high
performance bicycle components and accessories. Founded in 1983 by three former riders
for the U.S. Cycling team, BikeStuff sells mostly to road and mountain bike enthusiasts
and triathletes. It’s the classic “lifestyle” company – the three founders run the store
mainly to pay the bills so they can continue to compete and have fun. None of them are
very tech-savvy, and until recently they didn’t even use a computer.

Traditionally they have received most of their revenues from in-store sales, but in the past
five years more and more customers have been calling the store to order components and
receive them by mail (i.e., postal service). In 2015 about 35% of their revenues came
from mail-order. Back in 2001 they got one of their friends to build and maintain a simple
website with a price list and a phone number (in exchange for free bike tune-ups), and
eventually customers began to call from all over the United States.

Though BikeStuff’s product inventory and prices are reasonably competitive with the big
mail-order companies (Performance Bike, Excel Sports, Specialized, etc.), the rise in
phone orders is mainly due to their customer service. Since all the employees at BikeStuff
are current or former professional cyclists, customers get extensive information and
advice before and after purchase. In the confusing, constantly changing world of high-
performance bike components, this level of service is extremely rare.

Inventory Management and Order Processing

Compared to other bike component retailers, BikeStuff is an extremely “low-tech” retail

store. They don’t have a computerized inventory control or order processing system –
everything is still done by hand using a paper-based system that really hasn’t changed
much since the store was opened in 1983. In 2001 they finally bought a second-hand
computer and learned to use Excel, but only figured out how to make simple lists (not
track inventory).

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Inventory and order processing at BikeStuff is managed with three documents – the
product catalog, the out-of-stock list, and the shipping charge list.

The product catalog (originally done by hand but now on Microsoft Excel) is just a
simple listing of product items and prices, organized by product category (wheels, brakes,
frames, tires, clothing, etc.) or product name. They update their product and price list
every quarter, print out copies for the Natick store, and get their friend to post it to the
website.

Once a week one of the employees walks around the store with the product catalog and
notes which items are out-of-stock. The employees are so familiar with the store’s
product offerings they can usually “eyeball” the inventory pretty easily. The employee
then updates last week’s out-of-stock list (also kept on Microsoft Excel), prints out
revised copies, and orders any items that have just gone “out-of-stock.”

Finally, they maintain a shipping charge list (on Excel) to help them calculate shipping
costs from Natick to anywhere in the United States. This is updated whenever the U.S.
Postal Service changes their rates, and is based on location, not order size or weight.

Processing Phone Orders

After BikeStuff started getting more and more phone orders, they created a simple order
processing system so that employees could take phone orders and still provide service to
in-store customers.

1. When a customer calls, the employee takes down the customer’s name,
shipping address, catalog number of each desired item, and their telephone
number on a paper order form (see Exhibit A). The employee tells the
customer they will call them back within 24 hours with item availability and
total cost.

2. When they have some free time (i.e., not serving a store customer), they look
up all the prices in the product catalog, check the desired items against the
out-of-stock list, determine the shipping charges, and calculate the final cost to
the customer (using a calculator).

3. Then they call the customer back with item availability and total cost, and get
their credit card information. If an item is out-of-stock, they might suggest an
alternative or arrange shipment once the item arrives (most seem to choose to
wait for the item).

When it’s real busy in the store (especially during the summer and on weekends), the
phone orders usually pile up throughout the day, and must be processed after the store
closes. Sometimes there are scores of orders, requiring several additional hours to get
through.

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Simulation Overview

This simulation recreates the after-hours order processing situation at BikeStuff, and
allows groups to develop and implement an IT solution to speed up order processing
time, increase accuracy, and ultimately reduce unwanted overtime.

The class will be divided into several organizations who will compete against each other
for order processing speed. Each organization will have four types of roles:

 Order Processing Team (2-3 persons) – their job is to complete and prepare
the paper-based customer order forms for customer call-back (determine total
product cost, identify out-of-stock items, calculate shipping costs and total
customer cost).

 IT Expert (1 person) – their job is to develop and implement an information

database (based on BikeStuff’s Excel spreadsheets) that can help the order
processing team increase their productivity rate by automating price, out-of-
stock, and shipping charge lookups as well as cost calculations.

 Quality Checker/Referee (1 person) – a somewhat neutral-party that verifies

that the customer order forms are correctly completed and returns incorrect
forms to the team for rework. They also keep track of the total number of
correctly completed orders and report this total to the process observer every
10 minutes.

 Process Observer (1 person) - watches overall group process, documents

strategies and approaches for later discussion, interviews group members
during the simulation, reports productivity numbers to the simulation manager
(i.e., the professor) every 10 minutes, and shares competitor productivity
results with their group.

For the purposes of this simulation, assume that the goal of each organization is to
improve the speed and quality of the existing order processing system, and not
create a new method of handling customer phone orders.

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Special Instructions for Order Processing Team

When the simulation begins you will receive a large binder of customer orders. For each
customer order, you must
 Locate and write down the price of all the items the customer is ordering by
using the product catalog.
 Determine and indicate if any of the items are out-of-stock by checking each
item against the out-of-stock list. If there are out-of-stock items, place an “x”
or “yes” in the box next to the item.
 Calculate total product cost
 Calculate shipping charges based on the customer address (state) by
referencing the shipping charge list
 Calculate total customer cost (product cost plus shipping)
 Give each completed Customer Orders Form to the quality checker for
verification. If there are errors he or she will return it to the group for re-
processing.

Measuring Productivity:

Every 10 minutes the quality checker will calculate the total number of orders processed
so far during the simulation.

Your results will be compared against other teams, and the process observers will provide
competitor’s performance data as it becomes available.

Rules and Comments for Order Processing Team

 Only THREE (3) people can be on the order processing team at any one
time.
 Clients’ orders are processed in the order they were received. Start with the
first order on the pile and so on.
 No soliciting or receiving help from anyone else.
NB. Help from the process observer is allowed for order processing teams
comprised of only two (2) persons.
 No looking at the file with answer keys used by the quality checker.
 Once the simulation begins it will not stop until the simulation manager
announces the end of the exercisew.

Special Instructions for Quality Checker

Your job is to verify that orders have been processed correctly and to calculate
productivity and error rate measures every 10 minutes. The simulation manager/professor
will provide you with a file containing the “right” answers to all the customer orders that
might be processed during the simulation. You are somewhat a neutral party in this
simulation.

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As the order processing team completes orders, you will:
 verify that the total product cost, total customer cost, and out-of-stock
indication is correct for each order
 If the order is correct, place it in the completed order pile. Keep track of how
many orders are correctly processed.
 If the order is incorrect, return the order back to the team for re-processing.
Do not tell them what was incorrect.
 Every 10 minutes report the total number of orders processed since the
beginning of the simulation to your team’s process observer.

Rules and Comments for Quality Checker:

 No help of any kind – the order processing team must do the work themselves.
o No cheating – you cannot provide cost and out-of-stock information to the
order processing team.
o No help on re-work – simply return the order to the team without
explanation. They must learn by identifying and correcting the mistake
themselves.
 Once the simulation begins it will not stop until the simulation professor
announces the end of the exercise. Schedule individual breaks and meetings
wisely.

Special Instructions for Process Observer

You basically have two roles. Your first role is to report team productivity numbers
back to the simulation manager/professor every 10 minutes (exactly), and bring back
comparison numbers to your order processing and IT design teams so they can see
how they are doing relative to other groups. Give your team totals to the simulation
manager, write down your competitor’s numbers, and bring them back to your team.
You might want to draw the following chart on a piece of paper, and use it to display
competitive information to your team:

Team 1 Team 2 Team 3 Team 4 Team 5

00:10
00:20
00:30
00:40
00:50
01:00
01:10
….and so on every 10 minutes until the simulation is over…

Your second (and most important) role is to act as a group historian, observing and
documenting the strategies, approaches, and outcomes of both the order processing
team and the IT team. Your data will be used to help everyone in your group
“reconstruct” what happened during the simulation when you discuss it during the

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 debrief period after the simulation is finished. Pretend you are a reporter, and
interview your group members as the simulation progresses. Capture feelings and
concerns as well as tasks, processes, strategies, and key decisions. Note the time of
any key decisions or activities.

Rules and Comments for Process Observers:

 You cannot provide help to the order processing team or the IT Expert.
NB. You may only help process orders in your group when the order
processing team is comprised of only two (2) persons.
 You are allowed to help the quality checker if he or she gets overloaded.

Special Instructions for IT Expert

Your job is to develop and implement a simple IT system in Excel to increase the
productivity and quality of the order processing team.

Initially, the order processing team will be referencing price, out-of-stock, and
shipping cost information from paper-based catalogs and lists. You will be provided
with the same information in an Excel spreadsheet (on a flash drive). Your objective
is to:

 Quickly develop a spreadsheet to automate the process of looking up item

prices, checking for out-of-stock status and shipping cost, and calculating total
product and customer cost.
 Install the system with the order processing team (i.e. give them a laptop and
working software), and provide necessary training to get them up to speed.
 Resolve any technical issues that may arise, and build any additional upgrades
as needed.

Rules and Guidelines for IT Expert

 Use the Excel Help system to determine which functions and techniques will
allow you to create a useful spreadsheet (HINT: Explore the VLOOKUP –
“RECHERCHEV” – function).
 You may “install” up to one laptop per order processing team member.
 No printing is provided – the order processing team will still need to copy
down resulting information from the spreadsheet to the customer order form.
 You cannot help the order processing team – they must process all the orders
themselves.
 Assume the maximum number of items a customer will order is ten.
 Assume the product, out-of-stock and shipping charge information will not
change during the simulation.

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S tu ff,In c .

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5
6
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1 0
1 1
1 2
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1 4
1 5

T o ta l P ro d u c t C o s t $
S h ip p in g C h a r g e $
T o ta l O rd e r C o s t $

* Note – at BikeStuff this information is written by hand. For the purposes of the simulation all
information is typewritten. Assume the maximum number of items ordered is ten, and customers only
order one of each item.

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 Bike
Stuff, Inc.

Example Shipping Charge Excerpt

(actual list contains all states)

To simplify the simulation, we assume a standard shipping charge for any order that only
varies by shipping destination.

State Shipping
Charge
MA 3.00
ME 3.00
NE 5.00
NV 8.00
NC 3.00
ND 5.00

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 Bike
Stuff, Inc.

Example Out-of-Stock List Excerpt

(actual list will be much longer)

Catalog # Item Description

00-4778B Blackburn TrakPump Pro TP-4
20-1276A Carnac Ellipse EV Road Size 43
40-0870E Performance Hurricane Grande Frame Pump
40-9827A Zefal Elegante Floor Pump
50-0665A Continental Grand Prix Supersonic 650cc
50-1284B Stradius Pro Black 700x20