Imagine it is the year 300 AD and you have just been promoted to run the family business. Your family is one of the wealthiest families in Roman Africa – the Septimi. The family owns extensive olive growing estates and is a major player in the olive oil export business. Are you up to the challenge of running this supply chain?
Providing Rome with Oil
The Roman Empire got most of its wheat and a large portion of its olive oil from its provinces in North Africa. The province of Tripolitania (now part of Libya) produced an enormous amount of oil (olive oil), and huge fortunes were made growing olives and exporting the oil to Rome. Here is a picture of that supply chain.
There were five main parts in the supply chain that delivered olive oil from Tripolitania to Rome (shown in the map above). Each of those parts is still quite visible today. In this case study we’ll start by looking at those five parts, then we’ll create a supply chain model that shows how those parts worked together.
A Sophisticated Supply Chain from 1,700 Years Ago
In the simulations of this Roman supply chain you will start to get insight into the complexity of this work even though it happened a long time ago. And in the process you will form an intuitive understanding or “mental model” of how the supply chain worked. Since the Romans didn’t have computers and even simple math was pretty complicated using Roman numerals, they too must have relied on mental models to manage the complexity and make this supply chain work.
Information for this case study is contained in a sequence of three articles in the SCM Globe Blog. Read these three articles to see how this olive oil supply chain worked. The first article shows the five main parts of the supply chain. The second article describes the different operations of the supply chain. And the third article describes the situation you are facing and what you have done so far to respond.
- Supply Chains of the Roman Empire
- Supply Chains of Rome – The Olive Oil Trade
- Supply Chains of Rome – Mental Models
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YOUR FIRST CHALLENGE — Improve profits by making adjustments to this supply chain so as to lower operating and transport costs and better balance on-hand inventories with demand at the different facilities. As described in “Supply Chains of Rome – Mental Models”, you acted quickly and got a handle on a difficult situation. But you see there is more work to be done.
Here are some things to think about as you work on this challenge:
- Supply chains in the ancient world and the modern world are governed by some basic principles that have not changed much over the centuries. How is this supply chain similar and how is it different from modern supply chains?
- What supply chain principles would you put into action in the areas of inventory management, transportation and delivery scheduling?
- What actions can you take to smooth out inventory flow through the supply chain and lower on-hand amounts of products while still meeting demand?
- What actions can you take to lower transportation costs?
- Summarize your answers in a short report. Use screenshots and data from simulations to illustrate what you did to lower operating costs and inventory levels.
After you improved performance of the existing supply chain, olive oil production at the family estates continues to increase as water works are extended and more land is brought under cultivation. In the screenshot below notice low stone walls built across the valley floors to trap rainwater causing it to seep into the soil and water olive trees once planted in those valleys. Several years go by and the oil production at each estate increases by 30 percent.
Also to support that increase, demand for manufactured goods and olive oil and wheat at the estates increases by 10 percent. In addition, there is a 10 percent increase in demand for manufactured goods and a 5 percent increase in demand for oil and wheat at the Leptis warehouse to sell to people in the city of Leptis.
You decide to expand into new markets to sell your increased supply of olive oil. There is a city even larger than Carthage several days sailing to the east of Leptis Magna. That city is Alexandria, in the Roman province of Egypt. It is an important new market for your olive oil. It is also a source of manufactured goods that you can sell in Leptis and use on the estates.
TIP: Save backup copies of your supply chain model from time to time as you make changes. Then if a change doesn’t work out, you can restore from a saved copy.
[ We are glad to provide a FREE EVALUATION ACCOUNT to instructors and supply chain professionals interested in exploring SCM Globe simulations — click here to request an account — http://blog.scmglobe.com/?page_id=6007 ]
YOUR SECOND CHALLENGE — Add a new warehouse facility in Alexandria, Egypt. Define this facility to be the same as your warehouse in Carthage. Find a good location for it down by the harbor. And then place daily demand on the warehouse for olive oil and wheat that is equal to half the daily demand for those products at the Emporium in Rome. Increase demand as shown above at the estates and at the Leptis Warehouse. Plan to import additional manufactured goods from Alexandria and/or Rome to meet this demand.
Here are some things to consider as you work on this second challenge:
- Increase production of olive oil and wheat at the estates, and increase demand for manufactured goods, olive oil and wheat at the estates and Leptis as described above.
- How many new coastal freighters will you need to handle the trade with Alexandria?
- Can a 30 percent increase in production at the estates produce enough olive oil and wheat to meet demand in Alexandria and also the increased demand on the estates and in Leptis? Is it too much or not enough?
- What can you do to balance supply with demand in this supply chain given that you cannot quickly increase production of olive oil?
- Do the sales revenues from selling the additional oil and wheat and manufactured goods cover the additional operating and transportation expenses? What is the percentage change in profits between the original supply chain and the expanded supply chain?
- Estimate sales revenue by looking at the amount of products going out of facilities where those products are sold (daily demand). Sales revenue at each facility equals the product price plus profit margin multiplied by the number of products going out of facilities where products are sold (not just transfered). Assume there is a 15 percent profit margin added to the price of products sold.
- Since your family owns the estates do not count demand for products at these facilities as sales. Do not add the profit margin to the price of products consumed at the estates and consider their consumption as an additional operating expense. How does this effect the economics of this supply chain?
- Write up a short report describing your answers to the questions above. Describe the biggest challenges you faced and what you did to address them. Use screenshots and simulation data to illustrate your main points.
For ideas on how to start expanding this supply chain see “Tips for Building Supply Chain Models” for useful techniques.
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