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Supply Chains of Rome – Mental Models

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Satellite picture of olive oil route from Rome to North Africa.

CASE STUDY CONCEPT: Supply Chain Managers Need Good Mental Models for Effective Decision Making.  

This supply chain model and the simulations are, in effect, your mental model of the business. Your mental model enables you to run scenarios in your head (we have computers now to help with this), and see how the different parts of the business work together: the products, facilities, vehicles, and routes. You see how making changes to one part can affect the others. (This article picks up where Supply Chains of Rome — The Olive Oil Trade left off.)

There’s no Internet or computers or phones in your world of 300 AD, so messages between facilities take a couple of days to several weeks to arrive and for replies to return. Because of these time lags, it is harder to keep up with what is happening. You need a mental model that helps you see the whole company and estimate what is happening at different locations. Without a good mental model you won’t survive in business for long.

Modern supply chain managers still need good mental models to manage their supply chains. There is technology to help us create and run models of our supply chains, but this same technology also makes business run faster. And because of the increased speed, things can quickly get out of hand if you loose control of a situation. Managers (then and now) need to develop strong critical thinking skills. They need to analyze situations to identify problems and opportunities, assess possible ways to respond, and then make decisions and take action.

Finding Problems and Opportunities for Improvement

You bring up your mental model of the company and start making observations and estimations. When you think about the vehicles that deliver wheat and oil to the Emporium from your warehouse at the harbor in Ostia, you see (shown below) there is more capacity on those vehicles so they can pick up more manufactured goods at the Emporium and start them on the trip back to Leptis.

Ostia was the Harbor of Rome

(SCM Globe supply chain modeling – click on screenshots to see larger images)

You figure the warehouse in Carthage isn’t getting enough manufactured goods (blue line in diagram in lower right of screen below), so you need to get more in from Rome. It looks like the place to direct your attention is that part of the supply chain that moves products across the sea, the route between Carthage and Ostia. If you bring more manufactured goods back across the sea, then you can move more manufactured goods down the coast from Carthage to Leptis.

From Carthage to Ostia

( graph on lower right shows on-hand inventory at Carthage warehouse – click for larger image)

You think about the other olive growing estates and farms the family owns in Tripolitania. They are spread across Tripolitania, and some are several days travel into the desert. They are out at the end of long supply chains. It’s tricky to get their oil back to Leptis in a timely manner and also keep them supplied with what they need.

Olive Oil from Desert Valley Farms

(screenshot showing on-hand inventory – click for larger image)

You figure that almost all of them are experiencing a buildup of olive oil inventory on-hand. That means all of them need to step up the rate of deliveries of oil to Leptis. And, because you just ran out of manufactured goods in Leptis, you know there is more demand at the estates and farms for manufactured goods in return. (Charts below show what is happening at three of the other estates.)

Simulation Data Display 1

(on-hand inventory at various olive oil producing facilities in the supply chain)

Making Decisions and Taking Action

Now is the time to take bold action to set things right before your supply chain falls further behind and things get really out of hand. Here’s what you decide to do:

  1. Ship more olive oil and use the proceeds to buy more manufactured goods in Rome – that means put more of your cargo on the big ships that sail between Carthage and Ostia.
  2. Increase the number of coastal freighters on the route between Carthage and Leptis to deliver more oil to Carthage and bring back more manufactured goods from the Carthage warehouse.
  3. Double the number of ox carts on the various routes to Leptis from the olive oil producing farms and estates so more olive oil can be delivered to Leptis for shipment on to Carthage and Rome.

This will cost more money, but if it works, you will also make more money from increased olive oil sales and increased sales of manufactured goods from your warehouse at Leptis. You run the plan past your uncle and he thinks it could work. But he cautions you to stay on top of the situation. There is a lot going on in this plan; if something big gets out of line it could drag down the rest of the company with it. You agree you have to stay informed and make timely decisions.

You find yourself wishing there was a magic talking device you could use to speak instantly with managers at the estates and desert farms, and the warehouses in Carthage and Ostia. That would make it so much easier… but there is only the slow delivery of written messages sent by sailing ship or horseback. You have to rely on your mental model of the company (also known as your intuition, street smarts, or professional judgement) and make the best decisions you can.

(Oil and grain merchants and ships with harbor lighthouse courtesy Ostia Antica
— http://www.ostia-antica.org/index.html.)

You write instructions to your business managers in Carthage and Ostia, and to the estate managers. Your instructions are based on what each facility manager needs to do to implement the three points above that are the basis for your plan. Because of the slow communications, there is not much opportunity to change or adjust these instructions from week to week once they are put into action. It will take a month or so to see what is happening, and another month to enact big changes to these instructions. So you hope your mental model is accurate enough to at least point you and the company in the right direction.

Going in the Right Direction

To check your mental model, and keep it updated as events unfold, you put in place a new procedure you call “THE END TO END VIEW.” You phrase it for everyone in Latin as, “VISUM FINEM AD FINEM.” It becomes your new strategy for managing the business. It is how you collect data from one end of the company to the other to stay informed and make timely decisions. Every ship captain and wagon train driver coming to the warehouses at Carthage, Ostia, and Leptis brings written documents showing the on-hand inventory of products at their facilities, and the daily demand for those products. They also show amounts of those products to be picked up and returned to their facilities. The Carthage and Ostia managers forward this information every week to Leptis where it is collected and analyzed.

Scribes keep careful records of this data, and there is a mathematician from the Library at Alexandria who has introduced new ways of displaying the data using what are called “X & Y Graphs”. These graphs are displayed on large papyrus scrolls with different colored inks for the different product categories. Scribes update them every week and hang the scrolls on a wall in your office. As time goes by, they show patterns and trends emerging at the different facilities:

Simulation Data Display 2

(on-hand inventory at facilities after implementing the three points above)

You are getting more olive oil delivered from the estates, but those estates (Desert Valley Farms on the left and Inland Estates in the middle) produce a lot, and oil is still building up at the estates. On the far right is the display for the Leptis warehouse.

You are bringing in more manufactured goods, but inventory gets drawn down quickly to meet daily demand. Then it spikes up again when new shipments arrive. Twice in the last 30 days you almost ran out before new shipments replenished the stock of manufactured goods. And you see you are also about to run out of wheat that you ship to Carthage.

Simulation Data Display 3

(on-hand inventory graphs and more data on products – click for larger image)

Looking at other facilities, you see a lot more manufactured goods inventory building up in Carthage on the left, maybe too much. You still need to move more of it to Leptis. In the middle you see things are looking good at the Emporium in Rome. Olive oil stocks are building up so they’ll be available to sell in the winter months when your ships can’t sail. Levels of manufactured goods and wheat are fairly stable; they’re keeping up with demand. On the right is more information about products at other facilities and data on vehicle costs (costs and product values are shown in denarii, not dollars).

You acted quickly and got a handle on the situation for now. But you can see there is more work to be done. To improve profits you need to fine tune this supply chain so as to lower operating and transport costs and better balance on-hand inventories with demand at the different facilities.

There is a working model of this supply chain available in the SCM Globe library, “Supply Chains of Rome_Olive Oil”. Import this model into your account to explore the issues discussed here. There are lots of ways to proceed… what would you do?

Now return to the first article in this case study, Supply Chains of the Roman Empire, and start putting your ideas into action and see how well you do.

 

Bibliography of Case Study Information Sources

The Ancient City: Life in Classical Athens & Rome, Peter Connolly and Hazel Dodge, Oxford University Press, Oxford, 1998

The Buried City: Excavations at Leptis Magna, Giacomo Caputo and Ernesto Vergara Caffarelli, Frederick A. Praeger Publishers, New York, 1966

Diocletian and the Roman Recovery, Stephen Williams, Routledge publishers, New York and London, 1985

Edict of Maximum Prices, Emperor Diocletian, 301 AD, as presented in an English translation of the Edict on Maximum Prices, also known as the “Price Edict of Diocletian” (Edictum de pretiis rerum venalium) – http://kark.uib.no/antikk/dias/priceedict.pdf.

Essentials of Supply Chain Management, 4th Edition, Michael Hugos, John Wiley & Sons publishers, Hoboken, 2018

Ostia: Harbour City of Ancient Rome, website devoted to information for professional archaeologists and historians, students of Roman archaeology and history, and interested lay-people, http://www.ostia-antica.org/

Septimius Severus: The African Emperor, Anthony Birley, Routledge publishers, New York and London, 1988

Tripolitania, David J. Mattingly, University of Michigan Press, Ann Arbor, 1994

UNESCO World Heritage Sites, the following articles:

Wikipedia, The Free Encyclopedia, the following articles:

 

 

Copyright © 2014, 2018 by SCM Globe Corp.

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