CASE STUDY CONCEPT: Supply chains of the Roman Empire had much in common with modern supply chains. Supply chains then and now require development of good mental models to understand them and keep them working well. Some ancient supply chains can also teach us lessons about sustainability that we could use today.
It is the year 300 AD, and you have just been promoted to the head of a large trading company dealing in olive oil. This company is owned by one of the wealthiest families in Roman Africa – the Septimii. They come from the city of Leptis Magna and they own extensive olive growing estates in the province of Tripolitania. You are a major player in the lucrative olive oil business that supplies the city of Rome. Are you up to the challenge of running this company and the supply chain that supports it?
In this case study you will see a supply chain as complex as many modern supply chains even though it operated a long time ago. The basic tasks involved in moving products from one place to another have not changed that much over the centuries (only the technology used to perform those tasks). As you run simulations and see the results, you will start to form an intuitive understanding or “mental model” of how this supply chain works.
NOTE: This is an advanced case. Work through the three online challenges of the beginning case, “Cincinnati Seasonings” before taking on the challenges in this case.
You will use your mental model to see where to make improvements to keep this supply chain running as efficiently as you can. The Romans didn’t have computers, and even simple math was pretty complicated… have you ever tried to do calculations with Roman numerals? So they must have relied on mental models or professional judgement based on years of experience in order to manage the complexity and keep their supply chains running. This skill in forming good mental models is still critical for managing supply chains today, maybe even more so!
Though we now have powerful modern technologies, supply chain managers still need to know what they are doing and understand why they are doing it. Computers and telecommunications make business happen a lot faster than it used to, so situations can quickly get out of control if people do not understand what is happening and how to respond appropriately. Computers, artificial intelligence and big data analytics allow us to manage larger flows of products in faster moving supply chains – but technology alone will not save us. We still need good mental models to understand how supply chains work, and make good decisions to keep them running and keep improving them.
A Picture of the Olive Oil Supply Chain
Rome got most of its wheat and a significant portion of its olive oil from its provinces in North Africa. The province of Tripolitania (now part of Libya) produced an enormous amount of olive oil (and still produces a lot even now). Huge fortunes were made growing olives and exporting the oil. Olive oil was used as food, as fuel for lighting, and as an ingredient in everything from paint, soap, cosmetics, and ointments. It was one of the most valuable commodities in the empire. Here is a picture of the supply chain that moved olive oil from North Africa to Rome. There were five main parts to the supply chain as shown below.
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The five main parts of the supply chain that delivered olive oil from Tripolitania to Rome are still quite visible today. We’ll look at those five parts, and create a supply chain model that shows how those parts worked together to move products between Rome and Leptis Magna. You will appreciate what it must have been like to manage this supply chain, and the skills needed to be successful. You will also see that most of those same skills are still needed to manage supply chains today.
1 – The Green Sea (A Sustainable Supply Chain)
This supply chain originated in an area of North Africa once called the “Green Sea” because it was literally a green sea of olive trees. People had been cultivating olive trees in this area for centuries and under the Roman Empire it reached its peak. Much of the coastal plain of Tripolitania was a forest of olive trees. This was an example of what we would now call a “sustainable supply chain.” Instead of supporting human activity that stripped and polluted the land, this supply chain supported human activity that enriched the land, and reclaimed the desert by planting trees. Could something like this be done again using modern technology?
Because olive oil was so valuable, extensive waterworks to support olive growing were built inland up into the dry hills at the edge of the Sahara Desert, and also out in desert valleys far from the coast. Terraces and retaining walls were built on hillsides to cause the occasional rains to soak into the earth instead of rushing into the ravines. Water that overflowed the retaining walls was captured in ditches leading to underground cisterns where it was stored for later use. And water that reached the ravines and valleys was stored behind low dams built across the valley floors so it seeped into the soil of the valley floors instead of draining off the land in flash floods.
The result was olive trees, date palms, and crops like wheat and millet could be grown on formerly barren hillsides and desert valleys. Roman demand for olive oil created a market and a supply chain that literally changed the landscape as shown in the pictures below.
Picture 1 shows a satellite view of Tripolitania. The roads between various centers of olive oil production are shown in blue. Picture A shows a close up of abandoned water works, hundreds of low dams across now empty desert valleys. Where there is just drifting sand, there were once forests of olive trees. Picture B shows a desert valley and ravines far out in the Sahara. The darker bands across the valley and ravines are strips of vegetation growing where the remains of Roman waterworks still allow water to collect and trees can grow.
2 – City of Leptis Magna
All roads led to a city on the coast where olive oil was loaded onto coastal freighters for shipment to Carthage and then on to Rome. This city was an impressive city with public buildings and monuments modeled on those in Rome. The oil of Tripolitania flowed through its port. It was also the family home of the Septimii, and from this family came a dynasty of Roman emperors – the Severan dynasty. When Septimius Severus became emperor in 195 AD, he endowed his already prosperous city with a fine new harbor, and a new forum and basilica and other buildings built on a scale to match those in Rome.
Picture 2 below shows the plan of Leptis Magna and its harbor. You can see the regular street plan, the big public buildings in the center of the city, and the now silted up harbor. It was a circular harbor with a lighthouse on the point of land extending into the sea. What is now a stretch of beach was once the entrance to the harbor, and ringing the harbor were stone quays and large, two story warehouses where olive oil was stored in shipping containers called amphorae and loaded onto waiting ships. This is illustrated in a rendering that shows how the city once looked.
3 & 4 – Harbors at Carthage and Ostia
Those ships sailed west from Leptis Magna along the coast to the capital of Roman Africa – Carthage. In the big harbor at Carthage the oil was transferred from the coastal freighters to the large ships of the grain fleet that carried wheat and olive oil from Africa to the port of Rome. Picture 3 shows the remnants of the harbor at Carthage. The circular harbor (A) was the military harbor, and the commercial harbor (B) is next to it.
Picture 4 shows the harbor on the other side of the sea that was the destination for the ships from Carthage. It was the port of Rome at the mouth of the Tiber River. The port was named Ostia and its harbor was built in the shape of a huge hexagon (A). Floods from the Tiber have since silted up the harbor entrance from the sea. On a good voyage, the trip took three or four days from Carthage to Ostia.
Through this port came food and other products needed to support the largest city in the western world at that time (at least a million people). The harbor was ringed with warehouses where olive oil in large amphorae were offloaded from seagoing ships. The oil was then loaded onto river barges that were pulled by gangs of workers up the Tiber River (B) to Rome.
[NOTE: This is an advanced case. Work through the three online challenges of the beginning case, “Cincinnati Seasonings” before working with this case. ]
The picture below on the left shows a harbor crane unloading a ship docked alongside a quay at a harbor such as Carthage or Ostia. On the right is one of the warehouses at Ostia where products were stored (the marble inscription above the main entrance says it was owned by two freedmen, Epagathus and Epaphroditus). The building was built during the reign of the Emperor Claudius circa 145-150 AD (CE).
(Roman cargo loading crane drawing courtesy Ostia Antica, http://www.ostia-antica.org/index.html. Roman warehouse at Ostia courtesy Wikimedia Commons, photo by Patrick Denker, 2007, https://it.wikipedia.org/wiki/File:Ostia_antica-17.jpg)
The picture below shows the modern harbor of La Spezia on the coast of Italy north of Rome. Note the harbor cranes for loading and unloading ships, and the storage containers for storing products (things are bigger but still much the same).
5 – Roman Emporium and a Mountain of Amphorae
On a busy day hundreds of barges loaded with olive oil and other products were pulled up the Tiber and unloaded at a huge dock and warehouse complex named the Emporium (A). There the olive oil was poured from the shipping amphorae it came in and stored in large holding tanks. The shipping amphorae were then transported several blocks away to a disposal site (B). At that disposal site today is a mound of broken shards of olive oil amphorae that is still some 115 feet high (35 meters) and a bit more than half a mile in circumference (1 kilometer). Picture B shows a close up of this mound – it is now known as Monte Testaccio. Note its size compared to the buildings around it.
Evidence from this mound and other sources indicates Rome was importing at least 2 million U.S. gallons (7.5 million liters) of oil annually. In the rendering above showing the Emporium on the Tiber River, the disposal site for empty olive oil amphorae, Monte Testaccio, can be seen in the upper right corner. Because of the biodegradable packaging material used to make the olive oil amphorae, this disposal site did not become a toxic waste site filled with plastic and deadly chemicals as so often happens with modern supply chains. Instead it became a tree covered hill, and a local tourist attraction.
Can you manage this supply chain?
Compared to modern supply chains, the technology is simple. But there is more going on than you might think. There is a lot to figure out if you are going to run this supply chain efficiently and keep the business profitable. We’ll model this supply chain and simulate its operations to see how it works.
Prices and costs used in this case study and supply chain model are denominated in the Roman silver coin called a denarius (plural is denarii). We know about these prices and costs because of an imperial edict on prices known as the “Edictum de Pretiis Rerum Venalium” (Edict Concerning the Sale Price of Goods) issued by the Emperor Diocletian in the year 301 AD (see more about this in the next article). By using Diocletian’s edict on prices, combined with well researched archeological evidence, we have enough detail to create a very accurate supply chain model and simulation.
Read the next two articles listed below to get a deeper understanding of this supply chain and how it works. What you learn from these two articles will show you how to get started with the First Challenge of improving the operating efficiency and profits of this supply chain.
- Supply Chains of Rome – The Olive Oil Trade — Investigate a model of the supply chain that supported the olive oil trade between Italy and North Africa.
- Supply Chains of Rome – Mental Models — Use simulations to see how well the supply chain works, and figure out how to make improvements and grow the business.
NOTE: This is an advanced case. Work through the three online challenges of the beginning case, “Cincinnati Seasonings” before taking on the challenges in this case.
FIRST CHALLENGE:
Improve operating efficiency and profit
Make adjustments to this supply chain as presented in The Olive Oil Trade. Find ways to lower operating and transport costs, and do a better job of balancing on-hand inventories with product demand at the different facilities. After you make these needed improvements, then you will need to respond to the issues and problems described in Mental Models. You need to resolve the two problems described there to meet this First Challenge. By doing so, you will then position yourself to take on the Second Challenge of expanding this supply chain to support business growth and increasing total revenue.
To load the model for this supply chain, click the “View Library” button, and import “Supply Chains of Rome_Olive Oil”. Open the model in the Edit screen and look at the facilities and the delivery routes, click on the different entities in the model and zoom in on the facilities and turn on the satellite view to learn more about them. Then run a simulation. It will run for a few weeks and then a problem occurs as shown in the screenshot below. You run out of manufactured goods in the Leptis warehouse. You need to investigate what is causing this and find a way to get your supply chain to run smoothly for at least a month (30 days).
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.
- Describe the model of your supply chain that has formed in your mind, list the important parts of the model and describe how they work together to produce the results you want
REPORTING TEMPLATE for use with this case study: Import your simulation data into the template and create monthly profit & loss reports as well as generate key performance indicators – Download a copy of the Olive Oil Supply Chain P&L Reporting Template here
[If you are using SCM Globe Professional version, these reports can be generated automatically by clicking on the “Generate P&L Report” button on the Simulate Screen]
CREATE A SHORT PRESENTATION to show what you did to put this supply chain on track for profitable growth. Show your biggest challenges and what you did to address those challenges. Illustrate your presentation with screenshots and simulation data. Show performance data from your Profit & Loss report and KPIs.
In 300 AD (or even 30 years ago) it would have taken years of experience to form a good mental model of this supply chain and the business it supports. How long did it take you to form and refine a good mental model by working with simulations instead?
SAVE BACKUP COPIES of your supply chain model from time to time as you make changes. There is no “undo”, but if a change doesn’t work out, you can restore from a saved copy. And sometimes supply chain model files (json files) become damaged and no longer work, so you want backup copies of your supply chain to restore from when that happens.
To share your changes and improvements to this model (json file) with other SCM Globe users see “Download and Share Supply Chain Models”
SECOND CHALLENGE:
Expand your supply chain to grow the business
Olive oil production at company farms continues to increase. You and others invest in building more water works in the desert valleys, more land is brought under cultivation and more olive trees are planted. In the screenshot below you can see low stone walls built across the valley floors to trap rainwater. The water would seep into the soil and water groves of olive trees once planted there. Shown below are the remnants of farms and waterworks in just one of many desert valleys.
In your Edit screen zoom in on the Desert Valley Farms facility. Turn on the satellite view and search other desert valleys in the area. In surrounding valleys you will find remains of more farms and waterworks. All those desert valleys were once green with olive trees, almond, and fig trees, and date palms. Wheat and millet was grown on the hillsides, and grape vines were also cultivated. The more you look, the more you will see the remains of farm houses on the hilltops and waterworks in the valleys (try looking in the area of hills and valleys to the southwest of the Desert Valley Farms facility).
Even further out in the Sahara Desert are the ruins of a large farming settlement called Ghirza. In your Edit screen zoom in on the facility called “Ghirza – Wadi Zemzem” and switch to the satellite view as shown in the screenshot below. This was a prosperous town situated on the hills overlooking a large desert valley. In Arabic a valley is called a wadi and this is the Wadi Zemzem. Remains of low walls across the wadi floor are easy to see. The wadi and smaller wadis feeding into it had extensive waterworks to channel and conserve rainwater. This enabled intensive wadi farming in the form of olive trees intermixed with date palms, almond and fig trees, and fields of wheat and millet. Farmers also raised chickens, sheep, and cattle.
If you move your screen view down and to the left to follow the course of this wadi, you will see the remains of many fortified farm houses on the hills on either side of the wadi. Imagine the number of people who once lived here, and what this and other wadis looked like with the farming and desert communities they supported.
These desert farmers who lived in Ghirza and along the Wadi Zemzem lived on the fringes of the Roman Empire. They formed a buffer society between the settled towns and cities of the coast and the nomadic tribes of the desert. The desert farmers were descended from Roman legionaries and settlers who were given land grants and encouraged to grow crops and supply food and olive oil to the Roman forts protecting the frontier. This society was largely self-sufficient, growing its own food, and inter-marrying with the desert tribes. People sold their olive oil and other produce to Roman soldiers or merchants in Leptis Magna and other coastal cities. They used the money thus earned to buy manufactured goods from city merchants, and from desert tribes they bought fine horses, ivory, gold jewelry, and slaves.
QUESTION: Can desert farming similar to this be done today with modern technology? Are there profitable markets for the olive oil and food that could be produced? See this article about a project in Egypt to terrace the hillsides to conserve water, plant trees, and turn the Sinai desert green.
SUSTAINABLE SUPPLY CHAINS GROW THE BUSINESS
The money you invested some years ago to build waterworks and plant more trees at your estates has resulted in oil production at each estate increasing by 30 percent. To support this production, demand for manufactured goods plus olive oil and wheat at the estates themselves has increased by 10 percent. In addition, there is a 10 percent increase in demand for manufactured goods, and 5 percent increase in demand for oil and wheat at the Leptis warehouse where you sell to people in the city of Leptis.
To sell your increased supply of olive oil you decide to expand into new markets. 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 you can sell in Leptis and use on the estates. A map of the major multi-modal transportation hubs and regional ports is shown below along with a rendering of Alexandria.
The concentration of regional ports (green circles) indicates the population density of those regions. Three of the four multi-modal hubs, shown in black, are in the largest cities of the empire (all except Gades). The main trade links between the multi-modal hubs are shown in red. In order for Leptis Magna to get its olive oil into the mainstream economy of the empire, it has to transport its oil to either Carthage or Alexandria or both.
OPENING NEW FACILITIES
Add a new warehouse facility in Alexandria, Egypt. Define this facility to be the same as your warehouse in Carthage. Find Alexandria on the map and zoom in on the harbor shown in the screenshot below — assume what you see now is what it looked like then. Locate a good place for the new warehouse down by the harbor. Assume you can generate daily demand at the Alexandria warehouse for olive oil and wheat equal to half the daily demand for those products at the Emporium in Rome.
Your plan is to use the revenue from selling olive oil and wheat in Alexandria to purchase local manufactured goods and import those goods back to Leptis to meet increased demand for manufactured good at the estates (10%) and increased demand at the Leptis Warehouse (10%). How well does this work — is it profitable? How profitable can you make it?
For ideas on how to start expanding this supply chain see “Tips for Building Supply Chain Models”. There are also useful ideas to be found in the section “Reducing Inventory and Operating Costs”
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 daily demand where those products are sold. Sales revenue at each facility equals the product price plus profit margin multiplied by daily product demand at facilities where products are sold. 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?
- List the main entities in this supply chain and describe how they work together to deliver the products handled by this supply chain
- Where are the main expenses, and where the main sources of revenue in this supply chain and how do they affect each other?
- Could something like this be done today? Are there profitable markets for the olive oil and food that would be produced?
REPORTING TEMPLATE for use with this case study: The reporting template is set up for the initial olive oil supply chain. It is assumed you understand the basics of how to use a spreadsheet. Look at the short tutorial at the bottom of the Analyze Simulation Data page; scroll down to the heading “MODIFY P&L REPORTING TEMPLATE FOR NEW FACILITIES – A SHORT TUTORIAL” and you will see how to change the spreadsheet to add more facilities to accommodate those added for this second challenge – Download a copy of the initial Olive Oil Supply Chain P&L Reporting Template here
[If you are using SCM Globe Professional version, these reports can be generated automatically by clicking on the “Generate P&L Report” button on the Simulate Screen]
CREATE A SHORT PRESENTATION to show what you did to put this supply chain on track for profitable growth. Show your biggest challenges and what you did to address those challenges. Illustrate your presentation with screenshots and simulation data. Show performance data from your Profit & Loss report and KPIs.
In 300 AD (or even 30 years ago) it would have taken years of experience to form a good mental model of this supply chain and the business it supports. How long did it take you to form and refine a good mental model by working with simulations instead?
SAVE BACKUP COPIES of your supply chain model from time to time as you make changes. There is no “undo”, but if a change doesn’t work out, you can restore from a saved copy. And sometimes supply chain model files (json files) become damaged and no longer work, so you want backup copies of your supply chain to restore from when that happens.
[ To access this Online User Manual — click “Help” button in upper right corner of SCM Globe application screens ]
To share your changes and improvements to this model (json file) with other SCM Globe users see “Download and Share Supply Chain Models”
Register on SCM Globe to gain access to this and other supply chain simulations. Click the blue “Register” button on the app login page, and buy an account with a credit card (unless you already have an account). Scan the “Getting Started” section, and you are ready to start. Go to the SCM Globe library and click the “Import” button next to this or any other supply chain model.