moving the ammunition by truck from the mine to the port. I was
in charge of loading the ship for movement.
Small trains powered by electric batteries removed the ammunition from the mines. The batteries were old and failed to hold
a charge, limiting operations to a few hours a day and lengthening the time required to remove the ammunition. The depot commander saw no reason to invest in new batteries since the mine
was soon to close. The officer in charge of the highway movement limited operations to daylight hours to avoid overtime costs
for driving at night. While both of the actions minimized cost at
the depot and freight costs to the port, they extended the time it
took to load the ship. The fixed costs of leasing the ship were
$50,000/day, significantly more than the cost of new batteries for
the trains or the additional labor costs for driving at night.
In attempting to optimize individual links in the supply chain,
these actions increased the total costs of the operation. This is a
clear example of piecemeal optimization and the fallacy of not
conceptualizing the all encompassing supply chain.
investment. If the competitive advantage gained by the
investment results in sufficient sales growth, it’s a good
decision; otherwise, it is wasted money.
3. It reduces risk to interruption of service. The supply
chain is a complex network of interrelated functions.
Success in the supply chain is dependent on providing
the right product or service to the right person in the
right place at the right time in the right quantity and
condition, with correct documentation, and receipt of
payment in a timely manner. Accomplish all of those
objectives and you succeed. Do all but one and you
All Encompassing Supply Chain
Each decision impacts its own link and can impact other links
in the supply chain. For the best results, a supply chain must be
managed as a system and not by its parts.
A well managed supply chain can provide value to a company
in a variety of ways, such as:
1. It reduces operating costs. Increasing a dollar’s worth
of sales adds 5-15¢ to the bottom line but reducing
logistics costs by a dollar adds a dollar to the bottom
2. It provides a competitive advantage through better
services to the customer. As a rule, improved service
requires some sort of
Facility Links in the Supply Chain
Facilities are key links in a supply chain, whether they are used
for administration, production, or distribution. People don’t just
decide to move to a new facility—they are trying to solve a problem or take advantage of a perceived opportunity in the supply
Whether or not the client is intentionally seeking to add value
to the supply chain or just addressing a logistics issue, the new
facility will have an impact on the company’s supply chain, especially if the current facility may not be the problem but merely a
symptom of a larger issue. In that case, a larger facility may ease
the pain but it won’t cure the disease. As a commercial real estate
broker, you need to look at the entire chain and then select a location or locations and design a facility or facilities which give your
client a systemic solution.
While you may think understanding supply chains is not your
responsibility as a commercial real estate