Professional Report - 2nd Quarter 2011

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 fail.

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 line.

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 chain.

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.