Fixed assets
The value-generating assets of a business that form the focus of supply chain management are a heavy drain on capital. They include manufacturing facilities, transport and distribution. They contribute to high fixed costs for an operation: that is, costs that do not change much with throughput. Such costs are therefore highly volume sensitive, as we shall see.
Many organisations respond by a ‘maximum variable, minimum fixed’ policy. This is helped by outsourcing all but the core capabilities, which are retained in-house. Thus transport and warehousing are today often outsourced to specialist ‘third-party logistics providers’ such as DHL Exel and UPS.