Module 1: What is Supply Chain Management? (ASU-WPC-SCM) - ASU's W. P. Carey School

welcome to supply chain management and I

know most of you have spent your

childhood evenings dreaming of taking

your first supply chain management

course but for those handful of you who

might not know what supply chain

management is let me provide you a brief

explanation let's take a simple product

like a bottle of water clean water a

plastic bottle a plastic cap and a label

bind them at the store or vending

machine might cost you about a dollar 50

how much of that do you think is profit

nope wrong wrong again not likely water

a plastic bottle and a label that

couldn't cost more than 50 cents and if

you buy them in bulk

how could each bottle not give you at

least a dollar and profit seriously if

you think you can make $1.00 per bottle

you should drop out of college right now

and get into the bottled water business

you see this right here illustrates one

of the most common consumer

misconceptions product cost is not equal

to material cost and in business you

don't have the luxury of thinking only

as a consumer you need to think like a

business executive or better yet an

entrepreneur so in order to figure out

where all that profit went we need to

imagine what it took for that bottle of

water to get into your hands first you

need to negotiate the purchase of the

empty bottles and caps those bottles

will be much easier to transport if

they're in boxes we'll need to shrink

wrap those bottles so they don't fall

out of the box we can move a whole lot

of boxes quickly if they're all put on

pallets in order to move the pallets

you'll need a forklift which means

you'll need a forklift driver that

forklift will then take the pallet and

put it into a truck which will require a

truck driver fuel and insurance also

you'll need a label for that bottle of

water therefore you need to design the

label print the label and get the label

shipped to the plant another truck

driver more fuel and insurance our water

bottling plant won't be free and neither

will the energy it uses in our bottling


we'll have employees and bottling

machines and let's not forget

day-to-day items like light bulbs

garbage bags machine parts janitorial

supplies toilet paper and anything else

that will be used at the plant by the

employees oh yeah

and we'll also need access to the

drinking water machines will then purify

the water other machines will bottle the

water and a fix the labels to the

bottles and still another set of

machines will box shrink wrap and then

palletize the bottles in order to move

those pallets again you'll need a

forklift which means we'll need another

forklift driver that forklift will then

take the pallets and put them into

trucks headed to the distribution

centers and as we've seen those trucks

will require drivers fuel and insurance

those distribution centers will also

require employees forklifts and energy

from the distribution center they'll

head out to retail stores on still

another truck which will require a

driver fuel and insurance that store

will need employees to unload the truck

stock the bottles of water on the shelf

or refrigerator if you have a

refrigerator you'll of course need

energy if we want to secure our stock we

may get a security guard or a security

system and of course the store will

likely get insurance also imagine the

cost associated with returning and

replacing bottles that are damaged oh

and for some reason even bottles of

water sometimes have 1-800 numbers which

means you'll need a staffed call center

to answer the customers questions about

your bottle of water Wow all those

materials boxes people machines

buildings energy fuel and vehicles they

cost money those things weren't free and

they probably weren't used efficiently

and it's likely that several bottles

didn't survive the journey to the

consumer oh and by the way the employees

at the water company you know the ones

that work in finance accounting

marketing human resources and IT they

want to paycheck too so through that

simple example of a super simple product

we're beginning to see the companies

face challenges when they buy things

make things move things sell things and

service things which Inc

whose repair and maintenance oh and

let's not forget companies need to do

all these things using sustainable

materials energy and methods guess whose

job it is to make sure that all these

things happen flawlessly with minimal

effort and of course a minimal cost

you guessed it supply chain managers the

supply chain manager needs to be able to

do all of these things they need to give

the customer the product they want when

they want it as often as they want it

for a reasonable price while still

managing to make a profit

this requires world-class skills and

knowledge in the study of supply chain

management there's that scary term again

supply chain management when we try to

make it friendlier by shuffling around

the words there you go the management of

the chain of supplies for some reason

that just seems a whole lot easier to

understand doesn't it but it also helps

us understand the complex nature of

supply chain management I mean the

management of the chain of supplies now

let's think of other products and what

their supply chains might encompass

hamburgers sweaters coffee tables cars

and airplanes and I know many of you are

saying but I live in a service economy I

won't be manufacturing anything wrong

again as of 2008 the US was still the

number one exporter of manufactured

goods okay

maybe not for long so let's talk about

service economy supply chains let's

think of something you're probably

familiar with the hotel industry

what do hotels manufacture lodging

experiences dining experiences spy

experiences which altogether make up

vacation and conference experiences in

order to do all these things effectively

and efficiently what's required hotels

need to buy things like beds furniture

televisions cable food soaps towels they

also make things or in this case

manufacture services like housekeeping

meals massages and special events

Hotels also move things like

transporting clean towels and food to

and from the rooms as well as

transporting guests and their luggage to

and from the airport they even sell

things like in-room movies internet

services and tickets to events and

finally they also provide services such

as making reservations organizing events

making wake-up calls and even cleaning

and pressing clothes once again we see

that the fundamental skills learned in

supply chain management can be used to

manufacture service experiences as much

as they aid in manufacturing products

well I hope that this has given you an

idea of what supply chain management is

all about you see this is the reason why

little kids all around the world want to

be supply chain managers they want to

take part in manufacturing the best

products and services on earth so again

welcome to supply chain management where

all of your childhood supply chain

dreams are about to come true