How is a supply chain managed
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
plant
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
you
