Module 1: What is Supply Chain Management (ASU-WPC-SCM)

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

Welcome to Supply Chain Management! While you may not have spent your childhood evenings dreaming of taking your first supply chain management course, it is a fascinating and essential field. For those unfamiliar with supply chain management, let's break it down using a simple example: a bottle of water.

Buying a bottle of water at a store or vending machine might cost you about $ 1.50. How much of that is profit? If you think it's a dollar or more, you might want to reconsider. This common misconception illustrates an important lesson: product cost is not equal to material cost. In business, it's crucial to think beyond just the consumer perspective and understand the complexities of supply chains.

The Supply Chain Journey of a Bottle of Water

First, you need to negotiate the purchase of empty bottles and caps. These bottles will be much easier to transport if they’re in boxes and shrink-wrapped. You’ll also need pallets and forklifts, along with drivers for those forklifts and trucks. Don’t forget fuel and insurance. Beyond the basic materials and logistics, consider the label: someone needs to design, print, and ship it. The bottling plant isn't free either, requiring energy, employees, and various supplies.

The journey continues with purifying water, bottling it, and affixing labels. More machines will box, shrink-wrap, and palletize the bottles. The pallets then need to be transported to distribution centers and then to retail stores, requiring more drivers, fuel, and insurance along the way. At the retail store, employees will manage unloading and stocking, and we might need energy for refrigeration, security systems, and insurance.

Costs Beyond Materials

Add in the cost of returned or damaged bottles, and a staffed call center if there's a 1-800 number for customer inquiries. Employees at the water company in finance, accounting, marketing, human resources, and IT also need paychecks. Clearly, material cost is just one piece of the puzzle.

Companies face challenges when buying, making, moving, selling, and servicing things. All these processes should use sustainable materials and energy. Whose job is it to ensure this happens efficiently and cost-effectively? The supply chain manager.

A supply chain manager delivers products to customers as expected, at a reasonable price, while ensuring profitability. This requires world-class skills and understanding in supply chain management – or as we can rephrase it, the management of the chain of supplies.

Broader Applications of Supply Chain Management

Now, think of other products like hamburgers, sweaters, coffee, tables, cars, and airplanes. They all have unique supply chains. Even in a service economy, like the hotel industry, supply chain management is crucial. Hotels manufacture lodging, dining, spa experiences, and beyond. They need to buy furniture, towels, food, and more; make things like housekeeping and meals; move things like clean towels and guests; sell services like in-room movies and event tickets; and provide services such as making reservations and pressing clothes.

The skills learned in supply chain management apply to both manufacturing products and service experiences, highlighting the field's versatility and importance.

Keywords

Supply Chain Management
Consumer Misconceptions
Bottling Process
Logistics
Sustainable Materials
Cost Management
Service Economy
Hotel Supply Chain

FAQ

Q: What is supply chain management?
A: Supply chain management is the coordination of buying, making, moving, selling, and servicing things to deliver products to customers efficiently and at a reasonable cost while ensuring high standards of sustainability and profitability.

Q: Why isn’t the cost of a product equal to its material cost?
A: Besides material costs, expenses in the supply chain include logistics, labor, energy, machinery, plant costs, insurance, and other operational expenses.

Q: How does supply chain management apply to the service industry?
A: In the service industry, like the hotel industry, supply chain management involves managing the procurement, creation, transport, and provision of various goods and services to ensure a seamless customer experience.

Q: What skills are essential for a supply chain manager?
A: A supply chain manager needs strong negotiation, logistical planning, cost management, and efficiency optimization skills, along with a deep understanding of sustainability practices.

Q: What challenges do companies face in supply chain management?
A: Companies must effectively balance the cost, quality, and timeframe of sourcing materials, manufacturing products, and distributing goods, all while maintaining sustainable practices.