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Welcome to supply chain management. Now, I know most of you spent your childhood
evenings dreaming of taking your 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 us take a simple product like a bottle of water, …….clean water a plastic
bottle a plastic cap and label, buying them at the store or vending machine might cost you
about $1.50. How much of that you think is the profit. $1.40? $1.25 nope wrong
$1.00? wrong again. $.50 not likely.
Water; a plastic bottle, and label that cannot cost more than fifty cents and if you buy them
in bulk, how can each bottle, not give you at least a dollar in profit.
Seriously, if you think you can make one dollar 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 still as an entrepreneur.
So in or to figure out where all their 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 are in boxes. We 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 are all put on a pallet. In order to move
the pallets you need a forklift, which means you 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!
A water bottling plant won't be free and neither will the energy it uses. In our bottling plant
we have employees and bottling machines and let's not forget the day-to-day items like
light bulbs, garbage bags, machine parts, janitorial supplies and toilet paper, and anything
