Responses to questions from short reflections:

1. Does the basic replenishment formula apply to limited-edition products? What possible mitigations can
be done in case there is a major supplier issue resulting to out-of-stock of a limited edition product?
Limited-edition products are new launches made available at limited fixed quantities and periods of time.
Thus, they are usually ordered manually (not through the basic replenishment formula). It is also unlikely
that a surprise supplier issue is encountered after launch because in most cases, the total limited fixed
quantity is already produced and made available for ordering prior to launch. In some cases however, only
a certain percentage of the limited fixed quantity is made available before launch, and the balance quantity
is produced after launch. When a surprise major supplier issue is encountered in such cases, back-up plans
are triggered (e.g. alternate suppliers, substitute materials, prioritization and allocation of available
constrained stocks, etc.)

2. How are locations for new retailer stores identified? What factors are considered?
The identification of new retailer stores location is the work of business development
managers/professionals. They consider factors and ask questions such as – 1) is there an untapped market
need or selling opportunity in the location?, 2) how does the competitor landscape look like?, 3) operating
costs, area security, sustainability of the land/building lease/sale arrangements, 4) and of course supply
chain and logistics considerations. The job of supply chain for new stores is to set up a sustainable logistics
and supply chain operations for the new stores such that reasonably fresh products are always available,
and not too much inventory is stored.

3. How do we manage inventory?

This is a big question with a complex answer, some part of which we have already discussed in class. A
simple way of answering this is that inventory is primarily managed in two ways. First, the generation of
inventory must be controlled by ensuring that your replenishment logic is working properly, that your
inventory targets are correct, that faster-selling SKU’s are prioritized, that you are more cautious in
replenishing slower-moving SKU’s (as well as SKU’s with a limited shelf lives), and that you apply best
judgement in generating inventory on new product launches which will be a problem if they don’t sell as
well as expected. Second, for over-stock issues that you already have, you must execute the right and
timely (i.e. before the products become too old or expired) interventions to liquidate or push out the excess
inventory. Merchandising interventions such as promos, bundle packs (with faster-selling SKU’s), and sales
are usually employed for this purpose. Executing these activities come at an additional cost, but this is
preferred versus having to dispose or scrap the products once they get expired.

4. Which supply chain model is more efficient – products produced within the market where they are sold, or
products imported from outside?
There is no simple and straightforward answer to this, but one way of looking at it is that – you need to
strike a balance between the cost of manufacturing and the cost of logistics and transportation. If you have
the manufacturing scale and capability within the market such that manufacturing costs are competitive
versus other sourcing options, producing the products within the market is often the better choice, and you
also get to save on the cost of importation. On the other hand, if there is a significantly cheaper
manufacturing site outside the market, to an extent that even the higher transportation and importation
costs are compensated for, then importation is the better option. Importation is also the better option
when there is an immediate market or selling opportunity, but setting up manufacturing capability (i.e.
building and starting up a new plant, hiring skilled workers, etc.) within the market would take time. Of
course, there are also greater risks (e.g. transportation catastrophes, regulatory and importation
constraints, etc.) that come with importing products, which need to be managed.

5. If regulatory requirements are suddenly changed, how would it affect the product supply processes of a
company?
The processes would of course need to adjust accordingly. Although, regulatory bodies usually recognize
that adjustments would take some time so they provide a reasonable transition period and deadline for
company operations to adjust to the new regulations.

6. Until when is the manufacturer held accountable for the quality of the product?
Until the declared shelf life (or “industry accepted shelf life” since regulations do not require shelf life
declaration for certain products in certain markets) of the product (regardless if the product was directly
served by the manufacturer or by a third party distributor), as long as the products are authentic
(manufacturers are not held accountable for fake or counterfeit products), and as long as the quality defect
in question is manufacturer-related (versus defects due to handling and selling processes and conditions, or
force majeures).

7. When is it more strategic to have a warehouse that is located separately from the plant?
Let’s take the case of the Philippines market, for example. Even if you only have only one manufacturing
plant in Luzon, it could be a better option to set-up separate warehouses in Visayas and Mindanao. This
way, you can ship in bulk to your warehouses versus serving each of your customers in Visayas and
Mindanao directly, which will require more shipments in small quantities. Shipping in bulk (palletized
goods in large, fully-utilized container vans) is significantly cheaper as compared to frequently shipping
small quantities (which you need to break from pallets into smaller orders, and load into small container
vans that could also be underutilized).

8. Which are more effective in driving trial – free trials inside supermarket/stores, or promos/bundle packs?
Free trials are usually employed for new product launches. This is a more aggressive trial drive that will
allow a broad consumer base to try the product within a short period of time. On the other hand, promos
are usually used to drive TI/TU/TA objectives for already existing products. Of course, for new product
launches, in-store free trial drives are also usually complimented with promos (to “lock-in” new consumers
who liked the free trials).

9. More clarification on non-utilized people as a type of waste –

Do recall that non-utilized people was identified as a type of waste in the context of supply chain
synchronization, and thus must be distinguished from the question on whether people are underworked or
overworked, or from the question on whether activities or results count as work. These are of course
important questions for management but they are distinct from the idea of non-utilized people as a type of
waste. The 8 types of waste are SYMPTOMS of a non-synchronized supply chain, and are usually not the
root causes of why the supply chain is not synchronized. The point is that when you see people not being
fully utilized, or are doing non-value-adding work just to keep busy, it means your value stream is not
synchronized. You would then need to analyze further WHY such is the case, and then correspondingly do
interventions to attack the root cause.
10. More clarification on volume sales versus value sales –
These are just two expressions/bases of the same sales, which provide important perspectives both
independently and when considered together. Volume units are usually defined based on average
consumer consumption, so an increase in volume sales mean that either more consumers are using your
product, or your loyal consumers are increasing their consumption, or both. These are all positive things.
An increase in value sales means that either volume sales are increasing, or that you have increased your
prices and consumers are still willing to pay for your product, or both. These are also all positive things. It
is unlikely for you to have an increase in volume sales on one hand, and a decrease in value sales on the
other hand, unless you did a massive price down. Ultimately, you want an increase in value sales because
at the end of the day, you want more profit and cash flow. However, you volume sales growth provides an
important perspective on the sustainability of your value sales growth, because you don’t only want to
grow your value sales, but you also want for it to grow sustainably. Sustainable growth is driven by – new
consumers, increase in consumption, increase in premium consumption –things which your volume sales
growth could provide a good indicator of.
Another perspective that volume and value sales growth provide when analyzed together – if volume sales
is growing faster than value sales, it could mean your consumers are buying cheaper SKU’s or smaller packs,
which you don’t want. On the other hand, if value sales is growing faster than volume sales, it could mean
your consumers are buying more premium SKU’s, or bigger packs, of you increased your prices and your
consumers remain loyal.

11. More remarks on pricing and end-to-end synchronization –

Since pricing decisions rely a lot on sound management reasoning, one way to approach it is as follows –
you can consider the four pricing factors, come up with a proposed change in pricing, plug it into your
financial model, then assess the risks by doing a limited scope test on the new price (e.g. just a few stores,
only in a few SKU’s, etc.). This way, the pricing decision can be adjusted accordingly as you get a better
sensing of the risks and opportunities.
Another important note – you need to distinguish among list price (how much suppliers sell to retailers),
suggested retail price (key word is “suggested”), and actual retail price (how much retailers actually sell to
end consumers). Under Philippine law, the actual retail price is at the sole discretion of the retailer.
Regardless of the industry, or the size of the company, the decision-maker can make pricing decisions to
ultimately balance profit and cash flow opportunities, and this could mean temporarily selling products at a
loss in certain parts of your business portfolio. Some examples on when this can make sense – 1) to
liquidate inventory that’s about to get expired or obsolete, 2) to aggressively respond to a new competitor
and avoid loss of market share, 3) to hold market share on a part of the business, which although not too
profitable, is important in maintaining your overall topline and scale, to drive costs down and cash flow
healthy.
In end-to-end synchronization, the keyword is “end-to-end.” Eliminating losses and having leaner
operations in one part of the supply chain will not make sense if the complexity and waste is simply passed
on to another part of the supply chain. For instance, to enable “deliver to demand” from supplier to
manufacturing, the easy but wrong way to execute is to expand the complexity of the supplier’s
transportation fleet, and to have the supplier keep more inventory, such that there is a dramatic increase in
agility to deliver more frequently and dynamically. In eliminating waste, the waste must be eliminated for
real, and not simply passed on.
12. When I buy shampoo, I find that price per ml for sachets is cheaper than price per ml for bottles. I
thought that as per the pricing ladder principle, price per unit should be cheaper for bigger packs?
The pricing ladder principle is a general principle to make it easier and more organic for consumers to trade
up because of higher perceived value on bigger packs. However, there are of course actual executions on
the trade that would deviate from this general principle. In the case of what you observed, perhaps (I am
just speculating) there was a trial drive in the past where the strategy was to significantly price down on
sachets, then afterwards it was already difficult to increase prices. In this particular case, because of the
broken pricing ladder, it would be challenging to drive consumers to trade up.

Other notes:

1. The claims that – 1) talent trumps grit in predicting success, and 2) UP ChE students are intellectually
superior versus UP IE students – are ludicrous claims, not because the diametric opposite claims are true,
but because such claims are not founded on solid reasons from discursive inquiry. My personal starting
position is to be skeptical of any claim that correlates the likelihood of personal success/achievement with a
single or a few variables (such as talent and/or grit), as any such claim abstracts the phenomenon of
success/achievement from evidently correlated factors of political economy, socio-cultural factors,
accidental privilege and luck, and others. I would also be equally skeptical of any reductionist account of
success in terms of metrics such as grades in school, wealth, fame, etc. Questions on things like success
and intelligence are monumental areas of inquiry, of which volumes upon volumes of diverse perspectives,
thoughts, and reasoning can be written about, and thus should not be reduced into a few inconsiderate
claims.
The question raised in class is simple, and let me rephrase – if as ChE majors we become interested to
pursue careers in product supply/supply chain, why would employers choose us ChE majors versus IE
majors? The answer is that – employers do not evaluate amongst majors, they evaluate amongst individual
candidates. Thus as long as you meet the qualities that the employer is looking for (these qualities vary
across employers), and you (not your major) come out as better/best when calibrated against the other
individual candidates (not against their majors), you are likely to get hired. Also, from my experience,
product supply and supply chain professionals from UP ChE (in particular) have a good reputation in the
consumer goods industry, and thus UP ChE is also perceived as a lead pool from which to get candidates for
product supply and supply chain positions. Also, it was rightfully pointed out in class that ChE majors are
quite versatile. In areas (such as product supply and supply chain) where problems and challenges require
multi/inter/transdisciplinary approaches, college majors don’t matter as much as your ability to think,
analyze, reason, innovate, and execute.

2. On the tensions between the logic of profit-making in a postmodern capitalist economic system on one
hand, and the self-evident need to mitigate environmental abuse and degradation on the other hand – this
is a problem statement of paramount importance, and the task of confronting this problem head on
(among other problems such as intellectual property, biogenetics, ever increasing extreme dehumanizing
poverty) is in our hands, the thinkers and engineers of our generation.
 Is the postmodern capitalist economic system good? - In many respects, yes. Still in many others,
no. But we need to recognize that today, much more people are living in relative prosperity,
 security, and freedom, as compared to other periods in human history. In short, at least in this
purely statistical/historical/comparative sense, this seems to be the best system we’ve ever had.
 Is there a better alternative to the capitalist economic system? – We don’t know. We have tried a
few alternatives but they seem to have always failed, and ended in some of the darkest periods of
human history. Maybe this postmodern capitalist economic system is the ultimate form at the end
of history, and what we can do is to simply make it better (e.g. more humane, more equitable,
more sustainable, less detrimental to the environment, etc.). On the other hand, maybe there is a
better alternative and we simply have not figured it out yet.
 Is there a way to make capitalist profits while ensuring environmental sustainability and
protection? - yes, with a small “y”. And I’m sure you all can provide examples of how to do this.
Also, it is important to note that wealth creation (which is the underlying pursuit of capitalist profit
making) is also of paramount importance to human society in general. In other words, as a society,
we need to continue to create wealth. The real question however is – are these mitigating
measures enough to reverse and prevent environmental damage in the pursuit of profit making, or
is the logic of profit making itself the problem, and thus environmental degradation is structurally
necessary?
 What do we do while we are pondering on these big questions? - By all means, participate in our
utmost capacities on efforts to make profit-making more responsible, equitable, more humane,
more sustainable, and less damaging to the environment. In the consumer goods industry, and in
product supply and supply chain, we need to more and more drive the use of greener materials and
manufacturing processes, utilize supply network designs that have less carbon footprint, prevent
wastage, and educate our consumers to use greener products. Let’s see if we can take up some of
these topics in one of our future class meetings.

3. On the expectation to have a “passion,” or “life goals,” or “a general direction or vision for your life.” – I
maintain my personal skeptical position on this expectation that seems to be heavier for our current
generation. In our last class meeting, I labelled it “elitist,” but maybe the right word is “reductionist.” If
you are disproportionately focused on certain personal passions, goals, or directions; and these things are
in some ways true/good/beautiful; and deep inside it feels right to be pursuing them, then good for you,
and by all means go, go, go! If however, you do not seem to have, or are unsure about, any specific
passions or directions, you do not need to perceive it as a deficiency or an inferior quality. At the end of
the day, passions, goals, and directions are just abstract labels/cognitive constructions that we as humans
use to make sense of our lives and the world. Are they real and do they exist? Yes, but only in a
secondary/derivative way that is inferior to real things, real people, and real actions, with
fundamental/basic qualities of truth/goodness/beauty, which you should continue to pursue and explore.

Additional notes: To provide further perspective, my current personal philosophies can be summarized in a
few main points below. These inevitably flow into my philosophical views on education.
 Amartya Sen’s capability approach – The goal of human development is to expand the capabilities
of people to actually live lives and do things that they value, and have reasons to value. Capabilities
(i.e. the set of things you can do or get, whether or not you actually do or get them) must be
distinguished from goods or functionings (the actual things you do or get). Expanding people’s
capabilities entail both expanding their freedoms, as well as their capacity to reason.
 Slavoj Zizek’s critique of ideology – There exists reality, and in reality there exists real
truth/goodness/and beauty. Ideologies (or false consciousness) mystify our perceptions of what is
 real. Thus, when we are presented with an idea that claims to represent what is real, we need to
critique to possible ideological elements of this idea. We should be especially suspicious with ideas
that explicitly present themselves as non-ideological (such as the postmodern claim that truth is
relative and not absolute, or the expectation that we should have fluid and undefined/undefinable
self-identities).
 Analytic metaphysics – There are things that are more fundamentally real than others. Individual
people, trees, animals, what our senses directly perceive, self-evident and verifiable/falsifiable
truths – these are more fundamentally real. Group affiliations, categories, institutions, implied or
implicated truths – these are also real, but only in a derivative sense, and not as real as what are
fundamentally real. Given a choice, we should prioritize what is fundamentally real.
 Existentialism – Meaninglessness, absurdity, emptiness – these things should not be feared or
avoided. They should be welcomed and savored as they open a defiantly profound sense of
absolute freedom. Existence precedes essence – before all these things that make me “essentially”
who/what I am, first and foremost I am a being that exists in this world.

Examples/pegs of basic supply chain problems for Feb 10 class discussion:

1. For the last several years, I have been making relatively frequent drives to Tagaytay with family and
friends. On the way, we often pass by “D’Original Buko Pie.” There was a time when buko pie was always
out-of-stock, or you had to wait for 30 mins to 1 hour before supply arrives. A note was posted at the
entrance, expressing apologies for the out-of-stock situation, citing the then ongoing cocolisap infestation
in Calabarzon as the reason.
2. There is a supermarket in Nuvali I like going to because the assortment suits my tastes (i.e. they carry
SKU’s that I like but which I cannot find in other supermarkets), and also because there are not a lot of
people shopping (yet). However, I notice that some products on the shelf (for the special SKU’s I like) are
already near expiry. Thus, when I buy, I need to always check the expiry dates on pack. Also, I imagine all
the expired products must be going to waste and must be hurting my business of my favorite supermarket
a lot.
3. When I go to Baguio and I don’t stay with relatives or friends, I have a favorite hotel to stay in for the
precise reason that I really like their breakfast buffet. The food is over-seasoned/flavored to perfection, the
tapa is tender and freshly grilled, the smoked bangus is great when eaten with juicy grilled ripe tomatoes,
and the thick/sweet hot chocolate is heavenly. Moreover, you get to enjoy breakfast by a pretty
garden/forest/cliff view with sunlight, flowers, pine trees, butterflies, and colorful rotating paper fans.
When I look at the kids happily running around and playing in the garden, I reflect and I imagine that I
would have turned out a better person if only I spent my childhood there. However, when breakfast time is
done, I always notice that the buffet is still as full with food as when I started, and wonder if all that food
would just go to waste.