ℭ𝔬𝔩𝔢𝔤𝔦𝔬 𝔡𝔢 𝔖𝔞𝔫 𝔊𝔞𝔟𝔯𝔦𝔢𝔩 𝔄𝔯𝔠𝔞𝔫𝔤𝔢𝔩, ℑ𝔫𝔠.
Founded 1993
Brgy. Fatima I, City of San Jose del Monte, Bulacan, Philippines
AE24 Strategic Business Analysis Chapter 7:
Supply Chain & Inventory Department Strategies and Analysis
Prepared by: Elming B. Ebio, Christopher Kit S. Fremista and Jonabel T. Hidalgo
I. SUPPLY CHAIN PROCESS
- The supply chain is the backbone of production and distribution. It ensures that a
product is not just made, but delivered and consumed. The core stages follows with
their respective order:
1. Planning- resources, budgets, and goals aligns with customer demand
2. Procurement- purchasing necessary equipments and materials need to
operate
3. Production- converts raw materials to goods
4. Warehousing- storing and handling
5. Customer Order and Delivery- fulfilling the request and transport of goods
A. PLANNING
- It involves anticipating demands based on resources, budget, and goals. It
also estimates the units to produce “vis-a-vis” demand
- Procurement also plays in this, since acquiring and purchasing the
production necessities is part of the planning that will be used for anticipated
production
Note: vis-a-vis: it means the supply of products shall relate, compare, or balance of
quantity of goods and services (supply) to the quantity desire of consumers
(demand)
Key Points (Porter, 2023):
1. The absence of a comprehensive plan can expose a business to risk
2. Supply chain planning helps fulfill real-time demand commitments
3. It also enhances efficiency and brings down operating costs
B. PRODUCTION
- This stage revolves around the manipulation of raw materials with the use of
machinery and manpower to convert into finished goods ready for selling.
- The areas that Warehousing is relevant since it consists of receiving,
inspection, inventory control, picking, and dispatch (as per ISO 9001:2015
QMS for warehousing management)
Key Points (Penske Logistics, 2026):
● Efficiency cost reduction
● Customer satisfaction
● Competitive advantage
C. CUSTOMER ORDER
-
- It regards the fulfillment of requests from customers to purchase certain
products from the business. The said orders are arranged from channels such
as distributions to branches, whole sailers, and retailers
Fill in Rate (FIR) is the percentage of fulfilling the order of customers by
supplying products sold.
Figure 1: Fill in Rate Formula
D. DELIVERY
- the final, critical phase of moving finished goods from producers to
end-users, focusing on efficiency, speed, and customer satisfaction
- It is scheduled according to the forecasted demand of customers.
- The supply of products must be available from time to time to satisfy
customer demand
Challenges of Deliveries:
● Demand volatility
● Higher cost
● Disruptions (ISO 39001 (Road Traffic Safety)
E. INVENTORY MANAGEMENT
- It is the system of ordering, storing, counting, and auditing assets.
- It ensures that organizations maintain visibility and control over their
information assets (Majumder, 2025)
- inventory management protects company assets and ensures product
availability. A critical part of this is Product Movement Analysis (PMA),
which classifies products based on their "offtake" (how fast they sell)
II. PRODUCT MOVEMENT ANALYSIS
What is PRODUCT MOVEMENT ANALYSIS?
- a retail inventory management process, it involves analyzing turnover rates
to optimize stock levels, minimize stockouts, and maximize sales efficiency
by identifying fast-moving versus slow-moving items.
Classification Performanc Description & Strategic Action Plan
e Level Effects
Fast Moving High Offtake is fast and Maintain Replenishment:
Performer meets set targets. Keep stock at ideal
This generates quantities and allocate
high cash flow SKUs based on specific
and captures channel needs.
customer interest.
Average Moving Middle Offtake is steady Boost Visibility: Use
Performer but not reaching effective displays at focal
peak targets. Sales points and utilize sales talk
are growing, but or negotiations to speed up
some the offtake.
budget/expenses
may be held back.
Slow Moving Non-Perform Low offtake Aggressive Promotion:
er results in high Implement sales
inventory levels. promotions such as
This leads to discounts, freebies, or
crowded "suggestive selling" to
warehouses and clear stock before it
potentially expires.
delayed payments
to suppliers.
Figure 2: Product Management Analysis (book-based)
Note: PMA uses SKU for tracking products going in and out.
Example: for Fast-moving products, Jollibee Fried chicken comes to mind since
they have a standard waiting time of 15-20 minutes for a fresh batch of chicken
making and it is quite popular as well. In contrast to Slow-moving products that
have low turnovers like Christmas-themed decorations adding to the fact that it is
seasonal and are not the most on demand products.
III. PRODUCT SHELF LIFE
- the period that preserves the quality and the "expected attributes" of a product. It
acts as a guide for how long a product can stay in inventory before it's considered
poor quality or a total loss. Here are the key details from your material:
- It pertains to the product movement, since identifying the shelf life of a
product is significant according to the standard set by the company and
degradation of goods. It tells the time span from a product until it becomes
unusable/unsellable/unsafe.
(refers to shelf life,expiration date and lapsed product; SEE ISO
16779:2015, ISO 14001)
Strategies to Maximize Shelf Life:
1. Use FIFO (first in, first out) and FEFO (first expired, first out) to sort stored
products based on their periodic usage
2. Reminders like signages, labels, which indicates the employees regarding
the shelf life, displaying them by applying strategic visual works as well
3. Use monitoring form for product shelf life and expiration date (should
indicate SKU)
4. Conduct suggestive selling or sales talk (SEE Art. 1546 CIVIL CODE
regarding Dealer’s Talk). Can also be utilized for discounts, promos and
incentives (like how they do in clearance section)
5. Forecast the product production and procurement based on supply
production, customer demand and quantity to sell (can also align to others
such as production,logistics, finance, marketing and operation since they
address the quantity to sell)
6. Handle properly to avoid deformities and preserved the “expected attributes”
7. Regularly update the sellers through meeting and setting individual or team
quota’
(these strategies fall under ISO 9001:2015 QMS with prescribing clauses; 8.5.2,
8.5.4, 7.3, & 7.4, ISO 22000 specifically for food safety management)
IV. ECONOMIC ORDER QUANTITY AND LEAD TIME ANALYSIS
Principle: “Every drop counts,every product is an opportunity”
- Accurate forecasting is essential to business. Mainly to make data-driven,
informed decisions, ensuring optimal resource allocation, cash flow
management, and strategic planning.
- Purchase Order (PO) serves as the trigger and execution of Economic
Order Quantity (EOQ) and Lead Time Analysis (LTA)
-
Purchase Order (PO) is an activity used for ordering goods, supplies, tools,
equipment, machine, and other assets used in business operations. It requires
forecasting skills since it helps create realistic decisions because of sound
judgement
A.ECONOMIC ORDER QUANTITY
- is a formula in inventory management that calculates the ideal number of
units to order to minimize total costs, balancing ordering expenses (like placing an
order) with holding costs (like storage), ensuring you have enough stock to meet
demand without overstocking or tying up too much cash
Figure 3: Economic Order Quantity Formula
B. LEAD TIME ANALYSIS
- is the period of estimating the process, delivery, and arrival of ordered
products or supplies in expected time, depending on the nature of the products,
supplier’s capacity to produce, and other factors that will affect the travel of
products from the supplier to the company.
Figure 4: Lead Time Formula
Ordering – Lead Time Analysis
- is the systematic way a business estimates how long it takes for products to move
through various stages of the supply chain.
The Role of ICO
- The Inventory Control Objective (ICO) acts as the "justification" for this
analysis. It uses the lead time data to decide exactly when to pull the trigger on a
new order so that the business stays in a "Just in Time" (JIT) flow.
Objectives of ICO:
1. Optimize Stock Levels
2. Customer Demand Fulfillment
3. Minimize Costs
4. Prevent Waste and Spoilage
5. Ensure Operational Continuity
6. Maintain Accurate Records
V. WAREHOUSE, STORE, AND OFFICE: INVENTORY MANAGEMENT -
SUPPLIES & FIXED ASSET
Principle: “Right quantity at right place and right time”
- ensuring products are available to meet consumer demand without causing excess
inventory or shortages. This strategy maximizes efficiency, reduces costs, and
enhances customer satisfaction by delivering the correct items precisely when and
where needed.
Is Inventory a current asset?
- Yes. simply because it represents goods expected to be converted into cash
within one year.
Note: Risk of Obsolescence occurs when slow-moving items become
obsolete/damaged or cannot be sold within 12 months. Therefore reclassifying
them or writing them off (as a loss to reduce taxable income) since it's no longer
convertible to cash.
Remedies for Obsolete Products: typically repurposing them (as stated in III.
PRODUCT SHELF LIFE), charitable donations, sell to a surplus
specialist/liquidator.
Inventory Management takes place since it is the control of inventory form
ordering, storing, and depleting. Within the organization is an important part of
reducing total costs. To manage inventory, a typical approach is to determine what
is there and how fast inventory is used (Verdin, 2020)
- ABC Analysis: A sorting technique where "A" items are fast-moving, "B"
are regular, and "C" are slow-moving.
- Just in Time (JIT): Also known as "zero inventory," where you only have
the product available exactly when it's needed.
Inventory Life Cycle
1. Reorder Level.
2. Safety Stock.
3. Inventory Budget.
4. Automatic Inventory System.
5. Inventory Turnover.
VI. PRODUCTION COST ANALYSIS
Principle: “Number is the game in production”
- it calculates sales, profits, margin, and expenses are must in planning for
production
- is the systematic, data-driven evaluation of all expenses incurred in transforming
raw materials into finished goods
- it is the study of making outputs to become profitable by providing accurate
quantity of productions
The Production Cost Analysis (PCA) implies the 4 elements, which are:
Principle Meaning (Exact Text & Context)
Right Evaluating the total expenses of raw materials, supplies and
Costing tools to avoid "non-performer" products that cause delayed
supplier payments.
Right Part of the core philosophy: "Right quantity at right place at
Quantity right time". It involves using EOQ (Economic Order
Quantity) to find the smallest entirety of stock to meet
demand without creating obsolete inventory.
Right The process of Price Channeling where the office sets the
Pricing MRP (Manufacturer’s Retail Price), WP (Wholesaler’s
Price), and RP (Retailer’s Price) to ensure profitability.
Feasible Achieving sales conversion through Demand Forecasting
Sales and LTA (Lead Time Analysis) to ensure products are
available when customers want to buy.
Figure 5: 4 Elements of Production Coat AnalysisI
PRODUCTION COST FORMULA
- it is the costing of finished products by adding direct labor expenses,
manufacturing overhead cost and direct materials.
Figure 6: Production Cost Formula
VII. DISTRIBUTION CHANNEL AND PLACEMENT ANALYSIS
Principle: “The right place is home sweet, home!” — it indicates that proper
distribution of products in the right channel is one of the factors that will make the
business successful. So in summary, Distribution Channel is the allocation of
goods in an ideal place.
Primary Persons in Distribution Channel
1. Manufacturer
2. Wholesaler
3. Retailer
4. Consumer
According to Lutkevich (2022), there are three types of Distribution Channel. The
following are:’
A.Direct- selling products directly to consumers without 3rd parties
B. Indirect- it uses third party intermediaries such as wholesalers, agents,
brokers, etc.
There are 3 levels of this which are:
Level 1 Manufacturer →Retailer→Consumer.
Level 2
Manufacturer→Wholesaler/Distributor→Retailer→Consumer
Level 3
Manufacturer→Agent/Broker→Wholesaler→Retailer→Consumer
C. Hybrid- as the name suggests, as it mixes both to maximize market reach
and flexibility
Note: this refers to how many “hands” the product touches before it reaches its
target consumers.
Methods of Distribution Channel
A.Intensive- The goal is to be in as many outlets as possible, it also requires
high inventory turnover
B. Selective- The product is sold in a few specific locations that fit the brand
image
C. Exclusive- Only one or two outlets in a specific area are allowed to sell the
product
Note: these methods can be integrated with the types of distribution channel to
further maximize market presence
PLACEMENT ANALYSIS
- It is the study of knowing the right decision for business to whom and where they
are going to place their products. This is also subsequently associated with the
Distribution Channel, as it involves strategically determining the optimal location
of facilities and deterring risks and preventing wrong losses in the future.
Aspect Details Key Success Factor
Facility Includes Center of Gravity Proximity: Being near
Location analysis finding the transit hubs
Planning mathematical "middle" (airports/ports) to cut
between all your customers to Lead Time (LTA).
lower fuel costs.
Inventory Uses Decoupling Points. Balance: Preventing
Positioning Upstream (at the factory) is "Crowded
cheaper for bulk storage; Warehouses" while
Downstream (at the store) is maintaining a high
better for "Amazon-style" fast "Fill-in Rate."
delivery.
Aspect Details Key Success Factor
Supply Focuses on Resilience. If one Integration: Aligning
Chain warehouse is hit by a "typhoon safety stock levels with
Design or earthquake", the design the speed of your local
ensures other "nodes" logistics.
(locations) can pick up the
slack.
Figure 7: Placement Analysis Information Table
VIII. DISTRIBUTION CHANNEL PRICING AND ANALYSIS
Principle: “Everyone should be happy yet profitable”
This principles refers to the:
1. For the Manufacturer (Profitable): The price must cover production,
marketing, and logistics costs while providing a sustainable margin, even
after offering incentives to partners.
a. Wins through brand loyalty
2. For Intermediaries (Wholesalers/Retailers): Partners must receive a high
enough margin to cover their operations (rent, staff, storage) and make a
profit, which ensures their continued commitment and "happiness" (low
channel conflict).
a. Wins through efficient bulk movement and high turnover
3. For the Consumer (Customer Satisfaction): The final retail price must feel
fair, reflecting the value provided, and be competitive in the market,
encouraging customer loyalty and satisfaction.
a. Wins through achieving demand
Important Aspects:
1. The Chain Link: The success of retailers and wholesalers is considered the
success of the manufacturer and the brand
2. Pricing Implementation: Broadcasting Suggested Retail Price (SRP) on the
television, radio, and social media means it is necessary to implement the
price
3. The Management Challenge: Setting the right pricing in different
distributions is challenging
The table explains the following participants that regards with the topic:
Channel Price Level Definition / Exact Text Description
Participant
Manufacturer Manufacturer The standardized price set by the
’s Retail Price producer for the end-user. This is often
(MRP) the price used for nationwide branding.
Wholesaler Wholesaler’s : The price channeling specifically
Price (WP) intended for wholesalers or bulk
purchases to allow them a profit margin.
Retailer Retailer’s The final price set for the consumer at
Price (RP) the store or outlet level (Branch/Outlet).
Market / Suggested The price broadcasted on television,
Public Retail Price radio, and social media. It is
(SRP) considered "necessary to implement"
to maintain brand success.
Figure 8: Distribution Channel Pricing Table
Note: Distribution Channel Pricing helps to protect the brand since SRP ensures a
customer pays the same in one city as they do in another (in the business’ POV), it
also helps protect the partner; The difference between WP and RP is the retailer's
"happiness" (profit). If the WP is too high, the retailer won't stock the item. Lastly,
Standardized pricing avoids "overpricing" at the branch level, protecting the
consumers.
END OF CHAPTER 7
THANK YOU ♥️