I.

DEMAND FORECASTING

Many businesses project possible outcome for their future operation to either maximize the
positive outcome or mitigate the foreseeable risks. Demand forecasting is a tool that is used to
make an estimation of possible demand for future operation. Thus, this tool provides information
that would influence the decision of the management. In line with the company chosen— which
is Puregold Price Club, Inc.— demand forecasting cannot be provided due to the fact that this
information is intended for internal management only. And for this reason, the basis for demand
forecasting concluded in this part is the financial performance and other information relevant to
projection of future demand.

The figures for demand were quantified through monetary value. The information about the
quantity of demand cannot be presented due to the fact that there is no available information
about this. For the year 2018 and 2019, Puregold Price Club, Inc. has earned roughly 150 billion
pesos. The company has projected a 200 billion pesos for the year 2020. The figure below
illustrates how the growth for the past years of their operation has grown this large.

Figure 1. Financial Performance of Puregold Price Club, Inc

SUPPLY CHAIN MANAGEMENT

For Puregold, replenishment and distribution are undertaken as follows:

Direct-to-store delivery – a substantial portion of the Company’s inventory and other supplies
and materials are delivered directly by suppliers to the Company’s stores. Considering the bulk
of business, the truck load. Orders and merchandise deliveries are received just in time with a
three-day lead time from PO date.

Figure 2. Direct-to-store Delivery

Cross dock facilities – about 12% of the suppliers who are unable to directly deliver to the
Company’s store two outsourced cross dock facilities for onwards distribution to Puregold
stores.

Figure 3. Crossdocking
Store-to-store transfer – all of the Company’s stores have stockroom on premises with
warehousing capabilities for additional inventory, however, there are hypermarkets with large
warehouses which can accommodate merchandise intended for nearby small format stores. As
needed, goods are transferred from a large store to small store.

Figure 4. Store-to-store Transfer

II. PURCHASING AND VENDOR SELECTION

Puregold Price Club, Inc. suppliers are mixed of local and international suppliers. Since the
nature of their operation is merchandising, they offer a highly diverse products ranging from
foods essentials and hygiene products. They usually source their products from a wide variety of
suppliers in order to provide the diverse needs of their customers.

Usually, purchasing takes place in a cycle. This is part of internal control to effectively monitor
the movement of inventory within their operation. First, a purchase requisition happens. All
departments are required to make a requisition. Second, after the requisition, the management
will identify which are the necessary for their operation. Third, after identifying which of the
requisition to be purchased, the management will now decide the pricing and availability of the
products to be purchased through analyzing the market condition. Fourth, the management will
now then choose vendors, those who offer the favorable cost will be chosen. And lastly, the
purchase order will be furnished and will be handed over to the chosen vendors. The illustration
below shows how this cycle took place.
 THIRD-PARTY
SUPPLIER

PURCHASE STUDY MARKET

REQUISITION CONDITION

PURCHASE ORDER

DECISION OF SELECTION OF
PURCHASE VENDORS

Figure 5. Purchasing Process

With over 3,000 regular suppliers, the Company’s supplier base is diversified between local
suppliers such as San Miguel Corporation, Universal Robina Corporation, Monde Nissin, and
multinational corporations such as Nestle, Unilever and Procter & Gamble. The company selects
its suppliers using a number of criteria, including product assortment and quality, market share of
the Company in a particular supplier’s location, brand reputation, supplier’s capacity, Company
business plans and budgets, logistics possibilities and compliance with the Company’s
commercial principles. S&R sources majority of its merchandise from global vendors who have
been supplying to membership clubs worldwide. Most of its products are sourced from United
States.

III. INVENTORY MANAGEMENT AND JUST-IN-TIME SYSTEM

Inventory is owned by all companies, and generally exists in a tangible state. Inventory includes
the raw materials that the company need, finished products or materials needed through the
supply work. The existence of inventory can help a company to cope with market uncertainty to
a certain extent. It also states that the inventory will bring certain consumption to the company,
which includes uncontrollable risks such as space, money, labor and the risk that the goods is
stolen. At the same time, Puregold Price Club, Inc. are considering that the inventory cost
consists of four costs, which are purchasing costs, ordering costs, the costs of inventory carrying
and shortage cost. Therefore, reducing inventory costs, maximizing profits and optimizing
customer service experience is one of the most important goals of inventory management. In the
inventory system, the control and maintenance of inventory levels are the most important things,
since the demand is uncertain, and it will make the inventory difficult to maintain and control.
Generally, inventory management is dedicated to transforming the expensive inventory assets
into the relatively cheap information assets. It has to be said that information technology has a
strongly impact on the supply chain, especially on the inventory management, and it played a
major role. The development of the information technology has provided more intelligent help
for inventory management personnel. As described by the company, on the one hand, staff can
obtain timely information about delivery time, inventory assets, and available capacity. On the
other hand, consumers can also know the inventory information about the goods they bought in
time.

Classification, allocation and replenishment are the three important components of inventory
management. Puregold Price Club, Inc. believe that, as a supplier, use the information
technology to classify and allocate existing goods can effectively reduce the waste of time cost
and transportation cost. In addition, timely replenishment of goods with information can also
effectively minimize the inventory. In order to better classify, allocate and replenish, correct
forecasting is essential. If a company has a correct forecast of its own product sales, then the
company's predictive classification, allocation and replenishment of inventory in advance will be
more correct. As a result, the inventory of goods can also be more flexible Meet the needs of
customers under circumstances.

The process of inventory management

Inventory management is a very important work in the process of production and operation. The
quality of inventory management has a very important influence on the production efficiency,
capital turnover rate and cost control. Operating a good inventory management requires real-time
updating of the inventory management expertise, and the enterprise inventory system is
optimized from time to time. The workflow of inventory management is generally to handle the
storage list, check the detailed list, check the inventory periodically, check the out list with the
contract/invoice, check the inventory at the end of the month.

1. Stock purchasing:
Make stock planning according to stock data analysis, calculate reasonable order quantity
and stock cost budget according to company budget.

2. Acceptance: check:
The quality of the goods needs to be checked before they are officially put into storage.
Which means the company need to check the contract quantity to ensure the quantity and
quality of the stock are in accordance with the contract standard. In this step, the
company needs to establish a complete acceptance process such as acceptance procedures
standardized, clear standards of inspection especially for the contract content of the
number of goods, invoices, original documents and other documents. The key point of
acceptance is to ensure the correctness of inventory quantity, the quality of goods and the
consistency of product specifications and contracts.

3. Storage:
During the storage of goods in all products flow between the various warehouses to
ensure that the contents of the storage to make a specific record. The record of in and out
of storage is also a guarantee to avoid errors in the record and to help in the timely
 disposal of lost goods in case of trouble. The more important part of the storage process
is to ensure the integrity of the goods and make reasonable storage methods according to
different products. For instance, temperature control management for sensitive items and
fire prevention for inflammable items, there are waterproof goods and goods for the
protection of the security guarantee against theft. At the same time in different batches
and different contract models, the validity period of goods should be reasonably
classified storage, to ensure that the goods will not be overdue, overdue to reduce
operating costs.

4. Out of the warehouse link:

It has to has a clearer standard for avoiding the error in the out of the warehouse link.
And all goods have a complete out of the warehouse procedures to goods out of the
warehouse. Also follow the content of the contract and the uniform notice of the
company to carefully examine the documents of the name of goods, specifications,
number of consignees, shipper and other details. Responsible for the proper handling of
receipts and signed documents for all deliveries.

5. Inventory:
Enterprises to their own inventory for regular and non-periodic inventory for the
inventory of the quality of goods for regular inspection and deterioration of goods in a
timely manner. The specific capacity of the inventory should be kept in accordance with
the record in the system.

Just in Time (JIT)

Puregold Price Club, Inc. never keeps large stocks in them. They will keep only the shelf full and
when the goods are being removed from the customer, it will be detected ad the shelves will be
replenished daily or twice a day. The important concept behind this system is not having large
stocks and continuous replenishment based on the consumption. This will give supermarkets
large floor space savings, less wastage and ability to react for the customer requirements. This is
what happens in JIT manufacturing. Goods are produced only when they are required. Therefore,
there is no requirement for the stocks. Raw materials are purchased in small batches, when they
are required. Then the goods are produced with a continuous flow. Then the finished products
are distributed to the customers in small batches, continuously. This means, no wastages in the
form of opportunity loss for the capital, reduced quality defects, floor space savings, higher
flexibility and shorter lead-times. This process will be stimulated by the customer demand.
Customer requirement will pull the product from the manufacturer.

Over the years, the application of JIT in Puregold Price Club, Inc. has been effective and
efficient within the manufacturing entities globally. This has led to the philosophy being adopted
and implemented within the service industries. The successful implementation and execution of
JIT in Puregold Price Club, Inc. allow manufacturing companies to counter the vulnerability that
they face due to the regularly changing financial climate. Based on research, the technique has
played major roles and drastic impact for agencies that had to manage their finances (costs
specifically).

The findings indicated that just-in-time significantly affects the performance of Puregold Price
Club, Inc. this effect therefore implies that just-in-time as an inventory management technique
contributes to the performance of Puregold Price Club, Inc. Another noted that the prime goal of
Just In time Technique is the achievement of zero inventory, not just within the confines of a
single organization but ultimately throughout the entire supply chain. It can be applied to the
manufacturing process within any company as it is also being adapted within service
organizations. Also noted that the company effectively implementing JIT principles have
substantial competitive advantages over competitors that have not. The trick is figuring out how
to apply JIT principles to gain competitive advantages in your specific industry and business
situation. The basic premise of JIT is to have just the right amount of inventory, whether raw
materials or finished goods, available to meet the demands of your production process and the
demands of your end customers.

IV. MATERIAL REQUIREMENTS PLANNING, MRP II AND ERP

Material Requirements Planning (MRP)

The findings are to prove a weak positive significant effect material requirement planning has on
performance of Puregold Price Club, Inc. this therefore implies that good material requirements
planning increases the level of performance of Puregold Price Club, Inc. and poor material
requirements planning reduces it. Noted that material requirements planning is standard system
for calculating the quantities of components, sub-assemblies and materials required to carry out a
production program for complex products. It is based on customer orders, sales forecasts and
manufacturing policy. Material requirements planning systems help manufacturers determine
precisely when and how much material to purchase and process based upon a time-phased
analysis of sales orders, production orders, current inventory and forecasts. The consistent
material planning stimulates consumer demand and the inventories are a significant portion of
the current assets of any business. They noted that business firms hold planning for inventory to
ensure uninterrupted business operations. Inventory needs proper control as it is one of the
largest assets of a business. The inventory has to be available at the right time, right place, right
quantity, right quality and right place in order for a firm to generally perform well. Material
requirements planning system may play a critical role in speeding up 58 production scheduling
execution. Scheduling entails generation of a plan with reference to the sequence of time
allocated for the completion of an item. And scheduling preserves systems capacity utilization
and directly affects the speed of response to customer demand.

This allows for the use of the MRP system not only to calculate demand but also to schedule
manufacturing orders on the shop floor. Following a higher level of use, the MRP system and the
underlying data are augmented and enriched to enable a further level of functionality including
capacity requirements planning, labor calculations, distribution management. The transformation
generated from the regenerative MRP system into an almost real supply of data makes it possible
to better reflect the reality of the production floor.

Manufacturing Resource Planning (MRP II)

MRP is an ideal mechanism for planning and controlling production activities, but is less useful
as a mechanism to reduce costs and waiting times, and improve quality. Following the trend of
the entry of more functions into the previous MRP system, the term MRP II was born which
means manufacturing resource planning. MRP II of Puregold Price Club, Inc. takes sales forecast
as the main input to determine the production master schedule which represents gross primary
demand. The material management function is to calculate the demand for secondary products by
considering demand and consumption-based information. This material is then considered in the
capacity management stage to try to adjust the demand to the engine. The production of schedule
of Puregold Price Club, Inc. is obtained by comparing the available resources and the appropriate
schedule so that production orders can be used on the production floor. Furthermore, the main
value of this functionally can check how much certain material is available for immediate
delivery or at a certain point in time. However, it has been identified that the number of functions
integrated into the MRP II system is not directly related to its value to the organization.

Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) Systems used for Supermarket Supply Chain Inventory
Management in Puregold Price Club, Inc., supply chain refers to the sum of all the processes
starting from the procurement of the raw material from the manufacturer/producer and ending
with delivery of the end-product to the consumer. The supply chain encompasses many activities
within it, such as production, purchase, sale and distribution. Moreover, a supply chain is an
organizational network of suppliers, shippers, production plants, distribution centres and
retailers. Due to these reasons, smooth operation of the supply chain is very important for
enterprises. Otherwise, enterprises can encounter unfavourable situations arising from supply
chain issues, such as increased costs, delayed orders, wrong order placements or wrong order
quantities. Such problems cause not only financial burden for the enterprise, but also have a
negative impact on the brand value in the eyes of the consumers. Puregold Price Club, Inc. have
aimed to be able to minimize the problems and risks they might encounter and, with this aim,
have in time integrated computer software into their systems. At first, Material Requirements
Planning (MRP) software which allowed companies to keep track of their inventories started to
be used. Later on, when these programs became insufficient for the task, they turned towards
ERP. ERP is the generic term used for management software that include modules such as
production, finance, marketing and human resources and that allow companies to plan their
goods and services. These software, used by many enterprises, particularly by multinational
corporations, have a critical role in ensuring increased efficiency. The new generation ERP
systems should be developed based on the principles of low cost, high quality and efficiency. In
the recent years, ERP software have become widely used in almost all sectors such as
production, services, finance, transportation and public utilities. Today, uncertainty seems to be a
critical factor that needs to be dealt with by the Puregold Price Club, Inc. in supply chain
management. The uncertainty factor should be handled delicately, especially in sectors such as
retail where inventory planning is a critical function. The retail sector needs new approaches that
will assist in managing uncertainty in the current competitive environment and that will ensure
fast and reliable response to changing market conditions. Yet, many planning systems rarely use
planning methods that include the uncertainty factors. The purpose of this study is to draw a
detailed picture of the supply chain inventory planning systems used in the retail sector in
Puregold Price Club, Inc . As a result of this analysis, an inventory of the currently offered
solutions that will respond to different needs in the retail sector and particularly in supermarket
chains will be created. To this end, the study will include a comparison of the products of
national and foreign companies producing solutions with different functionalities for the retail
sector, and an evaluation thereof in view of enterprise management.

V. AGGREGATE OPERATIONS PLANNING

Aggregation planning is the process of determining the quantity of goods and the timing of
production to forecast demand. The overall plan typically includes targeted sales forecasts,
production levels, inventory levels, and customer backlogs. The main goal of the consolidation
plan is to effectively match supply and demand, effectively minimize costs, and minimize
changes in production rates and personnel.

The various capacity options companies are implementing to meet their current demands include:
Part-time employee use, inventory changes, subcontracting, cross-training, and work force size
restrictions. Comprehensive planning typically includes a combination of planned performance,
employment, procurement, and subcontracting and can be planned for a period of 9 to 12
months.

The aggregation plan takes two factors. Demand options are strategies that are addressed to
change the demand for capabilities. On the other hand, the supply option is a capabilities strategy
to change the ability to meet demand.

Puregold Price Club, Inc. has 156 branches in 14 years, as one of the most competitive
companies across the country. The Puregold Price Club, Inc. applies a comprehensive plan to
ensure that product supply is sufficient to meet the needs of their customers, and determines the
competitiveness of various strategy. In recent pandemic, Puregold Price Club, Inc. guarantees the
proper supply of medical products. This has been driven by growing consumer demand for face
masks, alcohol and over-the-counter medicines. The store offered a wide range of products at
very affordable prices, from basic household groceries to household items. Puregold Price Club,
Inc. has more than 30,000 employees. With knowledgeable staff, Puregold Price Club, Inc.
serves its valued customers through effective customer service programs and competitive pricing
schemes. With the aggregation plan, Puregold Price Club, Inc. is branded as one of the
Philippines's leading supermarkets.

VI. SCHEDULING, SEQUENCING AND DISPATCHING

Scheduling
The scheduling refers to the process of determining the time and utilization of resources inside a
company. Scheduling is related to the utilization of equipment and facilities, the scheduling of
human activities, and the receiving of supplies under the operations function both manufacturing
and services. While long-term concerns such as facility location and plant and equipment
procurement are considered long-term, and intermediate-term ones such as aggregate planning
are considered short-term, operations scheduling is considered a short-term issue. As a result,
scheduling is usually the final step in the transformation process before the actual output like
finished goods is produced in the decision-making hierarchy.
TYPES OF SCHEDULING

Forward scheduling
Forward scheduling is used when new job is started on a workstation as soon as the previous one
is completed. As a result of the plan's implementation, all tasks will be completed as soon as
feasible, potentially completing jobs ahead of schedule and generating extra inventory.
Subassemblies for final assemblies are finished at different periods, resulting in additional work
in progress. Resources are used to the fullest extent possible. This mode can only be used for
short-term planning. You don't want to start manufacturing right now for a six-month sales
projection.

Advantages of Forwarding Scheduling

1. Easy to schedule manually.
2. High rate of labor and machinery utilization as jobs are piled on top of each other.
Disadvantages of Forward Scheduling
1. There is a risk of material shortage due to material exhaustion. When an unexpected high-
priority order arrives, you may not have enough material to complete.
2. Lead times are long because production is always booked at full capacity, which cannot be
scaled as new orders come in.
3. High inventory holding costs due to jobs being completed earlier than required and finished
products requiring space for processing and storage.
Backward scheduling
Backward scheduling starts with the demand's due date and preparations for a just-in-time order
completion. This method helps to reduce the amount of work in progress and inventory. The
order in which components enter an assembly is synchronized. Non-bottleneck resources are
used only when they are required, leaving gaps in the schedule. This mode is useful for both
short-term and medium- to long-term planning.

Advantages of Backward Scheduling

1. Inventory levels are reduced as orders are fulfilled in a timely manner, resulting in reduced
inventory holding costs.
2. Increase production efficiency through optimal capacity utilization.
3. Delivery time is more flexible from the customer's point of view, increasing customer
satisfaction.
Disadvantages of Backward Scheduling
1. Buffer time is rarely when something unexpected happens, which can lead to missed
deadlines.
2. Congestion without a provider. Production cannot resume until raw materials are available.

SEQUENCING
Sequence is the order in which jobs are processed. Not only must the order for the processing of
jobs in the workstations be determined, but also for the jobs to be processed in individual
workstations. When workstations are very busy and involve long jobs, the situation can become
complicated. The order of processing can be very important in terms of the cost of waiting to be
processed and the cost of idle time in work centers.
There are several precedence rules or heuristics that can be used to select the order of pending
work. Some well-known ones are presented in the list adapted from Vollmann, Berry, Whybark
and Jacobs (2005)

1. First come/first served (FC/FS). This rule is sometimes considered fair because jobs
are processed in the order in which they arrive. It is very easy to understand and to
implement and those poor in performance as average wait time is high.

Process Wait time: Service Time- Arrival Time

P0 0-0=0
P1 5-1=4
P2 8-2=6
P3 16 - 3 = 13
Average Wait time: (0+4+6+13) / 4 = 5.55
 2. Shortest processing time (SPT). The job with the shortest processing time is given
priority. This rule tends to reduce WIP inventory, average processing time, and average
job latency. It is the best approach to minimize waiting time, impossible to implement.

Process Wait time: Service Time- Arrival Time

P0 3-0=3
P1 0–0=0
P2 16 - 2 = 14
P3 8-3=5
Average Wait time: (3+0+6+14) / 4 = 5.50

3. Early due date (EDD). The job with the earliest due date goes first. This seems to work
well if the firm performance is judged by job lateness.
 4. Critical ratio (CR). To use this rule, one must calculate a priority index using the
formula (due date–now)/ (lead time remaining). This rule is widely used in practice.

DISPATCHING
It is the routine of setting productive activities in motion through the release of orders and
necessary instructions according to preplanned time and sequence of operations embodied in
route sheets and loading schedules. A dispatcher is familiar with the productive capacity of
each equipment. He always keeps an eye over the progress of orders which move at different
speeds on different routes.

Two Different Kinds of Dispatching

1. Centralized Dispatching
It is done from a centralized location that has a complete view of the capabilities of the entire
production department and maps orders to workers based on individual order requirements. It
offers greater control, greater flexibility, and efficient coordination between multiple
installations. It also effectively uses human and other resources.

2. De-centralized Dispatching
This is done at the workshop level. It reduces the communication distance and time required to
solve everyday problems. Since the workshop employee has a better knowledge of the local
operation, he maneuvers accurately and intuitively. It also reduces duplication of shipping the
same order.

REFERENCES

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Business World (2021). Puregold income climbs nearly 15% despite decline in sales.

https://www.bworldonline.com/puregold-income-climbs-nearly-15-despite-decline-in-sales/

Chaudhary, N. (2017). Purchasing and Vendor Management. Slideshare

https://www.slideshare.net/kaustabhji/purchasing-and-vendor-management-74927834

Info Entrepreneur (2009). The supplier selection process. Business Link UK

https://m.infoentrepreneurs.org/en/guides/supplier-selection-process/
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50% rally from its lows.

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