Skip to main content

Do Those Social Media Gossipers Complaining About Inflation Know ANYTHING About BASIC Supply Chain Management?

It's really funny (and frustrating) to see all the posts on Facebook concerning inflation. "Thought leader" page Silent No More Philippines is just one of them. I couldn't help but laugh (and cringe) when they started complaining about the prices of goods increasing. Unfortunately, that page is only known for complaining since the reign of former Philippine president, Rodrigo R. Duterte and the recent reign of Philippine President Ferdinand R. Marcos Jr. Once again, I'd like to state that I didn't vote for Marcos Jr. The problem with that page isn't their criticism. The problem is that the page hardly displays solutions. In fact, recent posts that they have complained about inflation and the increase in price of Jollibee fast food makes me ask, "Do they know a thing about supply chain management?" That's why I really refuse to take advice from social media gossipers, especially in matters about economics (read here).

ScienceDirect.com

I decided to revisit some old lessons way back in 2004-2007 during my business administration years. A simple analysis of the supply chain will tell you how pricing is done. People say that the government is just using the war in Ukraine (or any factor beyond the control of the Philippines) as an excuse to have expensive gasoline. Please, it's all about the law of supply and demand. A simple supply chain management will tell you that barrels of gasoline are still transported by gasoline. If the supply of gasoline in the world market is low then the demand in the world market is high--gasoline prices ought to rise up. Subsidizing gasoline or making gasoline companies sell at a lower price than their costs is just plain bad business and economics!

Yup, you can just expect it to backfire badly on your face.

This just reminds me of the classic demand by some protesters for higher salaries, lower prices of goods, and cash handouts for everyone. The three demands are very self-defeating (read why here). The supply chain will tell you that salaries are all parts of the means of production. If the company increases the salary rate of the workers--they ought to increase the prices for products and services. If farmers are going to get a raise then the cost of rice must increase to continue giving that rate. The prices can only drop when there's an economy of scale (which fills in the supply-demand gap). Otherwise, prices must normally increase if workers are to get a higher salary.

Image by Sabrina Jiang © Investopedia 2020

Once again, do I need to display basic accounting for why demanding higher salaries while lowering the prices of goods is stupid? The supply chain really has the cost of goods sold and other expenses. All these will end up adding up to how much must be sold in order to gain a profit. The revenue is deducted from the cost of goods sold  (COGS). Every direct expense such as materials purchased will affect the final price. 

Let's think about Jollibee's current increase in prices. There are many factors why the prices will increase. It all involves expenses. If the cost of gasoline is high then naturally the materials they need will have to be priced higher. Let's say gasoline prices increase due to the world market. Jollibee must have a shipment of supplies. Think about Jollibee having longer operating hours these days. If gasoline prices are high then the cost of electricity will be high as well. Longer operating hours equals higher operating costs. It might be a complex network but it doesn't take a genius to understand it. Jollibee is a very huge company. Therefore, operating expenses will be naturally expensive. If Jollibee is to sell their food at the same prices all the time--you can expect Jollibee to shut down soon!

The same can go for whipped cream which is a basic grocery item. If there's an increase in gasoline prices then do you think the costs of transportation and power will be lower? The cost of raw materials will be higher. The cost of production will be higher. If one part of the supply chain's cost increases then logic dictates that you need to sell higher to be able to survive. It makes sense for whipped cream to nearly double its price if one (or more) component of its supply chain has an increased its cost.

These people are just there to spread gossip. That's why I refuse to take pages like Silent No More PH seriously. Whoever the administrators are, I'd like to ask them if they even bothered to see the situation beyond blaming politicians they dislike. Besides, even if Atty. Maria Leonor Gerona-Robredo won as the 17th president--the Philippines will still feel the shock. Meanwhile, if they do demand for more "economics magic"--we can guarantee that the Philippines will go from simple inflation to hyper-inflation like Venezuela. 

Labels:

Popular posts from this blog

Venezuela as a Cautionary Tale on #SahodItaasPresyoIbaba, Nationalistic Pride, Welfare State Economics

The Sunday Guardian Years ago, I wrote about Venezuela's pride and protectionism , under a more "formal" style of writing compared to my latest posts. I decided to use an even "less formal" and "less academic" tone since I'm not writing a term paper. Instead, it's like how a professor and a student discuss the thesis using first person over third person, using contractions, etc., while the thesis doesn't use such tones. Back on track, I thought about the arrest of Venezuelan President Maduro can spark debate. Was it a violation of sovereignty? I'm no expert on international law. However, Venezuelans can be seen celebrating Maduro's arrest. Right now, I'm using Gemini AI and Google search to help me find some sources for this blog. It's because I don't want my blog to become another gossip central, but a place to discuss facts with my own personal opinions (making sure they don't  derail the facts).  I used Venezuela ...
Read more

Venezuela's Pride and Protectionism

The Telegraph Venezuela is an oil-rich country yet it's a very poor country. Somebody could go ahead and give every unthinkable reason such as "foreign investments caused it" (a blatant lie) and "It's because America had economic sanctions in Venezuela". Yet, the answer can be found in several causes such as corruption. Yet, China and Vietnam, which can be seen to still have a good amount of corruption, are far more successful. The answer also lies in one policy--economic protectionism . The very idea that a country that first world countries used "protectionism" to succeed is a lie as proven by Venezuela's ongoing crisis. A common-sense examination of one root cause of Venezuela's continuing crisis Forbes magazine mentions this in "What Do Investors Need To Understand About Venezuela's Economic Crisis?" by Nathaniel Parish Flannery on December 21, 2016: Venezuela is far and away the worst-managed economy in the Americas . Ad...
Read more

Davide vs. Mahathir: Which Lolo Should Filipinos Take Economic Advice From?

The real issue isn't that something is old or new. Instead, if something old or new still works, or doesn't work! Many modern laws are built on some ancient principles, while adjusting to the current times!  The Constitution of Japan is actually older than the 1987 Constitution of the Philippines. However, it's more effective for the reasons that (1) their constitution is silent when it comes to regulating economic activities (ex., protectionist measures), and (2) it's a parliamentary system. Honestly, it's a pretty straightforward constitution compared to ours! As Mahatir Mohamad turned 100 today, I would like to raise up Atty. Hilario G. Davide Jr. once again. The problem isn't Davide's age but his unwillingness to embrace change when needed (read here ). This time, it's time to bring up a contrast between wise old people and unwise old people. A young person can be right where the old person is wrong. A young person can be wiser because he or she lea...
Read more

From Lying About the Marcos Years Parliamentary System to Marcos Years Economic Liberalization?

Manuel L. Quezon III"s Twitter Account The first issue I've had is people saying on social media, "No to the parliamentary system because the first Marcos Administration was parliamentary!" It's really something because such people never bothered to do any further research. Please, knowledge isn't that expensive! Benigno Simeon "Ninoy" A. Aquino Jr. even stated, "We had a parliamentary form of government without a parliament." Later on, even Ferdinand E. Marcos Sr.'s own words showed that the Philippines was still presidential . Why would people still insist that it was a parliamentary form of government? Even more, I'm not surprised that some people are saying on Facebook, "Economic charter change is all about term extension." Even worse, it can be from the Philippine mass media. Sadly, the late Lee Kuan Yew was right to fall the Philippine press rambunctious in his book From Third World to First . I can refer the book t...
Read more

Ironically, COMMUNIST Vietnam Continues Improving FDI Conditions, Compared to DEMOCRATIC Philippines

Vietnam National University It's crazy how people don't realize the bigger picture between Communist Vietnam and the democratic Philippines (read here ). It's really crazy how Senator Joseph Victor Gomez Ejercito apparently thinks that delayed proceedings to Vice President Sara Duterte-Carpio's impeachment trial could scare away FDIs. Meanwhile, Atty. Renee Louise Co of Kabataan Partylist could talk about economics, all the while Kabataan Partylist is still against open FDI. It's amazing how Raoul Abellar Manuel, a cumlaude in applied mathematics, still believes in #SahodItaasPresyoIbaba economics! Meanwhile, the biggest picture is that Communist Vietnam , while it's under a One-Party State of the Communist Party of Vietnam, is has the better picture of how to invite FDIs. In fact, the Constitution of Vietnam  is rather silent on economic restrictions . The CPV chooses to impose economic restrictions through legislation rather than enshrining them in its Constit...
Read more