Well, I shall elaborate rather than argue the semantics of an Urgot.
Cleaver shred would still be effective but applied before Penetration, thus Cleaver continues to be effective against scaling armor, however, combining cleaver with percent pen doesn't do ridiculous things like reduce a scaled amount by a flat amount. Thus, attempting to combine shred and percentage pen, would actually cause the the percentage penetration to REDUCE the effectiveness of the Shred rather than synergize with it.
The same is true of flat penetration. The more flat penetration you have, the more it will reduce the effectiveness of you percent penetration. This is because by applying flat penetration before hand, the percentage is of a smaller number and thus, not as effective.
This is an important balancing point because flat armor pen is useful against things with low armor that can reasonably be attained through effective itemization, in order to be able to kill them. However, percentage penetration is more effective against a target who's armor exceeds consistant or reasonable flat penetration.
Now for proper itemization, ADCs must be aware of how the tank members of the enemy team are building, either as Damage reduction tanks, or Health tanks, and then choose the proper items for either flat OR percent penetration, rather than previously building both and remaing effective against high armor targets while having what was needed to harm squishy targets as well. If this was implemented taking flat armor pen against squishy targets or health tanks would make you significantly less effective against high armor targets.
Below is some important math with numbers I pulled from thin air.
Current System:
Target Armor is 400, the attacker has 20% armor pen and 50 armor pen and also can reduce their armor by 20. This means the armor is reduced first to 320 by percent pen. Then armor shred is applied, reducing it to 300 for the attacker (still 380 for everyone else) then an additional 50 is removed for flat pen cutting it to 250 armor. This meams that it is 62.5% effective against that target.
Same attacker, squishy target with only 150 armor. It is reduced to 120. Shred takes it to 100. Flat pen takes it to 50. That's 66% effective against this target.
As you can see, two vastly different targets with vastly different builds are similarly affected by this paticular pen/shred schema
Now, using the proposed system, let's look at it again.
400 armor, reduce to 380 by shred, reduced to 330 by flat pen. Reduced to 264 by percentage pen. Which is 44 percent effective.
This is because, the flat penetration is applied before the percent and thus the flat penetration is being removed from a large number, not a small one. Therefore the effectiveness is minor against the high armor target. This should encourage the attacker to invest more heavily into percent armor pen.
150 reduced to 80 by flat pen and shred then to 64 by percent. An effectiveness of only 42% Now, the attacker is wasting gold in what could be flat armor pen which would be far more effective against this target because this change would apply the percentage to the smaller number, which, as anyone who understands math knows makes the percentage penetration less gold effecient, and that the ADC is wasting what could be crit, AS, or AD.
Long story short, it would increase the effectiveness of armor, make armor pen easier to balance discourage hybridizing penetration because it would be less gold effecient and on a side note would make Yasuo SOOO much less cancerous in lower ELO.