USING EOQ TO ESTIMATE THE OPTIMIZE YOUR FOOD AND BEVERAGE STORAGE IN HOME

In the big company, inventory management uses EOQ to calculate the most economic quantity of order. The purposes are to know the optimum order with the lowest cost parameter. There are three main basic components to calculate EOQ such as re-ordering cost, demand, and holding cost.

EOQ also can use in the daily activity to calculate of consumer good storage in home. In the daily life, everyone must keep something in home to store vegetables, meats, fruits, milk, book, bath equipments, and other consumer goods. To store everything, people usually don’t consider about the optimal time, size, and quantity when they buy something to stock in home. For example, how much mother should buy milk for her children in the market. This example will be calculate later.

The first component is re-ordering cost (RC). The definition of re-order cost is total expenses involved in repeating supply such as order preparation, communications, transportation, inspection, administration, and other costs. For example, the distance from house to market is 20 km. Assume that the car’s consuming is 10 km per litre and gasoline price is $1 per litre. Therefore, the re-ordering cost is 2 x 20 / 10 x $1 = $4 (the calculation is for 2 ways, go to the market and go home).

The second component is demand (D). Demand in EOQ is define as the estimate of consume or how much the product will be sold in a year. For example, the children can consume 8 cans of milk in a month. Hence the demand is 8 x 12 = 96 bottles annually.

The second component is holding cost or storage cost (HC). It can be defined as expenses involved in keeping and maintain a stock. It is including rent of space, equipment, materials, labour, insurance, security, interest, and other direct expenses. For example, a $200 locker can store 10 cans of milk. It estimates that have a reliability age 10 years. Therefore, we can calculate the holding cost as $50/10/10 = $2 per can annually.

The calculation of EOQ for this example is EOQ = (2xRCxD/HC)^0.5 = (2 x 4 x 96 /2)^0.5 = 19.6 ~ 20 cans. It means that each order or buy is 20 cans of milk. Moreover, the calculation of total annual inventory cost is VC = (RCxD/EOQ) + (HC*EOQ/2) = (4x96/19.6) + (2x19.6/2) = 19.6 + 19.6 = $39.2. In addition, the time between order is 360/5 = 72 days (around 2.4 months).

By this calculation, each family is able to calculate the most optimal storage of daily consumer goods. In this example if the mother buys 15 cans every purchase (below EOQ), the total annual inventory cost will be VC = (RCxD/Q) + HC*Q/2 = (4x96/15) + (2x15/2) = 25.6 + 15 = $40.6. It will be the same if the mother buys 25 cans every purchase (above EOQ), the total annual inventory cost will be VC = (RCxD/Q) + HC*Q/2 = (4x96/25) + (2x25/2) = 15.36 + 25 = $40.36.

For conclusion, each family can save money with EOQ calculation in daily life.

MODERN INDUSTRIALISM VS HUMANITY AND SOCIALITY

MODERN INDUSTRIALISM VS HUMANITY AND SOCIALISM

In the modern industrialism, trading is a necessity for every country. Export, import, logistics, and supply chain become popular because modern industrialism is not only produce products for one country, but also for another country by trading.

Big scale companies from developed country usually make their products in the underdeveloped and developing countries, then they sale it back in the developed country. Some countries in Asia and Africa are their target to build factories. Theoretically, this strategy gives win-win solution. For underdeveloped and developing countries; they can get income, vocation for their citizen, and development. For developed country, they can get cheap worker and new market.

The fact says that this system have some problem in humanity and socialism. There is gap between the origin country of the company and in the country of the factory. In the developed country, high consumerism is common scenery. On the other hand, poverty still appears in the underdeveloped and developing country.

Big population countries like China, India, and Indonesia are the target of big companies to get the cheap worker because the supply of labor force is higher than the demand of worker. Some independent survey and interview said labor only paid $1-$2 per day. With that wages, labor still can survive, but they must live in poverty.

This situation is sometimes difficult to solve by companies. If the wages is high, companies perhaps prefer use automation machine to chance worker. As the effect, unemployment in the world will be raise and poverty will be wider.

Is there any solutions? Is it the consequences of modern industrialism?