Economic Order Quantity and Its Implementation on Business

The economic order quantity is used for this situation because it shows the number of pairs of laces that can be added to the inventory each time an order is placed to minimize the holding and ordering costs. It provides the information that can be used to control the inventory levels and costs.

EOQ is used to find the optimal order quantity so that the annual inventory cost is

Logistics is the one important function in business today. No marketing, manufacturing or project execution can succeed without logistics support. 'Logistics ' is the management of the flow of resources, not only goods, between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics is one of the main functions within a company. The main targets of logistics can be divided into performance related and cost related. They are high due date reliability, short delivery times, low inventory level and high capacity utilization. But when decisions need to be made, there is always a trade off between these targets.

In recent years, logistics has been identified as having the potential to become the next governing element of corporate strategy to create value for customers, generate cost savings, enforce discipline in marketing efforts and extend the flexibility of production and information technology helps to improve the logistics management.

Due to the large quantity of freight and the long distance that it must travel to arrive to its destination exporters and importers alike have found logistic service providers essential to engage in international trade (Rodriguez, Comtois, Slack, 2013). While some Logistics service providers focus only on the area of transportation others specialize in freight consolidation, distribution management, and warehousing (Robinson, 2014). They have enough market knowledge, information and communication systems to offer supply chain solutions tailored to the specific needs of any company be it small or large (Rodriguez, Comtois, Slack,

We know, A = d * LT, so the fixed order interval order quantity equation Q becomes

Supply chain management has emerged as an important aspect in the modern business environment in light of the challenges businesses face because of rapidly changing customer expectations, inefficient product development processes, and increased cost of operations and human resources. This concept is increasingly considered as a new means of managing businesses and increasing performance and profitability. However, business enterprises must consider various aspects related to supply chain management during its implementation to gain performance and increase profitability. These elements include supply chain strategies and policies, suitable infrastructures or technologies, and logistics function.

Entrepreneurs also need to spend time in determining the logistics and supply structures that need to exist in order for the business to function. First, the business person should insure that their business can received, process and store goods in a timely manner and that overhead can be kept at an optimal level. A venture can suffer when turn-around times on goods fall short of customer expectation compared to the competition. In addition, some goods may not be available or have restrictions in certain states, counties and

The optimal order quantity Q* occurs at the point where total "fixed costs" (eg., ordering costs) equal total "variable costs" (eg., inventory holding costs).

1. How can Design for logistic concepts be used to control logistic cost and make the supply chain more efficient?

Inventory handling is very crucial as per the physical distribution management is concerned. This is because it has direct influence to satisfaction of customers. Inventory levels are said to a function of market type within which the company operates. Therefore companies should not run out of inventory so as to maintain their customer base. Transport is the influence of distribution cost. Therefore the chosen mode of transport should be at apposition of protecting the goods from damage thus not endangering the future of the business. In reference to the article regarding the distribution centers, several retailers like the Tesco & Sainsbury have diverted all their warehousing to various logistic companies to offer transportation services. In an economic point of view, marginal cost (MC) is equal to marginal revenue (MR), (Acemoglu, 2012). This statement also applies to marginal marketing expense (MME) equals to marginal marketing response (MMR). This will only occur when there is an increment in the service levels. In conclusion, the knowledge of physical distribution is only essential to purchasers and work study management can be related to PDM since it entails accuracy and efficiency. On the other hand, logistic structure should not be nonflexible but can be

• To make the best use of money available or to avoid unnecessary cost penalty

Sourcing, procurement and logistics management. The recurring needs of business is fulfilled by Sourcing to make sure that there is sufficient access to resources necessary to run a business, which can either be goods, services or both by proper finding, evaluating and engaging. Procurement is obtaining or buying goods and services which includes preparation and processing of a demand till the end receipt and approval of payment. Logistic Management complies with process of planning, implementing and controlling the proficient, operative flow of goods, services and related information from point of origin to point of consumption for customer’s requirement. Logistic management includes elements of order processing, inventory, transportation, warehousing, channel partners, third party logistic providers.

3- Ease of operations – EOQ does not only provide information about the optimum amount of inventory to be ordered but it also helps in providing information such as the reorder level , lead time and the amount of safety stock to hold . All these information help in running the business efficiently and minimizing the

The second major argument is that the Hong Kong’s logistic industry has a significant economic growth. As mentioned before, the logistics industry is one of the pillars of Hong Kong’s economy and it is essential for maintaining the Hong Kong’s success and prosperity. As the logistic industry is developing well, it can create a large amount of employment opportunities and contributes direct and indirect tax revenue to the Hong Kong government which is beneficial for maintaining Hong Kong’s competitiveness. According to the statistics of the stock market in Hong Kong, the stocks in the logistic sector raise an average of 54% in the last 12 months (Kerry Logistics Network, 2014). We can see that the investors are interested in Hong Kong’s logistics industry as the e-commerce expands further nowadays and it needs logistics to coordinate. Some local logistic companies are profitable such as, Kerry Logistics. The net profit of Kerry Logistics rose 71.5 per cent to HK$1.83 billion last year. And the earnings per share of Kerry Logistics are increased to HK$1.4 dollars. The Kerry Logistics said the focus of the huge e-commerce market will be cross-border e-retailing (So, 2014).