Industries using Economic Order Quantity Essay Example | Topics and Well Written Essays - 750 words

Industries using Economic Order Quantity - Essay Example In this sense, distributors of the pharmaceuticals to improve efficiency in the distribution and minimize the ordering and holding costs that are very high in the industry have often used the Economic Order Quantity. An estimated savings of more than $200, 000 was reported by those industries that utilized effective inventory management techniques in their ordering and determination of optimum quantities to be reordered by the company (Siegel, and Shim 203). The basic reason that makes EOQ necessary for this industry is its ability to reduce its storage and holding costs. Most pharmaceutical wholesalers do not have ample storage facilities that can handle inventory for long periods. Further, storage of such inventory could be dangerous because of the risks of expiry which may lead to losses. In perspective, the technique helps in mathematical calculations of specific order quantities that the wholesalers can be able to order, achieve good business performance, reduce risk of expiry and make an economic gain out of the transaction (Krajewski, and Ritzman 79). In the manufacturing industry, the use of economic order quantity is popular, being a major current asset of most manufacturing industries. In this case, the example of a soft drinks manufacturing company is used. To make sure that the customers get the best products, in time and manufactured at the least cost, it would be important to analyze the production process in light of using specific measures to determine the optimal ordering quantities of the materials used. The company uses at least three materials namely, sugar, concentrates and crown corks, all of which are produced within the country (Siegel, and Shim 215). However, the company needs to make decisions of how much of each to order in order meet the demand in the market. In this respect, the Economic