## Monday, December 13, 2010

### Digging into the Data

In our Excel Math curriculum we help kids to study a problem, then re-evaluate data, re-present it in different ways, and learn more about it using their math skills. Let me give you an example.

I read an article today about increasing shoe production in Indonesia. Shoe makers there are getting some of the shoe business that used to be performed in China. But the article was all text - about various companies and countries. Apples and oranges really, too hard to compare. Things like "China share of output currently at 80 per cent, expected to fall to 70 per cent over the next two years", etc. I decided to make some graphs.

Looking at these two pie charts, you can readily see how the NIKE company has balanced their production across three countries, while Payless is heavily oriented towards China. They are in the process of "balancing" their production to reduce exposure to rising currencies.

Another quote in the article said that Indonesia is expected to produce 300 million pairs of shoes this year, with a value of approximately \$2.5 billion US dollars. I wondered,

How much is that per pair?

You can't do it easily in your head and it's not easy on my hand-held calculator either because there are too many zeros to display. We can solve this on paper, and drop zeros to simplify the task:

2,500,000,000 ÷ 300,000,000  =  2,5∅∅,∅∅∅,∅∅∅ ÷ 3∅∅,∅∅∅,∅∅∅ = 25 ÷ 3 = \$8.33

or we can do it on a spreadsheet:

Here's how it looks on the calculator that pops up on my spreadsheet software. You can see that the average value (to "the country of Indonesia"; NOT the sales price) is about \$8 per pair. This value represents some labor and some materials, and possibly some packaging.

The same article told me that one of the shoe companies sold 170,000,000 pairs of shoes resulting in revenues of \$3.3 billion. Let's do a little math on the numbers.

3,300,000,000 ÷ 170,000,000  =  3,30∅,∅∅∅,∅∅∅ ÷ 17∅,∅∅∅,∅∅∅ = 330 ÷ 17 = \$19.41

My math says about \$20 per pair total revenue to the company. Presumably this includes shipping the shoes out to stores, inventory, sales expense, etc. Plus the \$8 earned in Indonesia, China or Vietnam.

If we wanted to learn more about the economics and politics of the shoe industry it would take a lot more research. Today we can just go away knowing that those three countries make many sport shoes, and get about \$8 a pair for their work.