Question

DECREASING the number of warehouses will __________ the warehousing and inventory costs, but may __________ transportation costs.

a. increase, increase
b. increase, decrease
c. decrease, increase
d. decrease, decrease

Answer 1

c. decrease, increase

Step-by-step explanation:

DECREASING the number of warehouses will decrease the warehousing and inventory costs, but may increase transportation costs.

As the number of warehouses in a system increase, there is a decrease in the cost of transport. The general reason is that there are economies of scale. In particular, when an order is to be executed and we assume that the product is available at each location, the order is shipped from the warehouse closest to the customer. This reduces transportation costs. Moreover, when goods are shipped to the warehouses, one truckload can service more than one warehouse reducing transportation costs. Finally, when a product is manufactured a part of the production is shipped directly to the warehouse closest to the plant; another part of the production is shipped to the warehouse second closest to the plant

Answer 2

The correct answer is letter C

DECREASING the number of warehouses decrease will the warehousing and inventory costs, but may increase transportation costs.