Exam CSCP topic 1 question 671 discussion

The implementation of a distribution warehouse network typically will reduce inventory carrying costs. Explanation: A distribution warehouse network allows companies to store goods closer to their customers, enabling smaller, more frequent deliveries and reducing the amount of inventory needed to be stored at any given time. This minimizes the cost of holding inventory, which includes storage space, insurance, and the opportunity cost of tied-up capital.

A is correct. Inventory cost may even increase as you will have some level of safety stock across locations

Inventory carrying costs are the expenses associated with storing and holding inventory, such as rent, utilities, insurance, and taxes. By strategically locating distribution warehouses closer to customers, companies can reduce the amount of time that goods are in transit and stored in warehouses. This can lead to significant savings in inventory carrying costs.Transportation costs (Option A) may or may not be reduced, depending on the specific design of the distribution warehouse network. If the warehouses are located closer to customers, then transportation costs may be reduced. However, if the warehouses are located further away from suppliers, then transportation costs may increase.

D It is incorrect. In fact, in some cases, warehousing costs may even increase due to the need to maintain inventory in multiple locations. The correct answer is A. Transportation. The reason for this is that a well-designed network of distribution warehouses will allow the company to store its products closer to its customers, which in turn should reduce transportation costs by reducing the distance products have to travel.