APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 48

In an effort to increase their customer service levels and reduce order cycle time, a company is considering adding two additional warehouses to their overall operations.
As a result, which of the following statements best reflects the cost impact of the additional warehouses?

Answer options

• A. Lower inventory costs and higher facility costs
• B. Higher inventory costs and lower facility costs
• C. Higher inventory costs and higher inbound transportation costs
• D. Lower inventory costs and lower inbound transportation costs

Correct answer: A

Explanation

The correct answer is A because adding warehouses can lead to lower inventory costs due to increased efficiency and better stock management, while facility costs are likely to rise due to the expenses associated with maintaining the new warehouses. The other options do not accurately represent the typical cost dynamics when expanding warehouse capacity.