Can an expert evaluate this AWA?

The following memo was circulated by the management team of a retail company:

"We are very pleased to announce the relocation of our inventory, which had been located in four different warehouses throughout the country, to a single new warehouse near Company headquarters in Boston. This consolidated location will cut the company's expenses for warehouse rent in half. As a result we expect our monthly profitability to go up by this amount."

Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.

MY RESPONSE :

The argument presents the idea that if there is a single consolidated warehouse, that is near to the company headquarters in Boston, then the company's expense for warehouse will reduce. This reduction is an improvement in the monthly profitability.

The above argument as a whole is weak and can be countered in the following ways :-

Let us assume that the company has to bring its inventory from another location. That particular location was near to one of the four different warehouses. The cost of transportation was very less. Now, in the above mentioned case, if the inventory has to be transported to the new warehouse location, which is quite far away from the source, then the cost of transportation increases and the company will have to pay more than it did earlier. This aspect is not considered and it can significantly reduce the profitability of the company.

There is a possible scenario that the labor available in the earlier four locations combined were cheap. Now, since the company has shifted the new warehouse near to the company headquarters in Boston, there is a very high possibility that the new workers or labor applying for jobs in this particular inventory could ask for much higher salary as compared to the earlier workforce. This might significantly adds up to the cost of the company and thus reducing their profits drastically.

Also, there is a possible chance of loss of experienced workers due to the shift in the inventory location. The company will have to invest heavily in training their new employees. This also can reduce their estimated profits.

Another factor which is not considered in the above argument is the size of the new warehouse, which is near the company headquarters in Boston. If the size is significantly less as compared to the size of the four inventories combined, then the company will have to surely look for another place, that would act as an aid to the new warehouse. This will also add to the company's cost books, thus increasing their expenditure and decreasing their predicated profitability.

In a nutshell, the argument does not consider the other important assumptions or implications, thus making it vulnerable to a lot of logical questions.