GMAT Essays (AWA)

Hey everyone, I have been studying for the GMAT's for the past few months and have made some progress I think, but I haven't really focused on the AWA yet. Here is a practice essay from a Manhattan GMAT practice test. If someone could read and send me some pointers that would be awesome!

Thanks

ESSAY QUESTION:
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.

YOUR RESPONSE:
The management team of a retail company recently released a statement saying that they will be relocating all of their inventory to one single warehouse near the Company headquarters in Boston. They expect that the consolidation of these locations alone will cut the company's expenses for warehouse rent in half. Thus, they feel that their monthly profitability will go up by this amount. This argument has several innate flaws and certain criteria that the warehouse team has failed to mention or consider.

First, regional centers for inventory can sometimes be more expensive in terms of warehouse rent, but are often times more efficient and cost effective when it comes to delivering the product to the customer. Shipping costs from one single warehouse can be extremely expensive, especially when a company is doing a large volume of shipping to various places in the United States or throughout the world. For example, Amazon, an extremely large and successful company that sells almost everything online, recently decided to expand their network of warehouses to store and ship their products. They feel that if they can increase the number of warehouses throughout the United States, they can save money in the long run from shipping costs. I believe that the management team of the retail team has failed to consider the possibility that their shipping costs will increase going forward.

Second, even though one consolidated location will cut the company's expenses for warehouse rent in half, they either failed to mention or consider if they will be able to store all of their merchandise in this one location. Before the consolidation they had four different warehouses. They are now attempting to store and ship all of this merchandise from this one location. This may cause decreasing marginal returns due to a lack of space. Aside from the fact that they may not be able to store all of their merchandise in this one location, workers may be less efficient at handling and shipping the merchandise with less space. This may cause delays in their supply chain and can hurt their long term profitability and customer service.

Finally, they have failed to mention if they will be able to replace the workers in their four locations with similarly qualified individuals. It can be very difficult, especially if unemployment rates are low, to find qualified workers. They may be able to do this very easily, but if the workers at the four regional centers were exceptional at service or a particular skill, they may be extremely costly to replace. I feel that the cost of replacing and training new workers for this one location may offset some of the gains from warehouse rent. The management team must consider these factors and test a hypothesis before consolidating to one location.

In conclusion, this argument lacks the evidence and acknowledgement from management that I feel it needs to hold its ground. The management team must include evidence from similar companies and mention some of the things above to be a stronger argument.