ESSAY QUESTION:
The following memo was circulated by the management team of a retail company:
"We are very pleased to announce that 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:
This argument describes a strategic decision made by a retail company in its supply chain. The management thinks that by consolidating the company's warehouses at a single location will increase the profitability of the company. According to me, this argument is flawed and has many assumption.
First, the management has not discussed the effect on other operations costs due to this decision. It is very probable that the company has various outlets spread across its are of operations. The transportation costs of a company will increase on transporting goods from a single storage facility in contrast to supplying goods from the warehouse which is placed near an outlet. Consolidating the warehouse to one location will also increase the transportation time, which can adversely affect company's profits.
Second, having warehouse facilities at different locations can have diversification benefits. For example: if due to some reason such as transport companies strike in a particular area or riots etc., the company is not able to supply goods from a particular warehouse, it has alternative to resume supplies from other warehouses. This will help in ensuring continuing operations of the company even in unforeseen circumstances. Whereas, in case of consolidated warehouse the supply of goods from warehouses to outlets will be stopped in case of such unforeseen circumstances.
The management has not discussed the costs associated with the movement of warehouses and how much time it will take to break-even after the decision is executed.
The management should consider the locations of its outlets, existing ware houses and the new consolidated warehouse. They should do a comprehensive cost analysis of moving warehouses at one place. If most of the outlets are located near the consolidated warehouse, then this decision can have the desired effect. But if they are scattered, then this decision might decrease the profits of the company.
The following memo was circulated by the management team of a retail company:
"We are very pleased to announce that 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:
This argument describes a strategic decision made by a retail company in its supply chain. The management thinks that by consolidating the company's warehouses at a single location will increase the profitability of the company. According to me, this argument is flawed and has many assumption.
First, the management has not discussed the effect on other operations costs due to this decision. It is very probable that the company has various outlets spread across its are of operations. The transportation costs of a company will increase on transporting goods from a single storage facility in contrast to supplying goods from the warehouse which is placed near an outlet. Consolidating the warehouse to one location will also increase the transportation time, which can adversely affect company's profits.
Second, having warehouse facilities at different locations can have diversification benefits. For example: if due to some reason such as transport companies strike in a particular area or riots etc., the company is not able to supply goods from a particular warehouse, it has alternative to resume supplies from other warehouses. This will help in ensuring continuing operations of the company even in unforeseen circumstances. Whereas, in case of consolidated warehouse the supply of goods from warehouses to outlets will be stopped in case of such unforeseen circumstances.
The management has not discussed the costs associated with the movement of warehouses and how much time it will take to break-even after the decision is executed.
The management should consider the locations of its outlets, existing ware houses and the new consolidated warehouse. They should do a comprehensive cost analysis of moving warehouses at one place. If most of the outlets are located near the consolidated warehouse, then this decision can have the desired effect. But if they are scattered, then this decision might decrease the profits of the company.
