Final answer:
Warehouse management systems are crucial for leveraging economies of scale, allowing firms like Amazon to manage extensive inventories with lower average costs. They facilitate efficiency in the storage and distribution of products, essential for online retailers to maintain cost-effectiveness and competitiveness.
Step-by-step explanation:
The point of warehouse management systems is to complement and enhance the economies of scale achieved by companies like Amazon, Costco, and Walmart. These systems facilitate the handling of large volumes of products in a more cost-effective manner. By using highly computerized warehouses with technologies such as robots and optimized processes for low-skilled workers, firms are able to maintain lower average costs per sale. This efficiency is due to the fact that as the quantity of output goes up, the cost per unit goes down, which is the essential principle behind economies of scale.
Companies that operate largely online, like Amazon, benefit immensely from utilizing warehouse management systems. These systems enable them to store their vast inventories in huge warehouses located in low-rent areas, minimizing the overheads associated with traditional retail store locations. Consequently, they can offer a wide range of products at competitive prices while ensuring convenient purchasing experiences and prompt deliveries.