Final answer:
Consolidating fulfillment centers from two to one decreases inventory holding costs and cycle stock levels due to economies of scale, optimized inventory management, and more efficient shipping, potentially increasing profits. Therefore correct option is C
Step-by-step explanation:
If a retailer plans to reconfigure its fulfillment network from dedicated (2 fulfillment centers) to integrated (1 fulfillment center), and the correlation of demand for product A across both locations is 1, all else equal, cycle stock levels and thus inventory holding costs for cycle stock will decrease. This is because the retailer would be consolidating inventory from two locations into one, leading to savings on storage space, utilities, staffing, and potentially improved inventory management due to aggregated demand. The integrated fulfillment is similar to economies of scale, which can reduce average costs per sale, as demonstrated by Amazon's centralized warehousing strategy. This consolidation also allows for more consistent and efficient shipping and handling of goods, as there is less complexity in the network and reduced chances for traffic over congested networks, thereby potentially increasing profits.
a retailer is planning to reconfigure its fulfillment network from dedicated (2 fulfillment centers) to integrated (1 fulfillment center). currently product a is stocked in both locations and the correlation of demand for product a across both locations is 1. all else equal, if the retailer moves from dedicated to integrated fulfillment, cycle stock levels and thus inventory holding cost for cycle stock will: question 13 options:
a)stay the same b)increase c)decrease d)none of the above