Final answer:
Most businesses have storage facilities to manage inventory, which allows for efficient distribution and cost savings through economies of scale. Amazon's use of large, computerized warehouses in low-rent areas exemplifies these benefits. Although initial costs can be high, long-term operational efficiencies often justify the investment in storage facilities.
Step-by-step explanation:
Most manufacturers, wholesalers, and retailers have storage facilities, which can be either part of their main buildings or located separately. These storage spaces, such as warehouses, are essential for managing inventory, ensuring that they meet customer demand efficiently. The use of storage facilities allows businesses to purchase or produce goods in large quantities, store them, and then distribute them to retail locations or directly to customers as needed. This approach generally leads to reduced costs due to economies of scale.
Amazon, for example, holds its inventories in huge warehouses situated in low-rent areas around the world. Their warehouses are highly computerized, utilizing robotics and relatively low-skilled workers to maintain low average costs per sale. The savings from lower rent and decreased handling costs can be substantial, allowing companies like Amazon to offer competitive pricing, even when including shipping costs. However, the initial setup and maintenance of such storage facilities can be expensive, but they are often justified by the long-term savings and operational efficiencies they provide.