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Question 60

Compared to a centralized distribution network strategy, an organization using a decentralized distribution network strategy can usually expect:

lower cost of lost sales and higher inventory cost

higher cost of lost sales and higher inventory cost.

lower cost of transportation and lower warehousing cost.

higher cost of transportation and lower warehousing cost.

Correct Answer: A

In a decentralized distribution network strategy, inventory is held at multiple locations closer to the customer. This typically results in lower cost of lost sales due to better service levels and quicker response times since products are available closer to the demand points. However, maintaining inventory at more locations increases the overall inventory cost. This is because more stock is needed across various sites to ensure availability, which drives up holding costs.

Discussion

nprestelOption: A

I believe the answer is "A." Decentralized distribution results in increased inventory at more sites and increased transportation costs. The advantage is lower cycle times and increased customer service.