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Copyright ? 2019 Pearson Education, Inc.
CHAPTER FIVE
Discussion Questions
How do the location and size of warehouses affect the performance of a firm such as Amazon? What factors should Amazon take into account when deciding where and how big its warehouses should be?
The location and size of Amazon’s warehouses have a direct bearing on how responsive and efficient they can be. At one time, Amazon ran their online bookstore out of one warehouse in Seattle; this warehouse was small by today’s standards and was unable to keep up with peak demand. Seattle, on average, is also quite far from customers in America. Amazon has since added other geographically distributed warehouses that hold the items with steadier demand. The dispersion of warehouses allows Amazon to ship items from closer to the customers and the stocking of items with more even demand allows for a higher service level at a reasonable cost.
Amazon should consider what regions with high demand are underserved by the current network of warehouses and where it is most economical to locate the next warehouse, effectively balancing their efficiency and responsiveness with their strategy. Amazon should account for facility, inventory, and transportation costs and the desired level of responsiveness when making its location decisions.
How do import duties and exchange rates affect the location decision in a supply chain?
Tariffs refer to any duties that must be paid when products are moved across international, state, or city boundaries. If a tariff is excessive, it provides a strong disincentive to do business across borders with entities in that area. The classic workaround to a high tariff is adding a location inside the area. Some regions have developed trade agreements that limit or eliminate the tariff on goods.
Exchange rates specify how much one currency is worth in terms of another. As one currency gains against another, it may be beneficial to add shift production to the area using the devalued cur
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