How does proximity to suppliers influence facility location decisions?
A) It reduces transportation costs and lead times
B) It has no impact on production costs
C) It increases marketing expenses
D) It only affects the quality of raw materials
Answer (2)
Proximity to suppliers greatly influences facility location decisions by reducing transportation costs and lead times. Being closer to suppliers improves supply chain efficiency and allows for greater flexibility and adaptability. Thus, the best option is A) It reduces transportation costs and lead times.
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Proximity to suppliers plays a crucial role in facility location decisions in the business field. Here’s why it matters:
Transportation Costs and Lead Times:
Transportation Costs: Being closer to suppliers reduces the cost of transporting raw materials to the facility. Shorter distances generally mean lower costs associated with fuel, logistics, and transport labor.
Lead Times: Shorter distances also result in faster delivery times. This can lead to more efficient inventory management as businesses can rely on just-in-time delivery systems and reduce the need for large warehouses to store materials.
Impact on Production Costs:
Proximity to suppliers has a direct impact, primarily on transportation costs, which are a part of production costs. Therefore, the statement that proximity "has no impact on production costs" is incorrect.
Marketing Expenses:
Proximity to suppliers primarily affects logistical aspects rather than marketing expenses, so option C is not correct.
Quality of Raw Materials:
While being closer might impact the timely delivery of raw materials, it does not inherently affect their quality. The focus here is on logistics rather than the quality control aspects which are generally the supplier's responsibility.
Given these explanations, the correct answer is option A , as proximity to suppliers reduces transportation costs and lead times, making it a pivotal factor in deciding facility locations.
