Certified Supply Chain Professional (CSCP) Practice Exam

An increased number of warehouses can affect which factor?

1. Decrease in customer service

2. Increase in transportation costs

3. Safety stock levels increase due to more facilities

4. Reduction in setup and overhead costs

The correct answer is: Safety stock levels increase due to more facilities

Having an increased number of warehouses can significantly influence safety stock levels due to the dynamics of inventory management. When more facilities are added to a supply chain, there is typically a need to manage inventory in a way that balances supply with demand across various locations. With additional warehouses, safety stock levels are often increased to enhance service levels. This is due to the variability in demand and lead times, which can differ from one location to another. By holding more safety stock, organizations can better accommodate fluctuations in customer demand and ensure that products are available when needed at each warehouse. Furthermore, the decentralized nature of having multiple warehouses means that each facility may need additional stock on hand to mitigate risks associated with stockouts or delayed replenishments. This approach aims to maintain customer satisfaction by ensuring that products can be quickly delivered to various geographic areas. In contrast, while other factors such as transportation costs and overhead might be negatively impacted by the presence of more warehouses, and customer service could potentially change based on how inventory is managed, the primary effect on safety stock levels is a key consideration in supply chain management when increasing the number of warehouses.