A retail firm operates a "decentralized" distribution system (factory to warehouse to shop), in which the system uses six smaller warehouses distributed around a region to receive a product from a manufacturer (called "primary distribution") and then send the product to a retail outlets (called "secondary distribution")

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A retail firm operates a "decentralized" distribution system (factory to warehouse to shop), in which the system uses six smaller warehouses distributed around a region to receive a product from a manufacturer (called "primary distribution") and then send the product to a retail outlets (called "secondary distribution"). The firm is offered the opportunity to shift to a "centralized" system, in which each unit of product will still undergo primary and secondary distribution, but now there will only be one warehouse in the middle of the region. The transportation of the product incurs financial cost and energy consumption per vehicle kilometer (vkm) of movement. In the case of the warehouse costs, inventory costs are incurred by virtue of needing to keep stock on hand in the warehouse between the time that the stock is purchased and the time it is sold, and energy is consumed to operate the warehouse. Transportation costs $1.50 and consumes 19 MJ of energy per vehicle-km. Assume that all other costs and rates of energy consumption are the same for either option, and therefore are not included in the calculation since they do not affect the outcome. Note also that the cost of energy is included in the warehouse and transportation cost values given. (a) Based on the data given, determine whether the decentralized or centralized system is preferred. (b) What is the environmental dilemma underlying this decision? Discuss in a short answer, up to one-paragraph long.

Warehouse costs  energy use per warehouse:

                               Inventory Cost {$1000/Year]                           Energy (GJ/year)

Decentralized              190                                                                   155

Centralized                   710                                                                 730

Transportation volume generated per year per warehouse:

1000vKm/year                     primary                                  secondary

Decentralized                      35                                              82

Centralized                          181                                            645