The following memo was circulated by the management team of a retail company:“We are very pleased to announce that the relocation of our inventory, which had been located in four different warehouses throughout the country, to a single new warehouse near Company headquarters in Boston. This consolidated location will cut the company’s expenses for warehouse rent in half. As a result we expect our monthly profitability to go up by this amount.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
Stated argument concludes that consolidation of warehouses will cut the company's expenses for warehouse rent in half, and as a result company's monthly profitability will go up this amount. Author doesn't mention any other factors that are like to get affected due to this move. Without considering all other factors, it cannot be concluded that profitability will definitely go up by this amount.
First, by consolidating warehouses in one location in Boston, company will cut the warehouse rent in half, as per the claim given in argument. Even though reduced rent may help profits go up a bit but we cannot certainly confirm that the profits will go by this amount. To illustrate this fact, consider, for example, if the mentioned company is a manufacturing company, and it has manufacturing plants throughout the country. And before move, these manufacturing plants were actually near to the warehouse locations. Even though the company will save half the rent, company may incur shipping or transportation expenses more than the saved rent. Second example could be if the company is a retail company, and company can only ship from the local store to the customers. Then the company will have to bear the additional expenses of shipping from the store. This amount may again exceed the amount saved in rent, thereby reducing profits rather than increasing it. Moreover, there may be other expenses. For instance, sales taxes may not be applicable at other locations because of the tax law in those states in which warehouses were earlier. After the consolidation, to compensate for the taxes, price of the final product may need to be increased. But prices can't be increased because of the fierce competition in the industry. Thus company will end up bearing the burden of additional taxes. Therefore, it's clear that without considering the other costs that may be impacted due to this move, it's hard to find whether the new plan will be profitable.
Second, consolidation may also lead to mismanagement at the warehouse because of the increase in size. Thereby increasing the waste and increasing expenses. Without knowing that the size has not increased to an extent when it becomes unmanageable and that the effective management plan is in place for the consolidated warehouse, it cannot be confirmed that the suggested plan will always be profitable.
Clearly, the argument lacks evidences in supporting that the recommended plan will be successful. To strengthen the argument, all other factors that affect the profit due to this move need to be considered, and full-fledged cost-benefit analysis needs to be done in order to confirm that the plan will be profitable.
If I look absent-minded or insane, I am just living a dream of being successful. If you still wonder why I am like this, you have no idea how success tastes like!