Conquer the CLTD Challenge 2025 – Navigate Your Path to Logistics Success!

Adding more distribution centers (DCs) to a logistics network typically reduces stem distance costs. Stem distance costs refer to the distance that products must be transported from a distribution center to the final delivery point. By situating more DCs closer to key customer locations, the distance that goods need to travel from the DC to the customer decreases, leading to lower transportation costs and improved delivery times.

This strategic placement of DCs also enhances service levels by allowing businesses to respond more rapidly to customer demands. Additionally, it can lead to greater flexibility in inventory management and fulfillment processes, ultimately resulting in a more efficient logistics system.

While other costs, such as drop distance costs or line haul costs, may also be impacted by the distribution network decisions, stem distance costs are directly related to the distance products travel from the distribution facilities to the final destinations, making them the primary concern in this context. Similarly, inventory shortage costs may be influenced by factors such as demand variability and inventory policies, which are not directly correlated with the number of distribution centers in place.