explain:

• a. How much impact did the change from Phoenix to Las Vegas have? Why?
• b. What is the rate of change in the savings as each additional warehouse is added?

These models have been run in the book and shown in the PPT. The following table shows the costs.

For Part a, the key point is to compare the S2 with S2we have just replaced LV with Phoenix. You can see that this results in only a $4M increase in cost (compared with the $58M total savings from the baseline). The key insight here is that moving to Columbus was the big saver.

For part b, the key insight is that the rate of savings decreases as we add warehouses.