From the description, we can make the following calculation. If there is a warehouse, then for each average shipment size, the processing cost is $8, which is obtained from $160/20. It is lower than the processing cost for average shipment when there is no warehouse ($10). In other words, processing orders in volume shipment size leads to a lower average processing cost than processing orders in average shipment size.

Does this reflect the principle economy of scale? Why or why not? In your answer, please describe the concept of economy of scale as it relates to logistics management.