As the number of facilities in a distribution network increases, total logistics costs tend to follow a curve that first declines, then rises.

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Quizplus · Accepted Answer

This is known as the U-shaped distribution cost curve. Initially, adding more facilities can decrease transportation costs by reducing distance traveled or improving service levels. However, beyond a certain point, the cost of maintaining and operating additional facilities outweighs the benefits, leading to an increase in total logistics costs.

As the Number of Facilities in a Distribution Network Increases