Compared to a centralized distribution network strategy, an organization using a decentralized distribution network strategy can usually expect:

A decentralized distribution network places inventory in multiple warehouses closer to customers. This strategy improves responsiveness and reduces lead times, thereby lowering the cost of lost sales. However, holding inventory in more locations reduces the benefits of risk pooling, which necessitates higher aggregate safety stock levels across the network. This increase in total inventory leads to higher overall inventory carrying costs. Centralized networks have the opposite trade-offs: lower inventory costs but potentially higher transportation costs and longer lead times.

B. A decentralized network is designed to improve customer service and reduce lead times, which lowers, not raises, the cost of lost sales.
C. While final-leg transportation costs may be lower, total warehousing costs are higher due to the expense of operating multiple facilities.
D. This is the opposite of a decentralized strategy's effects; transportation costs are typically lower (shorter final delivery), and warehousing costs are higher.

1. Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2020). Supply Chain Logistics Management (5th ed.). McGraw-Hill. Chapter 7, "Logistical Network Design," discusses the trade-offs between centralized and decentralized inventory, noting that decentralized systems increase inventory costs but improve service.

2. APICS. (2023). CLTD Learning System. Module 2: Logistics Network Design, Section A, Topic 3. This section details how increasing the number of warehouses (decentralization) increases inventory costs but decreases outbound transportation costs and improves customer response time, reducing lost sales.

3. Rushton, A., Croucher, P., & Baker, P. (2017). The Handbook of Logistics and Distribution Management (6th ed.). Kogan Page. Chapter 5, "Network Design and Location," explains that a decentralized strategy leads to higher inventory and warehousing costs but lower final-delivery transport costs and better service levels.