There is a fixed cost any time product is transported. This is especially high whenthe carrier is ship or plane or train; and to amortize this fixed cost it is necessaryto fill the carrier to capacity. Consequently, a distributor may consolidate shipmentsfrom vendors into large shipments for downstream customers. Similarly,when shipments are consolidated, then it is easier to receive downstream. Truckscan be scheduled into a limited number of dock doors and so drivers do not haveto wait. The results are savings for everyone.Consider, for example, Home Depot, where more than a thousand stores are suppliedby several thousands of vendors. Because shipments are frequent, no onevendor ships very much volume to any one store. If shipments were sent direct,each vendor would have to send hundreds of trailers, each one mostly empty; orelse the freight would have to travel by less-than-truckload (LTL) carrier, whichis relatively expensive (Figure 1.1). But there is enough volume leaving eachvendor to fill trailers to an intermediate crossdock. And each crossdock receivesproduct from many vendors, sorts it, and prepares loads for each store, so thatthe the total freight bound for each store is typically sufficient to fill a trailer. Theresult is that vendors send fewer shipments and stores receive fewer shipments.Moreover, the freight is more likely to travel by full truck-load (TL) and so paysignificantly less transportation costs (Figure 1.2).A warehouse also provides opportunities to postpone product differentiation byenabling generic product to be configured close to the customer. Manufacturersof consumer electronics are especially adept at this. Country-specific parts,such as keyboards, plugs, and documentation, are held at a warehouse and assembledquickly in response to customer order. This enables the manufacturerto satisfy many types of customer demand from a limited set of generic items,which therefore experience a greater aggregate demand, which can be forecastmore accurately. Consequently safety stocks can be lower. In addition, overallinventory levels are lower because each item moves faster.Another example is in pricing and labeling. The state of New York requires thatall drug stores label each individual item with a price. It is more economical todo this in a few warehouses, where the product must be handled anyway, than ina thousand retail stores, where this could distract the workers from serving thecustomer.