Jones Company, a company producing and distributing household electrical products, is evaluating whether to invest in a local warehouse close to the market. In the current situation without a warehouse, orders are directly shipped to its customers (wholesalers) as individual shipments. For simplicity, we assume all shipments that are delivered directly have the same shipment size, and they are called the average shipment. Each average shipment costs $10 to process and $26 in shipment costs. If a local warehouse is built, then the warehouse can receive volume shipments, which are larger in size than the average shipments. Suppose that the size of a volume shipment is equal to the size of 20 average shipments. Each volume shipment costs $160 to process and $460 in transport to the warehouse. After a volume shipment arrives at the warehouse, local deliveries are made in the average shipment size and each local delivery costs $4. The warehousing cost of an average shipment is $3. For this question, you need to use the Network Transportation Cost Minimization model below
Based on the Network Transportation Cost Minimization model, which option should Jones Company choose, and why?