Physical distribution involves various functions to be performed like warehousing, Inventory management, Acquisition, transporting, packaging material, and customer services. Traditionally marketers considered these activities independent and traded them in isolation but now the decisions are taken in coordination with other activities.
Total system approach implies that these components are interrelated. And if the decisions would be made in isolation to each other it will affect the efficiency of other elements. For example, goods were transported through rail transport but to reach early and reduce time, company shifted to air transport. Transporting time could be reduced but the transportation cost increases due to air fares. So these elements are integrated and affect each other.
Total cost approach aims at reducing the total cost involved in physical distribution system. Various costs incurred in physical distribution of goods like inventory cost, warehousing cost, packaging etc. Total cost approach implies that marketer should try to reduce overall distribution cost, not any particular cost.
For example, Cost of stocking in warehouse. A is Rs. 1000 and in warehouse B is Rs. 1200 located in different areas. But if we choose warehouse A our transport cost will increase. So marketer needs to reduce overall cost notably specific.
Common Carriers: They are the public carriers that help to transport all types of products in various regions of the country.
Contract Carriers: They enter into a contract for transferring goods in certain period of time.
Private Carriers: They are privately owned by the individuals or organizations to transport their own products.
Rail Transport: Transporting goods via railways is feasible if heavy bulk products are to be moved at distant places. Railways may provide some special services.
1. Unitized Train: Train with large number of cars that can carry heavy products in bulk. Used for transporting coal, iron ore, grains etc.
2. Piggy, back services: Moving the loaded truck trailers or vans over the special flat cars on the rail road lines. It reduces loading cost and avoids damages.
3. Containerization: Where loaded containers can be moved and changed from one transport to another. It helps to reduce handling charges, damage and losses.
Air Transport: Goods can be transported via airways. Main advantage is it saves time and disadvantage is air freights are very high.
Pipelines: Liquid petroleum products can be transported through pipelines. Products like natural gas, petrol, diesel, chemicals, wood chips etc. can be moved via pipeline. It is very inexpensive. It can be measured in tons originated and tons miles.
Waterways: Goods are transported through ships. Its easible when goods are to be transported at very distant places like some other country. Main disadvantage is that it is very time consuming.