As the functions are interdependent, the cost there of are also closely inter-related. Very often, one function subsidies another For example, if the firm is prepared to incur increased costs on transportation, it may be in a position reduce its warehousing/inventory cost. This is because in such a case, the firm can use the fastest mode o-f transport and rush the stocks to the desired warehouse, unmindful of the transportation cost. Obviously, it can reduce the inventory level in as such a case. The converse is also equally true; when warehousing/inventory holding is unlimited, slackness in transportation does not cause any damage to sales.
Logistics Functions are Inter-related and therefore it Needs integrated Handling
It is evident that in the nature of things, the component functions of marketing logistics are interrelated and hence need coordinated handling. They cannot be handled in isolation, as they have no- separate identities. If the functions are scattered in an arbitrary manner among different department of the company without a common direction, control will get fragmented and effectiveness adversely affected. In fact, in such a situation, the very objectives of physical distribution get fragmented and distorted. The different functions will pull in different directions. The transportation people will go all out to reduce the cost of transportation, unmindful of the effect of such policy on other aspects; they will settle for less reliable and slower modes of transport; they will also resort to bulk dispatches of the product to a few selected places instead places instead of dispatching it to a large number of scattered demand center at a greater frequency and in smaller and more convenient lots. Similarly, the sales people left to their own planning, will opt for unlimited inventories scattered over several locations, with a view to maximizing delivery service level. And, the inventory control people will opt for the diametrically opposite objective, viz., minimizing inventories, whatever may be the consequences! In brief, when different functions of physical distribution are viewed and handled in isolation, the tendency will be to reduce the cost of the particular function, unmindful of its consequences on the other functions.
A single Task and a Single Unified system
In brief, because o-f the interrelationship among the different functions and their costs, it would be necessary and desirable to look at the physical distribution job as a single unified system and optimize the efficiency of the system as a whole. This is precisely what a â€˜systems approach to physical distributionâ€™ means. Such an approach will facilitate better coordination among the various component functions and remove sub-optimization of the system. A â€˜system approachâ€™ in effect means a â€˜total efficiencyâ€™ and a â€˜total cost approachâ€™. It means that the decisions on all functions of physical distribution are taken in an interrelated manner and in alignment with the other component functions. The effort involved in the approach will be worth the while in view of the rewards inherent in it.