For any business, the cost of transportation is normally the largest single item in the overall cost of physical distribution. It doesn’t necessarily follow, though, that a manufacturer should simply pick the cheapest available form of transportation. Many companies today use the total physical distribution concept, an approach that involves maximizing the efficiency of physical distribution activities while minimizing their cost. Often, this means that the company will make cost tradeoffs between the various physical distribution activities. For instance, air freight may be much more expensive than rail transport, but a national manufacturer might use air freight to ship everything from a single warehouse and thus avoid the greater expense of maintaining several warehouses. When a firm chooses a type of transportation, it has to bear in mind its other marketing concerns – storage, financing, sales, inventory size, and the like. Transportation, in fact, can be an especially important sales tool. If the firm can supply its customers’ needs more quickly and reliably than its competitors do, it will have a vital advantage: so it may be more profitable in the long rub to pay higher transportation costs, rather than risk the loss of future sales.
In addition, speedy delivery is crucial, in same industries. A mail-order distributor sending fruit from Oregon to Pennsylvania needs the promptness of air freight. On the other hand, manufacturer shipping lingerie from New York to Massachusetts may be perfectly satisfied with slower (and cheaper) truck or rail transport.