What are the two criteria for establishing a particular physical distribution system?

The correct criteria for establishing a particular physical distribution system focus on the balance between the cost of transportation and the cost of warehousing. In logistics and supply chain management, these two elements are critical as they directly impact the overall efficiency and effectiveness of the distribution system.

Transportation costs comprise all expenses related to moving goods from suppliers to customers, including freight charges and any related logistics costs. On the other hand, warehousing costs encompass expenses associated with storage, handling, and inventory management of goods before they reach their final destination.

Both transportation and warehousing costs play a crucial role in achieving a desired service level, which refers to how well customer requirements are met in terms of delivering products on time and in the right conditions. A well-designed distribution system must optimize these two factors to minimize total costs while meeting the service expectations of customers. This optimization is essential for organizations aiming to maintain competitiveness and efficiency within their supply chain.