In view of the close interrelation between inventory level and customer service level, inventory control definitely involves a compromise between cost and service. These two factors are the main ingredients of inventory tracking software.

The different functions of physical distribution such as transportation, handling, warehousing and inventory management interact constantly with one another. As the functions are interdependent, the costs are also closely interrelated. Very often, one function offsets the other. For example, if the firm is prepared to incur increased cost on transportation, it may be in a position to reduce its warehousing/inventory cost. This is because when there are no curbs on transportation costs, the firm can use faster modes of transport and rush the stocks to the desired warehouse, and thereby keep inventory at reduced levels. The opposite is also true when warehousing/ inventory holding is unlimited, slackness in transportation does not cause damage to sales.

This means that none of the physical distribution functions can be handled in isolation. They have no separate identities. They need a high degree of coordination and common direction. If the functions are scattered in an arbitrary manner among different departments of the company without a common direction, control will become fragmented and effectiveness will be adversely affected. In fact, under such a situation, the very objectives of inventory tracking software get fragmented and distorted. The different functions would pull in different directions. The transportation people would go all out to reduce the cost of transportation unmindful of the effect of such a policy. They would settle for less reliable and slower modes of transport. The sales people, on the other hand, would opt for large inventories in several locations with a view to maximize customer service.

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