Strategic decisions related to the design of a physical distribution system can be classified into three basic components : facility location, transportation, inventory decisions. In this research the interdependence of those decisions are expressed in a mathematical model such that the total relevant cost of the system is minimized. We suggested a heuristic technique for solving the model. In broad terms, our solution technique combines a heuristic method for determining which candidate DCs to open and an exact method for minimizing costs given a set of open DCs. And we also developed a decision supporting package for the design of a physical distribution system.