Introduction

A Distribution Center is a warehouse with order fulfillment capabilities to optimize your supply chain for delivery times. The efficiency of your 3PL partners won’t matter if you cannot process the orders efficiently.

While a warehouse is ideal for you to safely store your goods until they are ready to be shipped, a distribution center makes more sense for an ecommerce business.

A DC will be the starting and central part of your delivery supply chain. Therefore, setting up an efficient and high-performing center becomes crucial to the success of your ecommerce business. In this blog, we will critically examine the term Distribution Center. This will empower you with information so that you can make the right decision for your business.

What is a Distribution Center?

A distribution center or a DC can be defined as a specialized building used to store products and fulfill orders simultaneously. A distribution center redistributes products in the wholesale, retail, and D2C supply chain. It can act as a fulfillment center for your ecommerce business where you can pick, pack and ship orders more efficiently than a traditional warehouse.

A DC is usually centrally located to enable faster pickups and better delivery times. There are different kinds of centers for other companies varying in their sizes and features. For example, a perishable goods company may invest in temperature-controlled storage, while a D2C fashion brand would like to invest in a DC, which can process orders faster.

4 Crucial Benefits of Using a Distribution Center

A DC can be a significant investment for any business. Therefore, before you build or purchase one, you need to understand the benefits. We have listed some benefits below to help you with the analysis.

1. Distribution centers are dedicated facilities for order fulfillment and provide benefits for a satisfying customer experience. Organizations maintaining multiple distribution centers covering a large area can conveniently take on a large customer base and expedite deliveries.

2. When manufacturing companies cannot afford multiple warehouses, distribution centers can provide efficiency in operating fluid and fast-tracked supply chains. Moreover, DC can break down bulk cargo into more minor bulks, making it easier to manage transportation.

3. Distribution centers also make life easy for retailers to buy the product in small quantities instead of investing in larger quantities and rid themselves of worrying about storage spaces.

4. DC simplifies large quantity orders by providing multiple functions like picking, packing, assembling, and combining similar products.

6 Key Functions of a Distribution Center

Distribution centers offer modern technology and fulfillment infrastructure to provide companies with accurate processing and shipping. Some of the functions are:

1. The distribution center is a temporary space for holding up products, which reduces the number of warehouses required in the supply chain.

2. Its primary focus is to allow the inflow and outflow of products through the supply chain without any hiccups.

3. Distribution centers are station posts that break down bulk cargo into smaller groups of commodities that are then processed, packaged, and transported.

4. Distribution centers also function as docking stations where similar products are grouped and packaged before sending them to the required destination. Goods are also docked for transportation within the distribution center and outside it.

5. DC can conveniently function as a facility for primary and secondary assembling and packaging of certain products before sending them out in the supply chain.

6. Returned and exchanged goods are forwarded to the distribution center before sending them to the origin warehouse, where they await reselling or exchange.

4 Key Features of an Efficient Distribution Center

While knowing the functions and benefits of owning a distribution center is essential, it is equally important to learn how to choose the best one for your business.

You will have to consider various factors to ensure that you get a good return on your investment. Here are some of the common factors you should look for investing in a distribution center:

1) Location

The location of the distribution center is always essential. The primary aim of a distribution center is to improve your delivery speed. If your DC is not centrally located, it will enhance the distance your orders travel, ultimately adding to the delivery time.

2) Size and Capacity

The size and capacity of the warehouse should be appropriate. A smaller DC will always leave your goods without a home, while a bigger DC will always burn holes in your pockets with empty shelves. Therefore, choosing a distribution center with just the right space is essential, including provision for future expansions.

3) Technology Integrations

The ability to adapt existing and new technology can significantly impact the distribution center's output efficiency. Features like WMS, IMS, etc., will help you establish a more efficient delivery supply chain and help in getting a better return on your investment.

4) Performance History

If you are considering acquiring an existing distribution center, check the performance history and issues with the past owner. Before acquiring an existing DC, you will have to look for factors like availability of skilled labor, construction quality, use of technology, presence of carriers, etc.

How is a Warehouse different from a Distribution Center?

While the purpose of a warehouse and a distribution center may be storing goods, some key areas differentiate the two. Some of the key differences are:

• Warehouses are primarily used for storage, whereas distribution centers, besides providing storage facilities, offer additional services like order fulfillment, packaging, cross-docking, assembly station, packaging, etc.

• Distribution centers are temporary storage locations, unlike warehouses, which allocates storage space for a longer duration. The flow of products through the DC is much more than a warehouse.

• Distribution centers are customer-prone, bridging the seller and buyer gap. In comparison, warehouses are stand-alone storage facilities.

• Distribution centers typically ship orders as order fulfillment locations, serving customers, whereas warehouses do not serve external customers.

• In comparison to warehouses, Distribution Centers are equipped with more modern technology and well-organized fulfillment centers for order processing, packaging, assembling, and inventory solutions with a more centralized management system.

Conclusion

Order fulfillment is an integral part of the ecommerce delivery process. An efficient distribution center can reduce your order processing speed and improve your delivery speed by expediting the order pick and process.

These centers become crucial to your success as your order volumes start to climb and are typically preferred over traditional warehouses by most ecommerce businesses.

FAQs

1) What are the types of Distribution Centers?

Distribution centers can be classified according to the systems they use in the order fulfillment process. The main three types of DC are:

Conventional Distribution center: This type of distribution center uses a combination of manpower and mobile machines to fetch the items from the shelves and manually package the orders.

Mechanized Distribution Center: A mechanized DC uses mechanical machines like a conveyor belt and mechanical sorting systems to fetch the items and pack them into the required packaging.

Automated Distribution Center: An Automated DC makes partial or complete use of robotics and advanced technologies to handle all tasks in the center. This includes reading the order, fetching the items from their shelves, and packing them for delivery.

2) What is the difference between a distribution center and an ecommerce fulfillment center?

While both of these centers are designed to store and fulfill orders for a business, there is a difference in the functioning and the services offered. A distribution center stores and sends goods to wholesale and retail goods for an area.

It is used as a centralized location to store most of your inventory to have better order delivery speeds in a particular geography. On the other hand, an ecommerce fulfillment center is used to ensure faster deliveries to the consumers directly.

3) Should I consider a distribution center for my ecommerce business?

A distribution center is essential in a smooth, functioning delivery supply chain. If your ecommerce business serves multiple localities that do not have the convenience of a warehouse, consider a centrally located distribution center to enable faster deliveries in that area.