Warehouse vs. Distribution Center Explained
Just as logistics professionals use some industry terms interchangeably, the same misconception is found when using “warehouse” and “distribution center.”
Distribution centers and warehouses look the same from the outside, but their internal processes are very different.
Even before walking into the facility one can differentiate the two by understanding the inventory turns of the facility.
After the turns are understood, then it will be easy to see the differences in layout and technology that are employed to support the inventory turn goals.
A warehouse could be defined as any supply chain facility that has 8 or less inventory turns per year, while a fulfillment center is greater than 8.
Typically, a DC has an inventory turn much greater than 8, although in many of today's settings facilities often try to be a mix between both a warehouse and DC where there is storage and order fulfillment aspect of the facility making the blended turn of lower than what is typical in a DC.
With the inventory turns in mind, a warehouse's primarily purpose is storing inventory, therefore the technology associated with a warehouse is all about packing the facility with as much product as possible without a tremendous amount of focus on moving through it quickly.
Prior to the ecommerce revolution the technology of a warehouse was not being stretched, thus the majority of facilities were more warehouses than distribution centers.
Distribution Center (DC) Defined
Distribution centers are more dynamic in nature, where it is important to have the “required quantity of the right product in the right place at the right time.” This “rule” highlights the flexibility of distribution centers. DCs (distribution centers) hold product for a shorter amount of time because of their critical nature of fulfillng customer orders quickly.
Contrary to warehouses where the main focus is to efficiently store products, DCs are crucial to oder fulfillment, cross docking, packaging, last mile customization, etc.
One will find a great deal more order fulfillment technology for pallet, case and each pick.
The technology enhancements of a distribution center / fulfillment center can be found in the WMS (warehouse management system) software utilized to optimize order picking and the on floor physical technology employed within the facility.
The future of DC technology will continue to expand with tighter WMS, transportation management system (TMS), OMS, and other connections outside a shippers four walls, along with more WMS capabilites to optimize picking efficiency between people, traditional physical technology, robitics and droves.
Additionally, distribution centers are focused on preparing and delivering product to customers. This means warehouses typically deliver to DCs, while the DCs act as an outlet to the external consumer.
Both warehouse and distribution centers are valuable assets to any supply chain and by capitalizing on their strengths optimize a shipper's supply chain and builds a competitive advantage.
For more on how to improve your supply chain:
- Importance of Order-to-Cash Cycle in Logistics & Supply Chain
- Logistics and Supply Chain Management - Comprehensive Guide
- The Comprehensive Guide to Managed Transportation Services
- Top 10 Benefits of LTL Freight Consolidation and How-to Implement
- Sustainable Supply Chain Explained