Imagine that you’re shopping on the website of one of your favorite retailers and find a product you’ve long desired. The store doesn’t have the item in stock, but they assure you that you’ll be able to pick it up within a day or two. Elated, you add the item to your cart, check out, and find a way to pass the hours until your appointed pick-up time.
While you wait, you might be too distracted by refreshing your email, hoping for the message that your order is progressing through the complex network of machinations you initiated when you clicked “order.” For you, it might be as simple as entering your credit card number and waiting a couple of days. But the truth is that convenience is largely achieved due to the complicated work occurring in distribution centers.
What is a distribution center? Why are they so crucial to modern-day retail operations? Here’s what you need to know.
Why Are Distribution Centers Important?
Distribution centers are among the most vital components of the product supply chain, which refers to the process by which goods are transported from manufacturers and wholesalers to customers. In the long journey from the manufacturer to the shelves of a store near you, a distribution center is an important layover for the goods and products you use every day.
Within the supply chain, distribution centers serve as bustling hubs of activity where those products are:
- Received from manufacturers and wholesalers
- Stored temporarily
- Distributed to retailers
Often, distribution centers are confused or conflated with warehouses or fulfillment centers. But they differ from both in a few distinct ways.
A difference between a fulfillment center vs distribution center is that a fulfillment center typically service customers on an individual level—for example, when you order an electric toothbrush to be shipped to your home, it comes from a fulfillment center. In contrast, distribution centers work directly with the retailers where individual consumers shop.
Distribution centers have even less in common with warehouses. Although both locations receive and store products, distribution centers focus on serving the retailers that rely on them to stay in business. So whereas a traditional warehouse requires businesses to store inventory and provide their own fulfillment services, a distribution center provides logistics services for customer satisfaction and demand. Aside from storage and shipping, the average distribution center is likely to provide additional services, such as: 1
- Product mixing
- Order fulfillment
- Product packaging
By providing these services, distribution centers help businesses harness the power of supply chain management to their benefit and keep their shelves stocked with products customers want.
How Does a Distribution Center Work?
The daily operations of a distribution center are incredibly complex. The exact nature of those operations varies from center to center depending on an individual center’s processing protocol.
That said, all distribution centers rely on the latest technology for warehouse management, order processing, and outbound shipping to run efficiently. Cloud management systems, inventory control systems, automation technology, and picking tools are just a few examples, as well as technological devices to input and track SKUs, process orders, and communicate with suppliers and retailers.
Distribution centers also use a range of machinery, like forklifts, pallet jackets, and motorized carts, to move goods around the center, wrap pallets, and combine disparate shipments. Depending on the center’s technological sophistication, some machinery may even rely on artificial intelligence and machine learning, like autonomous mobile robots (AMRs).
Order fulfillment and shipping
In general, products arrive at distribution centers as part of one of two kinds of freight:
- LTL freight – LTL freight stands for “less than truckload,” or an order that doesn’t require the use of a full semi trailer, allowing multiple businesses to combine transportation.
- FTL freight – FTL freight is “full truckload.” This refers to larger orders that fill the entire semi trailer. 2
These orders arrive from wholesalers or manufacturers and are processed and moved into storage at the center. But they’re only visiting; soon, they’ll be shipped out to stores.
As an example, imagine that a distribution center receives an LTL shipment of home Wifi extender devices for an electronics store near you. The store isn’t likely to need the entire shipment of extenders, so the distribution center will combine only the quantity needed now with other products the store has ordered and send them off together. When they need more, the distribution center sends them from the stored inventory.
Understandably, the distribution process requires very precise logistics, from inventory management on the part of the retailers and centers, to distribution center storage and shipping management, among many other aspects.
If you’re in the business of connecting people with products, you already know how complicated dealing with a massive supply chain management can be. And you also know how quickly associated expenses can add up.
But it doesn’t have to be that way. Shipware is here to simplify your volume parcel and LTL shipping and generate huge savings for your company. Let our team of experienced and knowledgeable experts introduce you to state-of-the-art distribution solutions that can reduce your shipping costs by 10–30%, no matter who you ship with.
From start-up companies to Fortune 500s, Shipware has the solution. Find out more today.