When it comes to logistics, the term ‘distribution centres’ will undeniably be thrown around, but what does it actually mean? These hubs are far more than just storage facilities – they’re purpose-built operations designed to manage the flow of goods from manufacturers to customers with speed and precision. Those who do it well that is.
Whether you’re running a small online store or managing a larger business, understanding the role of a distribution centre can help you understand how to streamline operations, cut costs, and meet customer expectations.
So, if you’re new to the world of supply chains, 3PL services, or distribution and warehousing, don’t worry – we’ve got you covered. In this guide, we’ll take a closer look at what distribution centres do, and why they’re vital to modern logistics.
What is a Distribution Centre?
A distribution centre is a specialised facility that handles the receipt, storage, and dispatch of goods. Unlike traditional warehouses, which are mainly used for long-term storage, distribution centres operate dynamically and keep goods moving. They primarily focus on short-term storage and aim to quickly process and ship products to their next destination, whether that’s a retailer, another warehouse, or directly to the customer.
Think of a distribution centre as the backbone of warehouse and logistics operations. It’s where the magic happens to keep products flowing smoothly from manufacturers to end-users. Whether your business runs their own distribution centre, or you’re working with a third party logistics company, the centre should ensure your products are where they need to be, when they need to be there.
How do Distribution Centres Work:
Now that we’ve covered the basics of what a distribution centre is, let’s get into the nitty gritty and pick apart how exactly they work.
1. Receiving Goods
Of course all distribution and fulfilment centres start by receiving goods. Goods arrive from manufacturers or suppliers and undergo quality checks.
Once checked, inventory will be logged into the systems, and mapped according to SKUs and locations for efficient management. This means that each product can be individually monitored for stock levels and easily located when needed to be shipped out.
2. Short Term Storage
Distribution centres primarily store products temporarily, with a constant flow of stock in and out. This means that organisation and efficient storage is vital. Many distribution centres store inventory from a variety of different B2B and B2C businesses, so they must be organised in a way that maximises space and accessibility.
How do they do this? Fulfilment centres utilise advanced racking systems and inventory software ensure items are easy to locate and retrieve and relocate if necessary.
3. Order Processing
When orders come in, products go through an order fulfilment process; they’re picked, packed, and prepared for dispatch. Each distribution centre has their own fulfilment process, which will work slightly differently.
4. Shipping
Coordinating with carriers, distribution centres ensure goods are shipped quickly, whether it’s to a retailer (B2B), or direct to the customer (D2C).
5. Returns Management
Handling returns is a vital part of modern logistics. Distribution centres manage returns efficiently, ensuring that products are either restocked or disposed of responsibly.
Some centres or 3PL service also offer extra services such as reverse logistics or product rework. Each has their own process and specialised skill set, which is why it’s so important to find the right one for your business.
Why Are They Vital for Warehouse and Logistics?
In modern supply chains, distribution and warehousing go hand-in-hand. A well-located warehouse can:
Location
Many are strategically placed close to transport hubs, with direct links to shipping partners. This means that delivery times and shipping costs are reduced for the businesses and customers. On a larger scale, consolidating shipments from one fulfilment centre also lowers overall transportation costs.
Efficiency
With high-tech, optimised warehouse management systems, distribution centres streamline the entire supply chain process throughout multiple locations.
Customer Satisfaction and Business Growth
Faster order fulfilment leads to happier customers. By integrating distribution and warehousing, businesses can optimise operations and adapt to changing demands and business growth. These facilities play a crucial role in keeping businesses competitive and successful in today’s fast-paced world.
The Advantages of Distribution Centres
Here’s why they are such an asset for businesses:
- Efficiency: They centralise logistics processes, reducing bottlenecks and delays.
- Scalability: They can handle fluctuating demand, making them ideal for seasonal peaks.
- Cost Savings: By optimising storage and transportation, businesses can save significantly.
- Sustainability: Efficient operations reduce waste and carbon emissions.
Technology in Modern Warehouses
Technology is transforming the way distribution centres operate. Innovations like inventory management systems and automations enhance accuracy and speed. Data analytics also play a big role, helping businesses make informed decisions about stock levels and delivery routes. These tools allow distribution centres to scale up their operations while maintaining high standards of efficiency.
How is a Distribution Centre Different from a Fulfilment Centre?
While both share some similarities, and the terminology is often used interchangeably, they serve slightly different purposes:
Fulfilment Centres
Traditionally, fulfillment centres focus primarily on direct-to-consumer orders, such as those from e-commerce businesses. Businesses rely on fulfilment centres to manage the storage, picking, packing, and shipping of their orders. Think of fulfilment as the last step before your parcel arrives at your door.
Distribution Centres
Distribution centres typically handle a broader scope, dealing with both B2B and B2C logistics. These responsibilities can include long term storage, and bulk shipments to retailers and other warehouses. They serve as a bridge between manufacturers, retailers, and customers.
If you’re a business deciding between the two, think about your specific needs. For ecommerce businesses, a fulfilment centre might be ideal. For larger operations that include wholesale or multi-channel distribution, a distribution centre is likely a better fit.
But what if your business handles e-commerce B2C and wholesale? Then you need a blend of the two. Some modern centres, regardless of whether they go by a distribution or a fulfilment centre carry out the functions of both. With businesses becoming more advanced and dealing with both B2B and B2C, modern day fulfilment centres have had to adapt, just like Lama Fulfilment.
