While many people use the words “warehouse” and “distribution” center as if they are the same thing, there are crucial differences between the two services. Read on to discover the nuts and bolts of these two services and what they mean for your business.

The terms “distribution center” and “warehouse” are often used interchangeably, even by logistics professionals in the field. While it may not sound like a big deal —for example, having a Long Beach warehouse become virtually synonymous with a Long Beach distribution center —in reality, these two terms are not the same thing. Knowing the difference between the two can save you a lot of potential trouble and disappointment in the future, particularly if you are involved in the shipment of time-sensitive goods such as agricultural commodities.

Warehouse vs. Distribution Center

Physically, you won’t see much of a difference in exterior between a Los Angeles warehouse and a Los Angeles distribution center. Both would likely have a roof, floors, four walls, truck doors and dock space. From the outside, the two buildings would look incredibly similar. However, a distribution center is a place where retail and wholesale orders are filled. Essentially, it’s a high-velocity operation, whereas a warehouse is more or less static storage.

While distribution centers evolved from warehouses and have some similarities, it’s the main functions of a distribution center that make the difference between the two services clear:

• Distribution centers offer more than just the static storage of a traditional warehouse, going into many value-added services. These include cross-docking, order fulfillment, transportation, packaging, labeling and whatever other services are needed for a full order cycle, such as receiving, transportation, order processing and preparation, shipping, performance measurement and the processing of returned goods.
• A distribution center is more customer-focused than a warehouse for a natural reason. For a warehouse, it makes sense that the focus is on finding the most cost-effective ways to store the products being housed there. This, in turn, helps keep customer’s costs down and the warehouse’s margins high. With a distribution center, the mission is to provide the best service to its customers since the primary aim is not storage but service.
• While both warehouse and distribution services involve the use of technology in today’s tech-focused world, a distribution center often uses more tech tools than a warehouse. In order to efficiently receive, locate and store products, scan bar codes, plan loads, and process orders, today’s distribution centers must have reliable transportation, order processing and warehouse management tech systems in place.
• The business of a distribution center is naturally focused on the customer-distributor relationship. Customer requirements drive the entire process, and the center is the primary link between customers and suppliers. A storage warehouse, by contrast, tends to be more inwardly focused.

The distribution center of today, in short, has evolved into a hub in many supply chain networks. Warehousing is still an important service that some companies need, but if you require distribution services, a distribution center is likely the hub for you.

Which One Do You Need?

When you’re looking at warehouse and distribution services, it might not come down to one or the other but both. As with many logistics decisions, it depends on what your products are, what type of transit times you need, your customers, and your service goals. In order to determine which services you need, you must research and analyze your entire supply chain and order cycle.

In a warehouse, your goods will generally be stored for a longer time. In a distribution center, the storage is very short, with orders often fulfilled on a daily basis. The center arrangement can work well if your orders come in consistently and aren’t on a long or global supply chain as your production units need to produce orders constantly to re-fill your distribution center’s stores so it can effectively serve your customers.

If you have a global or long supply chain or inconsistent orders or fulfillment capabilities, you can use a warehouse and distribution center to effectively serve all your needs. Your distribution center can replenish its stores from your warehouse, shortening delivery times to the center and economizing scale with bigger loads and vehicles.

Don’t Forget Your Market

Each market has its own needs that must be considered when you’re making decisions. The agricultural commodities market, for example, needs a network that is multi-modal so transport and delivery is as efficient as possible. While some products can sit in a warehouse for days, these types of products have special warehousing concerns and limited shelf lives, so speedy order and supply chain cycles are absolutely crucial in this market. Possible logistics methods you can use to help meet these concerns include pool distribution, when orders for a specific region are pooled together and distributed at once, and cross-docking, when your products are delivered from the supplier directly to the retail chain or customer with little to no time in storage.

Choosing the Right Center

Whether you need warehouse services, distribution center offerings or both, finding the right provider is crucial. Research providers who specialize in the handling of your product type, and look at any available success metrics you can find for each one. While cost is always a concern, a cheaper service may end up costing you more in the long run because of delivery or processing delays, lost or damaged goods, and customer or merchant dissatisfaction.

Speak to other companies in your industry if possible and find out who they have used for their warehouse and distribution services. Ask about their experience with each provider available to you, from customer service to delivery and processing times and other logistics-related matters. The experiences of other customers can help you determine which providers to investigate further and which providers to avoid.

Don’t forget to include your retail customers and suppliers in your decisions. You stand the best chance of success when everyone involved in your business cycles believes in the logistics methods you’ve chosen.