What is a Distribution Center?

The term distribution center is used to describe a building or warehouse which is stocked with inventory to be re-distributed to retailers, wholesalers, or even directly to consumers. A distribution center is an integral part of the order fulfillment process. Distribution centers are generally demand driven. Product or inventory leaves the facility when an order has been placed.

The name by which distribution centers are known can be based on the purpose of the operation. For example, a retail distribution center normally distributes goods to retail stores, an order fulfillment center commonly distributes goods directly to consumers, and a cross-dock facility stores little or no product, however, distributes goods to other destinations.

Distribution centers are the foundation for a company’s supply chain, since distribution centers tend to be large facilities that hold a vast amount of inventory. The holding of inventory is maximized throughout the facility by placing product in racks. This can be seen in the picture below.

As you can see, nearly all products are stored on pallets. This allows inventory to be stacked and transported by forklift with ease.

It is helpful to view distribution centers as a production operation. Goods, or inventory, arrive in bulk and are then stored until needed. The products are then retrieved and assembled into shipments for stores or customers. Not all stores will want or need the majority of products that a company sells, and the same goes for customers (if speaking about a direct-to-consumer facility). For example, a department store located in New York may sell more coats and boots, while the same store in Florida may need to have more sandals and t-shirts available for sale.  A distribution center can cater to these specifications based on orders placed by store or region.

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