ERP Manufacturing Insights

What’s the Difference Between a Warehouse and Distribution Center?

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Whats the difference between a warehouse and distribution center

At first glance, there may not seem to be many fundamental differences between a warehouse and a distribution center. Many people who use the terms don’t bother to differentiate between them, so it’s not surprising that they’re often regarded as highly similar, if not interchangeable.

However, in the 21st century supply chain environment, warehouses and distribution centers now serve different purposes. Each can be an essential component of a supply chain, but each also needs to follow best practices appropriate to its function. What do those practices look like, and how do they help illuminate the difference between a warehouse and a distribution center?

Manufacturing warehouse erp
There are fundamental differences between a warehouse and distribution center

Warehouses and Distribution Centers: Similarities and Differences

The different strategies needed to create productive warehouses and distribution centers can be identified by looking first at the key ways in which their purposes align and differ.

First, the traits they have in common:

  • Part of logistics and supply chain networks.
  • Control the storage and movement of goods.
  • Often use similar equipment such as forklifts, barcode scanners and pallets.
  • Significant capital investments for businesses. 

Next, consider the key traits of a warehouse, which are:

  • Used primarily for storage.
  • Has a dock and other equipment for inbound and outbound freight, but typically isn’t designed for fast-paced distribution.
  • Often keeps products in storage for extended periods.
  • Relatively uncoupled from demand in comparison to a distribution center.
  • Often located in less accessible areas, farther from main thoroughfares.
  • Can typically run with lower staffing levels. 

Meanwhile, the key traits of a distribution center are:

  • Used primarily for fulfilling orders and distributing products, either between facilities or from the business to the customer.
  • Often performs many value-added services such as product mixing and packaging.
  • Highly demand-driven and is expected to adapt to a variety of changing market conditions.
  • Often functions as part of a node network that facilitates fast and efficient distribution over a wide area.
  • Can be the last touch before last mile logistics systems take over.
  • Typically require relatively high staffing levels to function effectively. 

Some distribution centers also feature warehouse space for long-term storage, but a warehouse typically can’t accommodate the more frenetic pace of a distribution center.

In today’s supply chain environment, key roles exist for both warehouses and distribution centers. To achieve better performance from both, businesses must treat them as unique entities and identify the strategies that drive results in each. 

Erp warehouse boxes manufacturing
ERP solutions can help manage warehouses and distribution centers

Unique Needs of the Warehouse

The warehouse should focus on the one main thing that it exists to do: storage. Thus, technology and personnel strategies should all be employed toward the goal of storing products more safely, more efficiently and more profitably:

  • Processes oriented toward ensuring storage that meets performance standards.
  • Specialized environments for items that are both sensitive and slow-moving, such as refrigerated or moisture-controlled storage.
  • Efficient receiving and inventory control processes.
  • Storage and shelving systems that optimize existing space.
  • Staffing levels sufficient to meet needs without overstaffing.

Unique Needs of the Distribution Center

The distribution center, as the high-velocity hub of 21st century commerce, has a more intricate challenge. Distribution centers shoulder a greater responsibility in terms of workload and complexity, so it’s important to address those principles in planning operational procedures:

  • Processes oriented toward maximum efficiency in fulfilling orders and creating value (without sacrificing safety).
  • Effective communication that allows the coordination of large volumes of inbound and outbound freight.
  • Competence throughout the entire life cycle of an order, from picking to packaging to returns.
  • Procedures that facilitate smooth receiving, shipping and last mile transportation.

How to Build a Better Warehouse

Improving warehousing operations requires the incorporation of new technologies into fairly well-established principles.

  • Ensure the timely check-in, receiving and clean-up of all shipments. Technologies like barcode scanning can make these processes much faster, but the most important principle is that jobs like put-away and waste disposal not be left to accumulate to a crisis point.
  • Implement thorough training procedures that instill employees with a strong sense of the reasons that their jobs are important.
  • Use warehouse management systems (WMS) software to track KPIs and identify areas for improvement.
  • Maintain open lines of communication between departments and suppliers. If the organization uses manufacturing ERP software, the warehouse should have access to necessary components of the system.

How to Build a Better Distribution Center

Best practices continue to evolve for warehouses and distribution centers alike, but the distribution center is undergoing more rapid transformation due to its importance in the new retail economy.

However, many of the following practices have well-established benefits:

  • Distribution ERP software is now essentially a necessity for any well-run distribution center. This software helps streamline multiple data flows into a single platform, which is key when dealing with the hive of constant activity that often characterizes distribution centers.
  • For businesses struggling with pick times at their distribution centers, consider implementing alternative technologies that can make picking more efficient. Businesses that don’t already have barcode or RFID scanners should work to correct that right away — but other technologies can help as well. That includes innovative options like pick-to-voice and pick-to-light, which can lessen the learning curve for newcomers and create more streamlined systems.

Investigate options such as cross-docking that have been used elsewhere in the industry with great success. Naturally, not every business has the warehouse space or logistical capacity for this. Nonetheless, simply understanding the concept (used by numerous power players like Walmart) can offer some illuminating principles on increasing efficiency.

For organizations that aren’t used to running warehouses and distribution centers differently, these concepts can take some time to fully grasp and implement. The current supply chain model, with its outsized importance of distribution centers, is relatively young and has not yet reached full maturity. Thus, perhaps the best long-term advice for both warehouses and distribution centers is to maintain flexibility, stay current on the technical side and recognize the unique places in the supply chain that they occupy. 

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