Distribution Center: Definition, Best Practices, and Pros & Cons
Running an eCommerce business is becoming more complicated every year. As the large eCommerce brands become better at delivering products to their customers, small and medium online sellers must stay on pace and find ways to streamline processes and improve efficiency.
That’s why a retail distribution center is something that more online sellers are considering. A distribution service processes orders much faster, providing you with more flexibility while simultaneously keeping costs in check.
But what does a distribution center mean? And what are the distribution center best practices you should follow?
Let’s explore below.
What is a Distribution Center?
The definition of a distribution center may not always be clear, as many people aren’t exactly sure how it differs from a warehouse where goods are stored. But the truth is that while there are similarities, a distribution center is much more valuable to today’s sellers because it offers more flexibility, less overhead costs, and the ability to provide a better overall service to customers.
In essence, the distribution center’s meaning is focused on the fact that it’s a hub to store goods. These goods are then processed and shipped in the same location, ensuring that they reach the customers quickly without the need to be transported to another site beforehand.
The distribution center definition is often used interchangeably with fulfillment center, as they both do the same thing: they take over the sellers’ order processing and shipping process, allowing them to focus on their business rather than warehousing.
Leading providers have established processes that are difficult to recreate without years of experience. And that infrastructure is what makes it so valuable to companies that want fast order fulfillment, high order accuracy, and no hassle with product delivery.
Multichannel Distribution System Examples
To better understand how the multi-channel distribution definition looks in real life, it’s a good idea to look over a few examples of companies that have succeeded using this method.
The most obvious multichannel distribution system example that comes to mind is Starbucks. It’s a company with an incredible multichannel distribution strategy, with thousands of stores across the world and an online site where people can offer coffee.
The entire brand has been built on ease of access and convenience. As a result, Starbucks has become an experience that many people can’t envision their day without.
But we don’t need to look at huge multinational corporations to get an idea of how multichannel systems of distribution can be beneficial. For instance, if you have a local bakery that sells goods in a physical store, they might consider adding an online or phone ordering system to deliver the goods to the customer’s door.
This way, they could avoid the long lines and enjoy the product in a more convenient way. At the same time, the seller would have an easier time keeping customers happy and could even reach customers that might not go to the physical store.
Distribution Center vs. Warehouse
Now that we’ve answered the question of what a distribution center is, we need to address how it’s different from a warehouse.
Let’s look at a few of the most powerful benefits.
For one thing, while warehouses are typically owned, rented, or leased by the retailer, distribution centers are usually part of a third-party logistics (3PL) services package, which provides order fulfillment, storage, and many other services.
One of the key reasons distribution centers are becoming so popular is that they focus on delivering a better service to the customers. As a result, you can leverage the best practices of the fulfillment process distribution with your provider, allowing you to expand the types of experiences you can provide your customers.
Finally, instead of manually shipping each order yourself, you can enjoy the connections of a distribution center provider, who will usually ensure same-day shipping and help you save on shipping costs in the process.
What Does a Distribution Center Do?
The distribution center definition contains some clues about the primary responsibilities that it can handle. But in reality, the list of services that a distribution center can offer retailers can be even more extensive.
For starters, a retail distribution center will store inventory for their clients, ensuring that they are ready to be shipped quickly after an order is placed. This also means that the distribution center processes for receiving products and adding them to inventory will be more effective.
At the same time, a distribution center will look for ways to streamline the packing process, allowing workers to pack and prepare more similar orders at once, reducing the time it takes.
Another important responsibility of a distribution center is to ensure that there are always enough items in stock, especially for high-demand items.
In some cases, the fulfillment center might also handle returns, freeing up the retailer to focus on running the business side of things and helping keep customers happy.
Advantages and Disadvantages of Distribution Centers
Distribution centers offer a variety of benefits, which is why more retailers are opting to use them. But to get a more rounded view of whether they’re a good option for you, let’s review the main advantages and disadvantages of these types of services.
- Saves time. When you use a distribution center, you don’t have to worry about having a warehouse and managing it yourself, saving a lot of time.
- Happier customers. A distribution center can offer your customers a better experience because the provider has the network needed to process orders quickly.
- Receive insights. If your distribution center handles returns and complaints, that can provide you insights about your audience and help improve your offerings.
- Less control. Even though it provides you with more time, a distribution center also means you’ll have less control over your processes. That’s why it’s essential to find a reputable provider with distribution experience and a good reputation.
Distribution 101 used to be that you needed to have a warehouse for all the products you are selling. But today, the distribution center definition has evolved, and it now means a service that can take over inventory, shipping, and restocking for retailers across the world.
At ShippingTree, we offer comprehensive eCommerce fulfillment software and services that provide coast-to-coast coverage, excellent customer experience, and flexibility for matching your needs. If you want to learn more, fill out a form today!