Difference Between Warehouse and Distribution Center – Supply chain management is multidimensional. It not only operates through several divisions, but also encapsulates numerous processes at various stages. In such a technical environment, supply chain managers and professionals often use the words “warehouses” and “distribution centers” interchangeably. In fact, most of the professionals consider these two terms to be the same with no considerable differences.
Are they correct? Technically, NO! Although warehousing and distribution centers may seem identical, they differ vastly in functions, processes and technicalities. It is to be kept in mind that the globalized economies have made supply chain management extremely precise and the misuse of jargon may become serious barriers to effective management. Thus, the post aims at differentiating between a warehouse and a distribution center in several ways.
What makes us think warehouses and distribution centers are the same?
Traditional supply chains aimed at storing the maximum quantity of products whenever and wherever possible, which led to warehouses stockpiling inventory to release when demand is created. But leading up the 21st century, supply chains started evolving and started adding more and more divisions to enhance precision, which has helped the managers predict the product demand and gain an insight into the future. Thus, these complexities have resulted in the misinterpretation of these terms and their interchangeable use.
The concept of modern supply chains
The small integrated economies have to cater to the demand-supply equilibrium to sustain themselves in highly competitive markets. The traditional supply chains lacked the ability to adjust with the modern economies due to greater complexities of these markets and larger influencing factors. Thus, modern supply chains have been designed to adapt to the complexities of integrated markets with their highly accurate design and more divisions.
Difference Between Warehouse and Distribution Center
Since we have discussed the evolution of supply chains over a period of time, we’ll now differentiate between warehouses and distribution centers on several fronts. Here are the reasons why warehouses differ from distribution centers:
Warehouses are humongous spaces used for storing goods until they are dispatched when the demand for the product is generated. These spaces act as a stabilizer of market equilibrium as they balance the demand and supply for a particular commodity. They also provide safety for the goods, a perfect storage environment for perishable commodities, and much more.
On the other hand, the scope of distribution centers is much wider than that of a warehouse. In other words, distribution centers act as “value adders” for a particular product. Besides storing products, distribution centers also offer value-added services like cross-docking, order fulfillment, packaging, product mixing, and much more.
Flow velocity refers to the period of time for which a particular product stays at a particular place. In regards to warehouses, the products are stored for a long period i.e. until the product is needed in the market. On the other hand, a product is sent to the distribution center for a short time when the value is to be added to the product i.e. generally at the time when the product is to be sent to the market.
Thus, the flow velocity of distribution centers is greater than that of warehouses.
Relation with the customers
The role of warehouses is to store the products efficiently and dispatch them for further process when the demand is generated in the market. In other words, a warehouse has nothing to do with the general public. It just helps the firm owners and manufacturers to supply the goods in the markets when required.
On the other hand, distribution centers generally revolve around the customers. These are the places where are goods sent from warehouses before they enter the markets. In other words, distribution centers deal with the general public. The goods are packaged/cross-docked/mixed and prepared for their entry into the markets.
Thus, warehouses don’t deal directly with the customers while distribution centers do.
As talked about earlier, globalized economies have resulted in more complexities in supply chain management. This complexity in the operations can be the basis of differentiation among these seemingly interchangeable terms. When talking about distribution centers, these places are extremely complex, involving more processes than a warehouse. As a product arrives at a distribution center, it is packaged into suitable packaging so that it can be sold in retail stores. Other processes include cross-docking, product mixing, and much more.
On the other hand, warehouses are less complex. Their function includes providing a suitable storage environment for different categories of products and ensuring proper security of these products before they’re dispatched for the markets.
Thus, distribution centers are much more complex than warehouses.
Warehouses vs. distribution centers – a bird’s eye view
If the distribution centers cater to most of the market functions, is it possible that warehouses will become extinct? No. Warehouses and distribution centers have their own benefits that make both of them inherent components of supply chain management. In the above section, we’ve already seen that warehouses and distribution centers differ significantly from one another, making both of them important in their own way.
Take the case of seasonal products. These products require a particular environment for their storage. If warehouses were to vanish, the firms dealing in seasonal products won’t be able to operate due to the inappropriate storage environment. Thus, warehouses are a lifeline of most industries.
The bottom line
Warehouses and distribution centers differ significantly and each have their own advantages. On the one hand, warehouses store the products, on the other distribution centers deal with packaging, cross-docking, etc. Thus both are an indispensable part of the supply chain and their contribution to economic development is important.
- Posted by admin
- On August 18, 2020