It's where the carriers are, and where the goods live, at least for a while! This essential logistical space, where products are received, stored and distributed to the end customer, contributes to the efficiency and fluidity of the supply process.
However, it's important to note that different types of distribution center exist, each with its own distinctive characteristics. In this article, we'll explore in detail their crucial functions within the supply chain, as well as their significant impact on overall business performance.
What is a distribution center?
A distribution center (DC) is a strategic logistics facility located between manufacturers and retailers or end customers. Its primary role is to efficiently store, manage and distribute products and goods.
The key objective?
To ensure that products are kept safe and organized, while being delivered to the right place at the right time. These facilities have been specifically designed to handle large volumes of goods, facilitating rapid and efficient product movement.
What is the flow of a distribution center?
Important to the challenges of a good Supply Chain, the flow of a distribution center may vary according to the specific structure and processes of each facility, but it generally comprises the following stages:
Goods receipt: product shipments arrive at the distribution center from manufacturers or suppliers. Products are unloaded, checked for quantity and quality, and entered into inventory management systems (often called WMS).
Storage: Products received are allocated to appropriate storage locations within the distribution center. This may involve the use of shelving, racking, pallets or other storage systems, depending on product characteristics.
Stock management: The distribution center constantly monitors stock levels and carries out control activities, such as replenishing products, reorganizing stock to optimize available space, and carrying out periodic inventories.
Did you know? Warehouse Management Systems (WMS) make inventory and warehouse management a whole lot easier! Connected to your IT tools, including accounting and invoicing, this software has become indispensable for many logistics companies.
Order picking: When an order is received, the required products are selected from the storage locations according to the order information. This can be done manually by employees, or using picking technologies such as voice systems, barcode scanners or light-gathering devices.
Packaging: Once products have been selected, they are packaged according to order specifications, including adequate protection of items such as the use of boxes, bags, bubble wrap or other packaging materials.
Dispatch: Packages ready for dispatch are taken to the dispatch area, where they are labelled with destination information and prepared for transport. Depending on requirements, packages can be organized on pallets to facilitate loading into transport vehicles.
Transport: Packages are transported to final destinations, which may be other distribution centers, stores or direct customers. This may involve the use of trucks, planes, ships or other means of transport, depending on the distance and urgency of the delivery.
What happens when an order arrives at a receiving dock?
When an order arrives at a receiving dock, also known as a logistics dock or logistics dock, there is usually a receiving and sorting process to ensure that it is directed to the right place and can be processed correctly.
First, the order is registered in the system, usually using a tracking code or unique identification number. This enables the status of the order to be tracked and monitored throughout the process. Next, the order packaging is inspected for visible damage or signs of opening.
This inspection is important to guarantee the integrity of the products and to record any problems that may have occurred during transport.
Order documents, such as invoices, delivery notes, eCMR or proofs of delivery - in short, the various transport documents - are checked to ensure that they correspond to the contents of the order and are correct. This is essential for the accounting, tracking and verification of all transactions.
Based on order information and system instructions, the unit performs sorting and determines the correct destination. This may be a specific area of the distribution center, a dedicated storage area, or preparation for immediate dispatch to an end customer. Once the order has been sorted and directed to the appropriate location, it passes through the processing stage, which includes activities such as :
application of shipping labels
preparation for shipment.
Once the order has been processed, it is prepared for shipment. This includes selecting appropriate packaging, inserting protective materials, generating shipping labels and organizing items to optimize space and security during transport.
The order is then sent to the shipping area, where it is grouped with other shipments for the same destination or route. A final check of the documentation is carried out, and the order is placed in the transport vehicle designated for delivery, be it truck, airplane or other means of transport.
Throughout the process, the order status is updated in the system, enabling the sender and receiver to track the progress and location of the order. These updates can include notifications of unit release, arrival in other units, or delivery estimates.
The status of an order, just like the status of a shipment, is extremely important in logistics. This is why transport planning is an essential element in the organization of a transport company. What may appear to be a simple function or table is in fact the basis of all programming for a successful delivery circuit.
What are the functions of a distribution center?
The distribution center plays several important roles in the supply chain management and product distribution process.
The distribution center receives product shipments from manufacturers or suppliers and performs an inspection to ensure that items conform to specifications and are ready for storage and distribution.
It is responsible for the efficient and safe storage of products, including the appropriate allocation of storage locations and inventory control through management systems. In addition, the distribution center is responsible for packaging products according to order specifications and transportation requirements. This includes the selection of appropriate packaging, adequate product protection and the application of shipping labels.
A distribution center plays several important roles in the supply chain management and product distribution process.
What are the main types of distribution center?
There are different types of distribution center, each with specific features and functions tailored to the needs and demands of the supply chain.
Primary distribution centers: Also known as regional distribution centers or higher-level distribution centers, these are responsible for receiving large volumes of products from manufacturers and suppliers, long-term storage and order processing for other secondary distribution centers or stores.
Secondary distribution centers: Located in specific areas, these centers receive shipments from primary distribution centers and are responsible for temporary storage, order picking and distribution of products to retail stores or end-customers in a smaller geographical area.
Cross-docking distribution centers: In this type of distribution center, incoming products are rapidly transferred from the receiving process to shipping, without the need for long-term storage. The aim is to speed up distribution by reducing the time products spend in the distribution center.
Online distribution centers: Also known as e-commerce distribution centers, these are specially designed to meet the demands of online commerce. These centers process online orders, performing activities such as order picking, packaging and shipping efficiently to meet the delivery times required by e-commerce.
Value-added distribution centers: These centers perform value-added activities in addition to warehousing and distribution. These may include kit assembly, customized packaging, special labeling, product configuration or other customization activities to meet specific customer needs.
What are the advantages and disadvantages of a distribution center?
Stock consolidation: The space enables the consolidation of stocks of different products in one central location. This helps reduce storage costs, saves space in retail facilities and simplifies inventory management.
Reduced transportation costs: By having a strategically located distribution center, transportation costs can be reduced by optimizing routes and consolidating shipments to final destinations, resulting in operational efficiencies and reduced logistics costs.
Improved customer service: With a distribution center, it's possible to speed up order processing, improve delivery times and respond to customer requests more quickly and efficiently, contributing to customer satisfaction and loyalty.
Flexibility and scalability: A well-designed distribution center offers the flexibility needed to adapt to changing market demands and future expansions. Storage capacity and operational processes can be adjusted in line with business needs.
The main disadvantages of a distribution center can include high initial set-up and operating costs, the need to maintain large inventories to meet demands, reliance on transport logistics to get products to final destinations, and the possibility of stock-outs or delivery delays if the distribution center is not operating optimally.
The various disadvantages can be grouped as follows:
Initial investment and operational costs: establishing and operating a distribution center requires a significant initial investment in facilities, equipment, IT systems and human resources. In addition, there are ongoing costs associated with leasing or owning space, energy, labor and maintenance.
Management complexity: distribution center operations involve a series of complex operations such as receiving, warehousing, order picking, packing and shipping. Managing all these activities requires an effective control and supervision system, as well as qualified personnel.
Transit time: while the installation can improve delivery times, it can also add time to the transport cycle. Products must be received, processed and dispatched from the distribution center, which can increase the time it takes for products to reach their final destination.
Risks of operational failure: a distribution center is a critical part of the supply chain, and any operational failure can have a significant impact. Operational interruptions, such as systems failures, stock problems or delays in order processing, can lead to customer dissatisfaction and loss of revenue.
How does cross-docking work in a distribution center?
Cross-docking is a distribution strategy used in a distribution center (DC) to speed up the product handling and shipping process. In this system, products received at the DC are transferred directly from the receiving location to the shipping location, without the need for prolonged warehouse storage.
When a shipment of products arrives at the CD, an initial inspection is carried out to check the quantity and quality of the items. Products are then sorted according to final destination or distribution route. Product segregation is carried out quickly and efficiently, organizing products according to outgoing orders or customer requests.
After separation, products are consolidated to optimize distribution. They are grouped according to delivery routes or final destinations, to reduce dwell time in the DC.
During this process, products can be labeled with the necessary information such as barcodes, customer information and destination.
Once consolidated and properly prepared, the products go directly to transport vehicles such as trucks or containers for immediate delivery to final destinations. The aim is to minimize transit time at the DC, guaranteeing fast, efficient distribution. The success of cross-docking depends on effective coordination between suppliers, the CD and customers. It is essential that shipments are correctly synchronized, that product separation is rapid and that delivery deadlines are met.
This strategy is best suited to fast-moving products, which do not require prolonged storage and have predictable demand. Cross-docking is widely used in sectors such as retail, perishable food products, large-scale distribution and e-commerce, where speed of delivery is essential to meet customer expectations.
By eliminating the need for prolonged storage at the DC, this strategy helps to reduce costs, increase operational efficiency and improve customer satisfaction.
What does it take to open a distribution center?
Setting up a dynamic, high-performance distribution center requires detailed, rigorous planning. The objectives and specific needs of the logistics site must be clearly defined, taking into account essential aspects such as storage capacity, strategic location to guarantee optimum logistical access, the development of a suitable infrastructure, and the provision of the human resources needed to ensure smooth and efficient operation.
Once these foundations have been laid, the next step is to carefully find a suitable space for loading the docks, taking into account fundamental criteria such as size, layout, safety and, of course, current regulatory requirements. While maintaining a professional approach, it's important to approach this stage seriously and competently, without neglecting the smallest detail. Reduce trucks loading times with a special time slot booking system contributes to the facilitation of this step.
Subsequently, the phase of acquiring equipment and storage systems must be carried out with precision. It's all about selecting the right elements to create an efficient working environment. This includes well-organized shelving, forklift trucks adapted to the workload, high-performance inventory management systems, and information technologies that optimize operations.
Operational processes also need to be defined clearly and professionally, to ensure that they run smoothly and consistently.
In this logistical adventure, partnerships with suppliers, carriers and logistics companies require a professional and strategic approach. Transport contract negotiations must be conducted with rigor, inventory management must be meticulously orchestrated, and service agreements must be concluded in accordance with the commitments made.
Compliance with legal and regulatory standards is an essential step in the opening and smooth running of a distribution center. It is essential to ensure that all required licenses and authorizations are obtained, and that safety and environmental regulations are scrupulously respected. This process must be carried out with seriousness and integrity, guaranteeing compliance with legal requirements.
Finally, detailed financial planning is crucial to ensure the economic viability of the distribution center. Initial investments, operating costs such as rent, energy and labor must be carefully assessed, while maintaining a clear vision of the expected return on investment. This professional approach will enable realistic forecasts to be made and financial targets to be met.
What's the difference between a warehouse and a distribution center?
A warehouse and a distribution center are both storage facilities, but there are significant differences between them.
A warehouse is generally used to store products for a longer period, with the aim of maintaining stocks on a stable basis. Products are generally received in large quantities and stored until they are needed to meet demand.
In contrast, a distribution center (DC) is designed to accelerate the flow of products through the supply chain. It acts as an intermediary point between suppliers and end customers, where product consolidation, segregation and distribution takes place. A DC receives products from various suppliers and separates them according to customer orders or store requests.
A distribution center can also offer value-added services such as customized packaging, special labeling, kit assembly or other customization activities to meet specific customer needs.
Another difference is the strategic location of CDs. They are generally positioned in strategic locations, close to transport routes, ports or production centers, with the aim of optimizing distribution and reducing logistics costs.