Many logistics professionals interchangeably use warehouse and distribution center. Some even claim that there is no difference between a distribution center and a warehouse. How different is a distribution centre from a warehouse? I will be the first to tell you that they are just as different from traditional supply chains in 21 century.

In traditional supply chains, the rule was to keep “maximum quantity of each product at all times”

Because of the lack of planning and information flow in the supply chain, this rule was necessary. This led to warehouses that were used for stockpiling inventory. Inventory would then be shipped out several months later than it arrived at the warehouse.

The supply chains of today are different than they were 20 years ago. Modern supply chains are equipped with more information and intelligence to be able to forecast product demand, plan appropriately, and deliver items when they are needed.

The new supply-chain rule is to ensure that you have the required quantity of the correct product at the right time and place

Traditional warehouses were not able to meet the new supply chain rules. This led to the creation of distribution centers from static warehouses. Let me now explain the difference between a warehousing and distribution center.

  • While a warehouse is used to store products, a distribution center offers value-added services such as product mixing, cross docking and packaging.
  • The time that products are stored in a distribution center is much shorter than those in a warehouse. The flow velocity through a distribution center is generally much higher than that through a warehouse.
  • The distribution center is customer-centric. It acts as a bridge between suppliers and customers. Although warehouses are responsible for storing products efficiently, distribution centers serve the purpose of efficiently meeting customer needs.
  • Most warehouse and retail orders are shipped from a distribution centre and not from a warehouse. A warehouse doesn’t usually serve customers outside of its own territory, while a distribution centre does.
  • Distribution center operations are more complicated than those at warehouses. Distribution centers have the latest technology to manage order processing, warehouse management, and transportation management.

Now you know the difference between a warehouse or a distribution center, and how it evolved over time. Is this a sign that warehouses are no longer needed or obsolete? If you think so, you will be wrong. Warehouses still exist, and they serve a purpose. One example is how inventory is built months ahead to meet high seasonal demand. It is then stored in warehouses before being shipped to distribution centers for customer service. The importance of warehouses has diminished and distribution centers are now the nerve center of modern supply chains.