Chapter 7 Distribution     

7.4 Distribution Centers

A distribution center for a set of products is a warehouse or other specialized building,often with refrigeration or air conditioning, which is stocked with products(goods) to be redistributed to retailers, to wholesalers, or directly toconsumers. A distribution center is a principal part, the order processingelement, of the entire order fulfillment process. Distribution centers areusually thought of as being demand driven. A distribution center can also becalled a warehouse, a DC, a fulfillment center, a cross-dock facility, a bulkbreak center, and a package handling center. The name by which the distributioncenter is known is commonly based on the purpose of the operation. For example,a "retail distribution center" normally distributes goods to retailstores, an "order fulfillment center" commonly distributes goodsdirectly to consumers, and a cross-dock facility stores little or no productbut distributes goods to other destinations.

Distribution centers are the foundation of a supply network, as they allow a single locationto stock a vast number of products. Some organizations operate both retaildistribution and direct-to-consumer out of a single facility, sharing space,equipment, labor resources, and inventory as applicable. A typical retaildistribution network operates with centers set up throughout a commercialmarket, with each center serving a number of stores. Large distribution centersfor companies such as Wal-Mart serve 50–125 stores. Suppliers ship truckloadsof products to the distribution center, which stores the product until neededby the retail location and ships the proper quantity.

Since alarge retailer might sell tens of thousands of products from thousands ofvendors, it would be impossibly inefficient to ship each product directly fromeach vendor to each store. Many retailers own and run their own distributionnetworks, while smaller retailers may outsource this function to dedicatedlogistics firms that coordinate the distribution of products for a number ofcompanies. A distribution center can be co-located at a logistics center.