Smart Warehousing Feb 18, 2022 3:21:00 PM 9 min read

Supply Chain 101: Warehouse vs. Distribution Center

Traditionally, warehouses and distribution centers were intrinsically different, each responsible for their own distinct objectives. Today, the two terms are often utilized interchangeably, evolving in the way they function and operate to accommodate the changing needs of the logistics sector.

Traditional supply chain models focus on production and provision, requiring companies to stockpile and maintain large quantities of products across multiple locations. These methods rely heavily on manual intervention, lacking streamlined information flow and planning mechanisms due to limitations in technology. This spawned the need for warehouses. Within warehouses, inventory is stored and subsequently shipped to its intended destination months after arriving in the warehouse.

But over the years, supply chains have evolved to meet today’s shifting market demands through hyper-personalization and an agile framework. Modern supply chains leverage technology to provide a myriad of solutions — from predictive analytics surrounding product demand to real-time inventory updates — all with the ultimate goal of delivering a faster, better, and more cost-effective service.

Where the traditional supply chain focuses on storing high volumes of inventory, today’s supply chain places an emphasis on having the right quantity of product, available at the right place at the right time to achieve consumer delivery expectations. To cater to this new ideal, many static warehouses expanded their offerings, aligning their solutions to more closely mimic the distribution or fulfillment center business model.


Warehouse vs. Distribution Center: What’s the Difference?

The terms “warehouse” and “distribution center” are sometimes used interchangeably. Both warehouses and distribution centers can involve receiving, storing, managing, and shipping goods. However, there are some key differences in what a warehouse can offer and what a distribution center can offer.

While some businesses have redefined classic notions of what it means to be a warehouse vs. a distribution center, let’s take a look at how the two have traditionally differed from one another.


Functional Differences

There are many similarities between fulfillment centers and warehouses in that both are used for storage, fulfilling orders and shipping. However, there are also some key differences. For example:

Warehouses typically consist of large commercial spaces designed solely for the storage of goods and products over an extended period of time. In other words, warehouses are designed for storage.

Warehouse spaces often propel market equilibrium, acting as a stabilizer between supply and demand for a wide range of commodities. As an intermediary location, warehouses can sometimes be the second-to-last stop for products before they reach store shelves. Warehouses can also be a storage space for individual parts before the next stage in manufacturing.

Additionally, warehouses can provide specialized labor and temperature control management from refrigeration to freezer space to accommodate perishables, cultivating ideal storage environments for products requiring special care.

Warehouses are typically equipped with the technology needed for sorting, transporting, and replenishing inventory — all facets of a warehouse’s daily operations. Warehouses commonly possess docking areas where goods are loaded and unloaded, and are strategically located around key transportation areas like highways, airports, railroads, and docks.

A distribution center, on the other hand, generally encompasses a larger scope of services. In addition to product storage, distribution centers provide value-added solutions such as order fulfillment, cross-docking, product mixing, packaging, and more. Distribution centers most often ship retail and warehouse orders, and are also able to serve external customers (vs. retail locations).

 

Flow Velocity

The period of time in which a certain product is housed at one location is known as flow velocity. For traditional warehouses, products can be stored for a long period of time, reserved for when market demands call for the shipment of goods. Time frames can vary depending on the type of goods stored.

A distribution center often stores goods for relatively shorter time frames, when compared to a warehouse. Products that are received by a distribution center, in contrast, are generally there for a short period of time before being shipped to its intended destination. As a result, the flow velocity at a distribution center is typically much quicker than a warehouse.

 

Customer Base & Relationships

Warehouses place their focus on efficiency of storing and dispatching various commodities as market demand calls for them. In a traditional supply chain model, warehouses didn’t interface with the general public. Instead, they served as a source of value for manufacturers and business owners that needed a sufficient place to house their products until they needed shipping. While many warehouses still follow this model, there are some businesses that utilize warehouse properties for a myriad of purposes, such as fulfillment.

Distribution centers, on the other hand, can be more customer-centric and the pace of procedures is typically much quicker than a traditional warehouse. Serving as the connective tissue between customers and suppliers for primarily B2B businesses, distribution centers strive to meet consumer expectations and needs. Operations within the distribution center model are generally more complex, leveraging cutting-edge technology to execute operations involving inventory management, order processing, transportation management, and warehouse management.

 

Intricacy of Operations

Globalized economies have fueled the level of complexity surrounding supply chain management. The intricacy of workflow and operations within a warehouse or distribution center can often be used as a basis of differentiation between the two interchangeable terms.

Whether a place is categorized as a distribution center or a traditional warehouse lies in the complexity of processes, as well as services offered, at a given location. In a typical distribution center, for instance, products that arrive may be queued up for packaging in preparation for being sold in a retail setting.

The traditional warehouse atmosphere can often involve fewer complexities. From a functionality perspective, their main objective is maintaining storage environments for a variety of products, while implementing optimal security measures to protect goods until they’re ready to be dispatched. More recently due to the growth of online shopping, warehouses have become utilized for fulfillment services to help meet demand.

Distribution center operations can sometimes be more complex, with more moving parts than the operations of a warehouse. As a result, distribution centers may feature some more advanced technology than warehouse counterparts.

 

Bringing It All Together

Both warehouses and distribution centers are inherent components of the entire supply chain picture – each with their own functionality and benefits. However, what if there was a single organization with the capacity to maneuver the entire supply chain to deliver everything from logistics services to inventory management, and so much more?

At Smart Warehousing, we can accommodate the entire supply chain under one roof. From omnichannel fulfillment to temperature-controlled management, we’ve paired innovative technology with industry leading automation to provide customized solutions that cater to your unique needs. Unlike warehouses, and unlike distribution centers, Smart Warehousing has a national network that seamlessly integrates with our inventory management system.

For more than 600 companies, the team at Smart Warehousing has provided fulfillment and technology solutions with true expertise for over 20 years and counting. To learn more about how our team of experts can help you achieve your business goals, contact us today.