The Role of Distribution Centers and Warehouses
Although warehouses and distribution centers appear to be interchangeable terms, they do have different characteristics. A warehouse is a facility where goods are stored for periods of time, while a distribution center tends to store goods for short periods of time as orders are fulfilled, commonly on a daily basis. On the above figure, if only a distribution center is used in a supply chain, the production units (e.g. manufacturing plants) would need to constantly produce consignments to replenish a distribution center servicing retail stores. Longer and globally oriented supply chains have often required the usage of warehouses where the output of production units can be stored for a period of time and consignments assemble in larger loads, such as container loads. Then, such warehouses can be used to replenish distribution centers that can be quite distant, commonly through long distance container shipping. This also conveys the advantage of shorter deliveries since orders from a retail store are provided from a nearby distribution center. There is also the possibility of benefiting of economies of scale through bigger vehicles and higher load factors.