Here’s Everything You Need To Know About Distribution Centre

Here’s Everything You Need To Know About Distribution Centre

Here’s Everything You Need To Know About Distribution Centre

A distribution centre, sometimes called a fulfilment centre, is a large warehouse that is a key part of the supply chain

What Is A Distribution Centre?

A distribution centre, sometimes called a fulfilment centre, is a large warehouse that is a key part of the supply chain. Distribution centres are the middle ground between where products are made and where they are sold. They are critical in getting goods to the customer quickly and efficiently.

What Is The Difference Between A Warehouse And A Distribution Centre?

Warehouses and distribution centres both deal with storing and moving products, but there are some key differences in their focus and function:


  • Warehouse: Primarily for long-term storage of goods. Think of it as a holding area until the items are needed elsewhere in the supply chain.
  • Distribution Centre: Goes beyond storage and concentrates on order fulfilment. They are geared towards efficiently picking, packing, and shipping individual orders.


  • Warehouse: Relatively basic functions like receiving, storing, and retrieving goods. Inventory management and organisation are crucial here.
  • Distribution Centre: Performs all the above tasks of a warehouse, including order processing, packing, and shipping. They might also offer additional services like product mixing (combining items from multiple orders) or cross-docking (transferring goods directly from one truck to another without storage).

Inventory & Speed:

  • Warehouse: Products can be stored for long periods, depending on demand. Inventory turnover is slower.
  • Distribution Centre: Products move faster through the facility. Ideally, items are received, processed, and shipped out relatively quickly.

Technology & Layout:

  • Warehouse: Can have less sophisticated storage systems and rely more on manual labour.
  • Distribution Centre: Often utilises automation and advanced warehouse management systems to ensure efficient order fulfilment. The layout is designed for picking and packing speed.

What Are The Key Activities That Take Place In A Distribution Centre?

A distribution centre bustles with activity to ensure a smooth flow of goods from receiving to shipping. The following are the key functions that keep things running:

Inbound Operations:

  • Receiving: Inspecting and verifying delivered goods against purchase orders or shipping manifests. This ensures the shipment is accurate and undamaged.
  • Unloading: Offloading goods from trucks or containers using forklifts, conveyor belts, or other equipment.
  • Putaway: Store received items in designated locations within the distribution centre. This often involves using a warehouse management system (WMS) for optimal space utilisation.

Inventory Management:

  • Stock Control: Tracking inventory levels in real-time to avoid stockouts or excess inventory. This involves regular cycle counts and maintaining accurate records.
  • Replenishment: Ordering new stock to maintain desired levels based on demand forecasts and reorder points.

Outbound Operations:

  • Order Fulfilment: Picking and packing individual items or assembling orders based on customer requests. Picking strategies like batch picking or zone picking can be employed for efficiency.
  • Packing: Selecting appropriate packaging materials to ensure safe and secure transport of the order.
  • Shipping: Preparing shipping documentation, labelling packages, and scheduling shipments with carriers for timely delivery.

How Do Distribution Centres Contribute To The Overall Supply Chain?

Distribution centres are the cornerstones of efficient and responsive supply chains. Here’s how they contribute:

Improved Efficiency:

  • Storage Optimisation: By consolidating inventory in a central location, distribution centres eliminate manufacturers’ and retailers’ need to maintain storage facilities. This reduces overall storage costs and streamlines operations.
  • Faster Order Fulfilment: Distribution centres are designed for picking and packing speed. With optimised layouts and automation, they can fulfil orders quickly, which translates to faster delivery times.
  • Reduced Transportation Costs: Strategic placement near transportation hubs allows for efficient distribution routes, minimising transportation costs.

Increased Supply Chain Visibility:

  • Inventory Tracking: Real-time inventory tracking systems in distribution centres provide valuable data on stock levels and product movement throughout the supply chain.
  • Reduced Lead Times: Efficient distribution centre operations shorten the lead time, which is when a product moves from raw materials to the end customer.

How Do Distribution Centres Manage Inventory Levels? 

Maintaining optimal inventory levels is crucial for a distribution centre’s success. Here are some key strategies they employ:

  • Demand Forecasting: Analysing historical sales data, seasonal trends, and marketing campaigns to predict future demand for each product.
  • ABC Analysis: Classifying inventory (A, B, C) based on their value and turnover rate. High-value, fast-moving items (A) receive closer attention and tighter controls, while lower-value, slower-moving items (C) may have less frequent monitoring.
  • Safety Stock: Maintaining a buffer stock of critical items to avoid stockouts due to unexpected demand fluctuations, lead time variations or delivery delays.
  • Minimum Order Quantity (MOQ): Negotiating minimum order quantities with suppliers to get better pricing while avoiding excessive stock buildup.
  • Warehouse Management Systems (WMS): Utilising software to track inventory levels in real-time, automate reorder points, generate reports on stock movement, and identify potential stockouts.
  • Just-in-Time (JIT) Inventory: In specific situations, employing a JIT approach where inventory arrives just before it is needed.

What Are Some Technologies Used To Improve Efficiency In Distribution Centres?

The rise of technology has revolutionised distribution centres, making them smarter and more efficient. The following are some key technologies that are transforming warehouse operations:

  • Warehouse Management Systems (WMS): This software acts as the brain of the distribution centre. It tracks inventory levels, optimises storage locations, generates pick lists for orders, and manages the flow of goods throughout the facility.
  • Automated Storage and Retrieval Systems (AS/RS): These high-density storage systems use cranes, robots, or shuttles to retrieve and store pallets or bins in towering racks. This saves space, improves picking accuracy, and reduces reliance on manual labour.
  • Picking Technologies: Various technologies assist with the picking process, such as:
  • Pick-To-Light Systems: Lights on shelves or bins guide pickers to the correct items, improving accuracy and speed.
  • Voice Picking Systems: Workers receive instructions through a headset, allowing them to keep their hands free for picking.
  • Put-To-Light Systems: Lights on workstations indicate where to place picked items, streamlining the packing process.
  • Robotics: Robots are increasingly used for various tasks, including palletising, depalletising, case picking, and packaging.
  • Artificial Intelligence (AI) and Machine Learning (ML): AI and ML algorithms analyse vast amounts of data to optimise picking routes, predict demand, and improve overall distribution centre efficiency.