What Happens at Distribution Centers?

Key Points:

• Global eCommerce market is predicted to reach a value of $6.39 Trillion by 2027, with over 5 Billion users and 9% growth a year
• Effectively using distribution centers can increase customer satisfaction by reducing shipping costs and delivery times
• Major worldwide brands, like Amazon, Nike and IKEA are increasingly investing in distribution centers to improve the delivery experience and profit margins
• Easyship can help you effortlessly plug in to a global network of distribution centers to create a fulfillment experience customer's love

Are you looking to unlock the benefits of distribution centers for your growing online store? This article breaks down what distribution centers do, some recognizable examples, and the key differences from a warehouse.

What Do Distribution Centers Do?

A distribution center is a specialized warehouse designed to receive and store inventory for your online store's orders. Once a customer purchases a product from your site, a distribution center will complete the order fulfillment process. Your chosen shipping solution will pick orders, plus pack and ship the package for delivery to the end customer.

Difference Between a Warehouse and Distribution Center

As eCommerce supply chains have evolved, the key differences between warehouses and distribution centers have evolved at pace. Checkout this quick breakdown of key comparisons:

• Warehouses are used for storing products until required. While distribution centers are equipped for storage, plus product mixing, order fulfillment, cross docking and packaging
• Warehouses store items for longer periods of time. While optimization of order processing systems in distribution centers demand a short period, high volume flow from storage to end customer to improve the bottom line
• Warehouses are focused on storing goods rather than creating a great customer service experience. Distribution centers typically are the key link between product suppliers and an on time delivery
• Generally, operations at warehouses are less complex. While distribution center work includes order processing, inventory management, transportation and warehouse management
• Orders for distribution warehouses and eCommerce customers generally pass through an essential distribution center process. Being picked and packed, rather than stored as inventory in a warehouse

While warehouses used to play an important role in supply chain management, for eCommerce, distribution centers operate at the center. Warehouses can still play a key role in stockpiling products before demand peaks. However, distribution centers offer value added services that can help online stores grow.

Examples of Distribution Centers

The global eCommerce market is forecast to rapidly grow at 9% a year till 2027. Potentially reaching a predicted market value of $6.39 Trillion and over 5 Billion users, according to a Statista study. Major retail brands are investing heavily in an extensive network of distribution centers to meet increasing online customer demand. Key examples include:

Amazon

With over 100 active fulfillment centers in the US and 180 worldwide, Amazon is the leading ecommerce marketplace. A key feature of Amazon fulfillment centers are the investment in automated storage and retrieval systems, reducing the need for service teams by relying on robotics.

Nike

Since 2020 Nike has been shifting its supply chain to focus primarily on eCommerce customers. Nike operates over 70 distribution center locations around the world, with 7 in the US. Outside the states, its major centers are based primarily in China, Japan, Korea and Belgium. Nike Chief Operating Officer, Andrew Campion, comments:

“As we continue building a digital-first supply chain globally to serve consumers more directly at scale, we have already tripled our capacity to serve digital consumers in North America and Europe, the Middle East, and Africa.”

IKEA

In 2023 IKEA's largest franchisee plans to invest €3 Billion by the end of 2023, to transform existing stores into eCommerce distribution centers. The aim is to reduce delivery time and costs for online customers, providing good customer service through last mile fulfillment.

Related post: Warehousing & Fulfillment

Types of Distribution Center Storage

Distribution centers store a wide range of products to fulfil a wide range of customer orders. Items are usually stored according to their specific protection and transportation needs. There are 4 different types of storage containers used at distribution centers:

Intermodal Containers

These freight containers are used to ship large quantities of products. The name intermodal comes from the different modes of freight shipping these containers can be transported by without the need for repackaging. Typically, this includes truck, ocean and rail.

Bulk Boxes

Pallet sized boxes used to store and ship bulk amounts of products. Also known as bulk bins, these are generally made out of wood, aluminum, plastic, steel or corrugated cardboard. Some may also have plastic liners to protect the contents.

Pallets

Pallets are the backbone of eCommerce distribution centers. Commonly made of wood or plastics, they protect goods, hold their combined weight and survive forklift encounters throughout the supply chain. The most common weight at pallet holds is one ton and are stored on the floor, stacked or on pallet racking.

Cases

These boxes contain multiple items. An example you may have encountered is a case of wine, with 6 or 12 bottles. Often stored and transported on pallets, they can also be stacked in racks.

Easyship Global Distribution Center Partners Can Help You Scale

Distribution centers allow online stores to ensure eCommerce customer satisfaction through reducing shipping costs and time. If you are looking to use a third party logistics (3PL) when your store receives an order, Easyship can help you unlock the benefits of global distribution centers.

Easyship effortlessly integrates your chosen sales channels with the carrier's warehouse management system (WMS) software in seconds. Allowing you to focus on growing your store, without having to worry about complex ERP systems, including additional order processing software for your products and services.

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