Understanding Warehouses, Distribution Centres, and Fulfillment Centres

In supply chain logistics, terms like warehouses, distribution centres and fulfilment centres are often used interchangeably. However, they represent and play distinct features in the supply chain process. By understanding the difference between each of them, businesses can optimize and effectively manage their logistics operations and make informed decisions.

In this blog, we will explore the differences between these three and understand their functions and how they contribute to the seamless flow of goods within the logistics supply chain.

Warehouse/Inventory Management

A warehouse is a central place where products and goods are stored for distribution. To store goods in a warehouse, orders have to be placed, goods are received, and stored on shelves or racked (depending on the goods) and then scanned, tracked and picked when needed to put away for shipping.

The type of the warehouse decides on what business it caters to:

B2B (Business to Business): Such warehouses are involved in handling recurring and bulky orders
B2C (business to consumers): These warehouses include handling a large number of orders at a given time. Orders are usually smaller in size and weight.
Bonded warehouse: These warehouses are secured and where the duties and taxes are deferred until they leave the warehouse.
Omni-channel: These generally offer fulfilment solutions for B2C, B2B and retailers with stringent compliance requirements.

Warehouses are generally located close to seaports, airports and railways to reduce cost, optimize efficiency and ensure the goods are moved faster within the supply chain logistics.

Distribution Centre

A Distribution Center (DC) focuses on the storage and distribution of goods. It receives, stores and distributes goods to multiple locations including wholesalers, retailers or even fulfilment centres. A major distinguishing feature of the distribution centre is that it does not directly ship to customers, but it acts as a transit point for products to change the mode of distribution (freight may change to truck transport from the distribution centre).

In a Distribution facility, pallet racking and floor stacking capabilities are often used. There have been many instances where products are shipped from DC to a fulfilment centre before it reaches a customer. Generally, large retailers use DC as a merchandise hub to replenish stock quickly at the retail outlets.

Fulfillment Centers

A fulfilment centre is specific to the final stage of the order fulfilment process. The objective of any fulfilment centre is to receive customer orders, pick and store the items from inventory, pack them, ship them, and deliver them to their destination. The fulfilment facility acts as a central hub for order processing and fulfilling customer orders, designed to manage bulk orders efficiently based on customers’ specifications. Most of the Fulfillment centres are equipped with robust infra including pallet racking, pick and pack sortation systems, multi-level mezzanines and robotic picking areas. Generally, a fulfilment centre depends on a 3PL to handle the storage, picking, and shipping of a product to be sent directly to the consumer.

Difference between Warehouse, Distribution Centre and Fulfillment Centre

How far automation is used in these three facilities?

Warehouse

In the warehouse, automation is focused on storing and managing inventory, hence the automation is used to track storage locations. Barcode scanners and RFID technology are used to track storage locations, often done through manual or semi-automatic processes.

Distribution centre

In the distribution centre, automation is used for a variety of logistics activities, from inventory management, and product sorting to transportation arrangements. Packaging and labelling equipment are widely used, and the technology is more advanced than in warehouses.

Fulfillment Centre

In a fulfilment centre, a fast automated system is used to pick, pack and ship products as soon as orders come in. It works on completing customer orders swiftly and accurately using automated packaging to expedite logistics movement. Real-time data and information help in achieving efficiency and accuracy.

Conclusion

Understanding the differences between warehouses, distribution centres, and fulfilment centres is essential for efficient and optimized logistics operations. Warehouses focus on long-term storage, distribution centres for efficient product distribution, and fulfilment centres for quick and accurate order processing. By leveraging the distinctive capabilities of each facility, businesses can streamline their supply chain and deliver superior customer experiences, ensuring the seamless flow of goods from origin to destination.