Distribution center
Overview
 
A distribution center for a set of products
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...

 is a warehouse
Warehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...

 or other specialized building
Building
In architecture, construction, engineering, real estate development and technology the word building may refer to one of the following:...

, often with refrigeration
Refrigeration
Refrigeration is a process in which work is done to move heat from one location to another. This work is traditionally done by mechanical work, but can also be done by magnetism, laser or other means...

 or air conditioning
Air conditioning
An air conditioner is a home appliance, system, or mechanism designed to dehumidify and extract heat from an area. The cooling is done using a simple refrigeration cycle...

, which is stocked with products (goods
Goods
Goods may refer to;*Good , physical product*Personal property, legal personal chattels...

) to be redistributed to retailers
Retailing
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...

, to wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...

rs, or directly to consumers. A distribution center is a principal part, the order processing
Order processing
Order processingOrder processing is a key element of Order fulfillment. Order processing operations or facilities are commonly called "distribution centers". "Order processing" is the term generally used to describe the process or the work flow associated with the picking, packing and delivery of...

 element, of the entire order fulfillment
Order fulfillment
Order fulfillment is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer...

 process. Distribution centers are usually thought of as being demand driven
Demand chain management
Demand chain management is the management of upstream and downstream relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. The term demand chain management is used to denote the concept commonly referred to as...

. A distribution center can also be called a warehouse, a DC, a fulfillment center, a cross-dock facility, a bulk break center, and a package handling center.
Encyclopedia
A distribution center for a set of products
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...

 is a warehouse
Warehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...

 or other specialized building
Building
In architecture, construction, engineering, real estate development and technology the word building may refer to one of the following:...

, often with refrigeration
Refrigeration
Refrigeration is a process in which work is done to move heat from one location to another. This work is traditionally done by mechanical work, but can also be done by magnetism, laser or other means...

 or air conditioning
Air conditioning
An air conditioner is a home appliance, system, or mechanism designed to dehumidify and extract heat from an area. The cooling is done using a simple refrigeration cycle...

, which is stocked with products (goods
Goods
Goods may refer to;*Good , physical product*Personal property, legal personal chattels...

) to be redistributed to retailers
Retailing
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...

, to wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...

rs, or directly to consumers. A distribution center is a principal part, the order processing
Order processing
Order processingOrder processing is a key element of Order fulfillment. Order processing operations or facilities are commonly called "distribution centers". "Order processing" is the term generally used to describe the process or the work flow associated with the picking, packing and delivery of...

 element, of the entire order fulfillment
Order fulfillment
Order fulfillment is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer...

 process. Distribution centers are usually thought of as being demand driven
Demand chain management
Demand chain management is the management of upstream and downstream relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. The term demand chain management is used to denote the concept commonly referred to as...

. A distribution center can also be called a warehouse, a DC, a fulfillment center, a cross-dock facility, a bulk break center, and a package handling center. The name by which the distribution center is known is commonly based on the purpose of the operation. For example a "retail distribution center" normally distributes goods to retail stores, an "order fulfillment center" commonly distributes goods directly to consumers, and a cross-dock facility stores little or no product but distributes goods to other destinations.

Distribution centers are the foundation of a supply network
Supply network
A supply network is a pattern of temporal and spatial processes carried out at facility nodes and over distribution links, which adds value for customers through the manufacturing and delivery of products...

, as they allow a single location to stock a vast number of products. Some organizations operate both retail distribution and direct-to-consumer out of a single facility, sharing space, equipment, labor resources, and inventory as applicable.

A typical retail distribution network operates with centers set up throughout a commercial market, with each center serving a number of stores. Large distribution centers for companies such as Wal-Mart
Wal-Mart
Wal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...

 serve 50–125 stores. Suppliers ship truckloads of products to the distribution center, which stores the product until needed by the retail location and ships the proper quantity.

Since a large retailer might sell tens of thousands of products from thousands of vendors, it would be impossibly inefficient to ship each product directly from each vendor to each store. Many retailers own and run their own distribution networks, while smaller retailers may outsource this function to dedicated logistics
Logistics
Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...

 firms that coordinate the distribution of products for a number of companies. A distribution center can be co-located at a logistics center.

Scale

A large distribution center might receive and ship more than ten thousand truckloads each year, with an individual store receiving from only a couple trucks per week up to 20, 30, or more per week. Distribution centers range in size from less than 50000 square feet (4,645.2 m²) to the largest approaching 3 million square feet (300,000 m²).

Storage

Although the primary role of a distribution center is to receive large quantities of products and ship small quantities to individual stores, an important secondary role is storage. Many retailers give priority to having as many items in stock at once as possible. To conserve space, minimize inventory
Inventory
Inventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...

 costs, and maximize the variety they offer, the retailer might stock only one or a few items of a particular product. This requires the ability to ship a replacement quickly once an item is sold. By keeping product on hand in the distribution center, the retailer can ship a replacement almost immediately after a product is sold.

Storage locations and storage containers

Goods (products) arrive and are stored in a distribution center in varying types of storage locations and containers suited to the product characteristics and the amount of product to be transported or stored. These types of locations and containers have specific industry-accepted names. Specialized pieces of equipment (material handling equipment, or MHE) are used to handle the various types of containers. The following is a list of some of the names and characteristics of common storage containers:
  • Intermodal container
    Intermodal container
    An intermodal container is a standardized reusable steel box used for the safe, efficient and secure storage and movement of materials and products within a global containerized intermodal freight transport system...

    s (shipping containers) are used for the efficient transportation of goods. Standards that specify the volume and dimensions of containers to facilitate efficient handling.
  • Pallet
    Pallet
    A pallet , sometimes called a skid, is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader or other jacking device. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies...

    s are one of the most commonly used means to store and move product in a distribution center. There are many specialized devices (MHE) used to handle pallets - see forklift truck
    Forklift truck
    A forklift is a powered industrial truck used to lift and transport materials. The modern forklift was developed in the 1920s by various companies including the transmission manufacturing company Clark and the hoist company Yale & Towne Manufacturing...

    , pallet jack
    Pallet jack
    A pallet jack, also known as a pallet truck, pump truck, or jigger is a tool used to lift and move pallets.The front wheels are mounted inside the end of the forks, and as the hydraulic jack is raised, the forks are separated vertically from the front wheels, forcing the load upward until it clears...

    , pallet inverter
    Pallet inverters
    A pallet inverter or pile turner is a machine that is used to turn over pallets whilst still loaded with products. The reasons for needing to turn over a pallet are varied, but one main reason is the need to replace a broken or inappropriate pallet without unstacking the whole load. Sometimes a...

    , and unit load ASRS
    Automated Storage and Retrieval System
    An automated storage and retrieval system consists of a variety of computer-controlled methods for automatically placing and retrieving loads from specific storage locations...

    . Pallets are stored on the floor, may be stacked, and may be stored in pallet rack
    Pallet rack
    Pallet racking, is a material handling storage aid system designed to store materials on pallets . Although there are many varieties of pallet racking, all types allow for the storage of palletized materials in horizontal rows with multiple levels...

    .
  • Gaylords are large single boxes usually connected or attached to a pallet.
  • Cases and Cartons
    Case (goods)
    A case of some merchandise is a collection of items packaged together. In the United States, typically a standard case contains a certain number of items depending on what the merchandise is. For consumer foodstuffs such as canned goods, soda, cereal and such, a case is typically 24 items,...

     are boxes usually containing many items. In distribution centers there is a generally accepted distinction made between the terms "carton" and "case", although both are boxes. Goods are received and stored in cartons, while goods are shipped in cases. A stored carton is called a case once it has been picked or pulled for shipment.
  • Tote
    Tote
    Tote may refer to:*Tote, abbreviation for Tote board, the name for the computerised system which runs parimutuel betting, calculating payoff odds, displaying them, and producing tickets based on incoming bets...

    s are reusable containers used to hold and transport goods.

Storage volume

In addition to shipping quickly, preparing for busy shopping seasons requires retailers to stock up on product ahead of time. For most retailers, the Christmas
Christmas
Christmas or Christmas Day is an annual holiday generally celebrated on December 25 by billions of people around the world. It is a Christian feast that commemorates the birth of Jesus Christ, liturgically closing the Advent season and initiating the season of Christmastide, which lasts twelve days...

 shopping season is the busiest of the year. Ahead of this time, a distribution center might double the amount of inventory on hand and then draw this level down through the shopping season. This strategy is especially important for imported items. With lead times measured in weeks or months, stocking these products in a distribution center is often the only way to maintain in-stocks at the store. New seasons, holidays, or special promotions may also prompt a retailer to store specific items prior to a large rollout or demand forecast.

Processing

Another way to look at a distribution center is to see it as a production or manufacturing operation. Goods arrive in bulk, they are stored until needed, retrieved, and assembled into shipments. The efficient processing of a distribution center can greatly impact the final price of the product delivered to the end user. Efficient processing not only directly impacts the cost of goods through reduced labor, but it also indirectly impacts the cost of goods through reduced inventory. Inventory
Inventory
Inventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...

 represents an investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 with its associated investment interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

 or inventory carrying cost. Reducing the processing time of order processing
Order processing
Order processingOrder processing is a key element of Order fulfillment. Order processing operations or facilities are commonly called "distribution centers". "Order processing" is the term generally used to describe the process or the work flow associated with the picking, packing and delivery of...

 can directly reduce the amount of inventory necessary to be stocked in the operation (see demand chain management
Demand chain management
Demand chain management is the management of upstream and downstream relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. The term demand chain management is used to denote the concept commonly referred to as...

).

Costs

The most efficient method of distribution
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...

 would be to ship a full truckload or railcar
Railcar
A railcar, in British English and Australian English, is a self-propelled railway vehicle designed to transport passengers. The term "railcar" is usually used in reference to a train consisting of a single coach , with a driver's cab at one or both ends. Some railways, e.g., the Great Western...

 directly from the manufacturer to the retailer. The next most efficient method would be to ship a full truckload to a distribution center, unload full pallet
Pallet
A pallet , sometimes called a skid, is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader or other jacking device. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies...

s of products, and immediately load the pallets onto trucks destined for individual stores. Both of these methods can only be used on very high-volume items. Most products cannot be delivered in this manner, and pallets or even individual boxes must be broken down and divided.

Once a full pallet must be broken apart, the costs of handling the product can increase quickly. Many distribution centers use large sortation systems
Logistics automation
Logistics automation is the application of computer software and/or automated machinery to improve the efficiency of logistics operations. Typically this refers to operations within a warehouse or distribution center, with broader tasks undertaken by supply chain management systems and enterprise...

 with miles of conveyor to move products through the facility and into a truck. They may also have automated equipment for de-palletizing and re-palletizing product. Some of the most sophisticated systems can convey product directly into storage racks and then convey out of the racks to trucks, all automatically. With a wide variety of product sizes and weights, these systems are designed to handle a specific range of products. Very large, small, heavy, or light products require varying degrees of manual handling.

As the process of handling involves more steps and becomes increasingly manualized, the cost increases. Storing products instead of receiving and immediately shipping them adds cost. Firms must determine when lost sales due to not having product on the shelves are balanced by increased handling and storage costs.

Distribution center organization

All distribution centers have three main areas and may have additional specialized areas. The three main areas are the receiving dock
Loading dock
A loading dock is a recessed bay in a building or facility where trucks are loaded and unloaded. They are commonly found on commercial and industrial buildings, and warehouses in particular....

, the storage area, and the shipping dock. In small organizations it is possible for the receiving and shipping functions to occur side by side, but in large centers, separating these areas simplifies the process. Many distribution centers have dedicated dock doors for each store in their shipping area. The receiving area can also be specialized based on the handling characteristics of freight being received, on whether the product is going into storage or directly to a store, or by the type of vehicle delivering the product.

Distribution center planning

A number of components go into the overall planning of a distribution center in order to maximize its efficiency. If the distribution center relies on a conveyor system suspended from the ceiling, consideration needs to be given to the weight-bearing capacity of the ceiling joists. If the conveyor system runs along the floor, than consideration needs to be given in the design stage to the placement of columns, particularly as they relate to the flue space between pallet rack frames. Other planning considerations include attention to such areas as slotting, product replenishment, storage media, and power requirements.

Simple distribution center outline

Because many distribution centers service both large and small clients, especially those which store a specific type of service as opposed to those which serve a specific company, roles and departments are generally more complicated. A simple distribution center which serves many clients of a specific theme or type of service may include:
  • Goods in: Usually containing specialized container
    Containerization
    Containerization is a system of freight transport based on a range of steel intermodal containers...

     unloading equipment and workers, including pallet wrapping, conveyor belt unloaders (as used on 40 ft shipping containers), forklift drivers, and administrative staff
  • Bulk: As a rule, a bulk department controls and ships larger orders or orders that contain only full cartons/boxes
    Box
    Box describes a variety of containers and receptacles for permanent use as storage, or for temporary use often for transporting contents. The word derives from the Greek πύξος , "box, boxwood"....

    . A bulk department includes forklift truck
    Forklift truck
    A forklift is a powered industrial truck used to lift and transport materials. The modern forklift was developed in the 1920s by various companies including the transmission manufacturing company Clark and the hoist company Yale & Towne Manufacturing...

     drivers to load containers and wagons
    Railroad car
    A railroad car or railway vehicle , also known as a bogie in Indian English, is a vehicle on a rail transport system that is used for the carrying of cargo or passengers. Cars can be coupled together into a train and hauled by one or more locomotives...

    , and man-up or combi forklift trucks to unload full pallet
    Pallet
    A pallet , sometimes called a skid, is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader or other jacking device. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies...

    s from warehouse racking.
  • Break-bulk: Break-bulk (also known as split case) is a lower-capacity version of the bulk department. Orders usually contain part boxes or items not requiring pallets. Due to the number of smaller customers a distribution center may serve, a break-bulk department may need more workers than a bulk department. A break-bulk department usually uses trolleys or, for palleted/heavy orders, small electric PPT or walkie low lift trucks. Items shipped by break-bulk are usually stored in pick, which are usually the bottom two pick-faces of warehouse racking. A pick-face is the space on such a racking system onto which a pallet can be loaded.
  • Export: An export department controls orders which are leaving the country of the distribution center. This department is almost identical in function to a bulk or break-bulk department; however, workers in this department build pallets conforming to different standards and sizes. An export department also uses different shipping containers or haulage firms.
  • Quality assurance: A quality assurance
    Quality Assurance
    Quality assurance, or QA for short, is the systematic monitoring and evaluation of the various aspects of a project, service or facility to maximize the probability that minimum standards of quality are being attained by the production process...

     (QA) department performs periodic checks of random samples of stock to check quality, including from the warehouse racking, goods in, and returned stock. This department may also take on cycle count
    Cycle count
    A cycle count is an inventory management procedure where a small subset of inventory is counted on any given day. Cycle counts contrast with traditional physical inventory in that physical inventory stops operation at a facility while all items are counted at one time...

     duties to find missing stock.
  • Administration
  • Packing and production: In many distribution centers it is not feasible to store stock in many different packaging styles or quantities, and while it may cost a customer more to do so, many customers, such as supermarkets, prefer their own packaging on stock. Because of this, packing benches are used to take raw items, such as a box of balloons, and pack them at a specific unit quantity, which are then packed into cartons and labeled accordingly for a customer. In many circumstances this may be more inexpensively done at a distribution center than by a customer or client.
  • Transportation: Arranges and coordinates shipments in and out of the distribution center.
  • Dedicated product departments: Divisions may be based on handling characteristics or storage characteristics, for example, refrigerated and non-refrigerated [meat and produce, frozen, dairy/deli, dry]. Each of these three areas have both shipping and receiving departments as well.


Distribution centers also have a variety of supporting departments, including human resources
Human resources
Human resources is a term used to describe the individuals who make up the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations...

, maintenance/facilities operations, production control, and accounting
Accountancy
Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in...

.

Distribution jobs

A distribution center typically has a general manager who manages the facility and typically has a number of department managers who report directly to him/her. Most distribution centers divide staff into two categories, direct labor and indirect labor. Direct labor staff execute the distribution processes, while indirect labor staff support the direct labor staff. Each department is in turn composed of supervisors and warehouse
Warehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...

workers. The direct labor jobs of a warehouse can include:
  • Unloader - unloads trucks and breaks down pallets as needed, using various pieces of power equipment
  • Receiver - inventories and tags unloaded pallets using a mobile cart computer unit and printer
  • Hauler - transports received pallets with equipment from the receiving dock to the storage racks
  • Putaway driver - puts product into racks with forklift
  • Lumper - helps unload shipments
  • Replenishment driver - pulls product from the racks and places it into the "pick slot" with forklift
  • Order filler - picks product from the "pick slot" by hand and moves with power equipment
  • Loader - wraps the order-filled pallets and loads trucks, using equipment


Indirect labor departments and jobs within a warehouse can include:
  • Supervision - floor (process) supervision, indirect labor supervision
  • Human resources - employment office and employee benefits
  • Facilities and housekeeping - maintenance of buildings
  • Inventory management - tracking and placement of product
  • Quality assurance - inspection and acceptance of incoming and outbound product
  • Asset protection - building security and loss prevention
  • Safety - insurance of safe operating practices
  • Equipment maintenance - electrical, mechanical, and pneumatic maintenance of MHE
  • Operations research - Industrial engineering, process improvement, labor standards
  • Information technology - support of information systems
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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