|This article relies largely or entirely on a single source. (October 2014)|
A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers. A distribution center is a principal part, the order processing element, of the entire order fulfillment process. Distribution centers are usually thought of as being demand driven. 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, 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 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 firms that coordinate the distribution of products for a number of companies. A distribution center can be co-located at a logistics center.
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 50,000 square feet (5,000 m2) to the largest approaching 3 million square feet (300,000 m²). 
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:
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 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.
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 represents an investment with its associated investment interest or inventory carrying cost. Reducing the processing time of order processing can directly reduce the amount of inventory necessary to be stocked in the operation (see demand chain management).
The most efficient method of distribution would be to ship a full truckload or railcar 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 pallets 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 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. Conversely, automating these additional manual steps can reduce the labor and costs associated with these processes. For example, automatic box-opening technology makes the process of opening individual boxes for re-packaging much faster.
All distribution centers have three main areas and may have additional specialized areas. The three main areas are the receiving dock, 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.
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, then 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.
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:
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 workers. The direct labor jobs of a warehouse can include:
Indirect labor departments and jobs within a warehouse can include:
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