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What is a Distribution Center?

By Cassie L. Damewood
Updated May 17, 2024
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A distribution center is a building, structure or group of units used to store goods and merchandise that are to be delivered to various places on an as-needed basis. Large facilities are sometimes shared by several businesses to reduce each company’s overhead. A distribution center may ship goods to one or many destinations.

Massive retail chains traditionally own and operate distribution centers strategically located throughout the geographic areas they serve. Small independent retailers often hire third party distributors to store and ship their goods. The third party companies usually contract with a number of small companies to meet their specific distribution needs.

A center of this type generally warehouses goods that are distributed to wholesalers, retailers or directly to customers. It is often set up as a resource network that simultaneously serves these three groups. This method of storage and distribution is usually cost-effective because the business can use inventory and labor resources to provide products to multiple sources.

Other common names for a distribution center include package handling center, warehouse or fulfillment center. Some centers are referred to as cross-dock facilities or a bulk break center. Companies often refer to these facilities by the term DC, which is short for distribution center.

The chosen moniker frequently depends upon the specific nature of the business. Package handling centers often simply receive goods from one source and forward them to another. A fulfillment center commonly ships orders directly to customers who have ordered products through catalogs or online stores. Cross-dock facilities typically have no storage capacity and just transport goods from one shipping source to another, commonly from trucks to ships or trains or vice versa. A bulk break center customarily receives shipping containers or pallets of goods that are broken down for distribution to various sources.

Distribution centers ordinarily consist of three major sections. These areas regularly include a shipping dock, receiving dock and storage zone. Each of these warehouse regions may be broken down further into specialized sections for different types of goods. If a company handles perishable and non-perishable goods, it generally has areas equipped with air conditioning or refrigeration to safely store fresh products. Docks frequently have designated areas to handle goods for storage, transport or other disposition.

Regardless of the distribution center’s physical configuration, the efficiency of its processing operations dictates its profitability. Keeping labor costs low and quickly turning over inventory generally have a positive impact on the company’s profits. Competent order processing tends to build customer confidence and helps ensure the facility can effectively and regularly accommodate incoming shipments.

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Discussion Comments
By jcraig — On May 30, 2012

@matthewc23 - I think it is much more common now to find online store distribution centers, especially since so many people are ordering things online nowadays. We have a warehouse like that near me for another company, and they always hire lots of extra people every holiday season to get the orders out. I've been told that about anyone who wants a job can have one as long as they pass a drug test, and you can work as much overtime as you want. I think that just shows how important these warehouses are.

Just the logistics a distribution center has to have has always amazed me. You constantly have shipments coming in, and it's important to make sure everything is there that should be. Then, there is the challenge of getting orders filled correctly and shipping them out on even more trucks.

I'm sure computers handle a lot of the details, but there are still a lot of places things could go wrong. Bad packages still go out, but it's amazing there aren't more of them.

By matthewc23 — On May 29, 2012

The article kind of alludes to it, but I know a lot of the larger companies have their own warehouse distribution centers that just serve their stores. In my town, there is an Amazon warehouse that a lot of my friends work at. Basically, they are scattered around the US in high-traffic areas that help to get packages to places sooner.

The size of the building is absolutely amazing, but it is not surprising considering that they probably have several tens of thousands of different products that they have to keep in stock.

None of my friends are managers, but they say everything is very structured and organized. The place is broken down into different sections like books, electronics, household goods, etc., and each section has its own manager. As the orders come in, it is up to the managers to make sure everything from their section is included in a shipment and then pass the order onto the next manager.

By TreeMan — On May 29, 2012

@titans62 - Good points. I believe that there are special companies like you mentioned that specialize in running warehouses. That is where the economy of scale comes into play. For one, several stores share the same building, which means they share the rent. Additionally, the warehouse company has an incentive to keep everyone happy.

Like you said, if one store's products are always behind schedule, they will threaten to stop using the service, and that should be a pretty good incentive for the supervisor to make sure everyone's shipments go out on time.

I don't have any experience working in a warehouse, but I did work in the receiving department section of a store one time, and it is tough work at times. It is a lot harder to keep track of boxes than you would expect. You also have to deal with complications like breakage and bad employees.

By titans62 — On May 28, 2012

The article mentions that sometimes a lot of business will share the same warehouse area to save money. When this happens, does each company have it's own section of the warehouse, or do the warehouse managers just throw everything together in whatever organization they think is best? Also, who pays these people? Are there special companies that do nothing but manage warehouses, or does each company hire its own people to work in the places?

I just ask because it seems like it would be more efficient for a business to just have its own space to store things rather than having to pay the middle-man to keep everything organized and make sure shipments go out on time. For example, what happens if Store As shipments are always late, but Store Bs are always on time? How do the stores decide whether or not to keep the warehouse manager employed?

By OeKc05 — On May 28, 2012

@lighth0se33 - It is a really hard job. I work in the perishable department of a distribution center, so in addition to having to work hard, I have to endure really cold temperatures during my eleven hour shift.

I work in a giant refrigerator, so it is always in the thirties. Sometimes, I have to go work in the freezer for awhile, and it is below zero in there.

By contrast, the guys who work on the nonperishable side have to endure the heat, because the area is not air-conditioned. It’s about ten degrees hotter in there than it is outside, so in the middle of summer, it can roast a man.

Every now and then, I get sent to work on the hot side for a few hours. I always keep some shorts and a t-shirt in my locker in case this happens.

By lighth0se33 — On May 27, 2012

My husband works at a distribution center, and he says that it is a really tough job. He has to lift heavy boxes all day and stack them onto a pallet, and he has to do it quickly enough to meet production without making any mistakes.

The company has strict policies on safety. The employees get into trouble if they hurt themselves, which I think is crazy.

He always tells people he works at “the DC,” and they know what he means. I think it’s cool that this article mentions that nickname, because I thought it was just something he had come up with to shorten the name.

By shell4life — On May 26, 2012

My good friend owns a small party supply store, and she stocks her store with items from a distribution center. Since her business is rather small, she doesn’t have her own warehouse.

She orders from the same warehouse that many other stores get their supplies from, and she has a lot of options. She sometimes has trouble deciding what to purchase and sell, because they have so many awesome things, but she can only fit so much in her tiny building.

She gets her inventory much cheaper by ordering directly from the warehouse. If she were to order the same items online, she wouldn’t be able to make a profit.

By cloudel — On May 26, 2012

Distribution center management must really be a chore. You would have all those different departments to oversee, and you would have a ton of employees.

I hear the job pays well, though. My neighbor manages a local distribution center, and he can afford to go on expensive vacations. He also has a nice house, a pool, and an expensive truck.

I hardly ever see him around, though. He has to work crazy hours, so the downside is that he doesn’t have a lot of free time to enjoy all the money he makes. I suppose he really lives it up on vacation, since it is one of his few times away from work.

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