One of the earliest decisions to make as an eCommerce business owner is where to store your inventory. At the beginning, it’s common to tape off a bit of space in your spare room or your garage and designate that area as your own micro-warehouse.
But, if the stars align and your hard work pays off, it won’t be long until you’re in need of an upgrade. Otherwise, bit by bit, your inventory will begin to seep into the bedroom, infest the living room, and infiltrate the kitchen. Before you know it, it will have taken over your own house.
Regardless of where you’re at in your growth journey, you’ve probably done a bit of research into warehouses and distribution centers. The issue is, these two types of building are often referred to interchangeably, making the whole thing more confusing than it needs to be.
It would be less than ideal to employ the services of a warehouse when in fact you needed a distribution center, and vice versa.
Fear not: in this article, we’re going to demystify the difference between warehouses and distribution centers.
In this article
Warehouse Vs Distribution Center
What is a warehouse?
In very simplistic terms, a warehouse is a building in which goods are stored. Anybody who’s ever worked in a warehouse knows that a lot goes into creating an efficient warehouse operation. But, for the purpose of this article, a warehouse is a place to send, store, and retrieve items, and nothing else.
What is a distribution center?
A distribution center, on the other hand, is more of a complex beast. Yes, a distribution center will store your products for you, but they’ll also fulfil customer orders on your behalf, whether that’s wholesale or direct to customer.
The majority of distribution centers function a little differently, offering different levels of service depending on the company.
That said, core services you should expect to find in every distribution centers are inventory processing, inventory tracking, picking and packing, carrier management and distribution, and inventory management tools.
Additional services some distribution centers offer include kitting, assemblies, returns management, custom packaging, and more.
Just be aware the distribution centers can be referred to by other names, such as fulfillment centers, handling centers, 3PL, and yes, a warehouse. Confusing, I know!
Do I need a warehouse or a distribution center?
You might be wondering whether a warehouse or a distribution center is right for you. That depends on what stage your business is at, as well as your requirements.
Below, we’ll outline the circumstances under which a warehouse might be more suitable, and when a distribution center might be the right choice for you.
When to choose a warehouse
- A warehouse will be more suitable if you need a long-term storage facility. Perhaps you’re waiting for a particular seasonal event, or are waiting to get other elements of your business set up before going to market.
- Choose a warehouse if you want to fulfil orders yourself. You may not be ready to relinquish the fulfillment aspect of your business over to a third party.
- A warehouse is a better option if you’re selling handmade goods to order, such as personalized gifts. You’re able to store the materials at a warehouse or self-storage facility, and collect them as needed.
When to choose a distribution center
- You’re actively selling more than 100 orders per month, rather than holding on to stock to sell at a later date.
- A distribution center will help you scale your business by improving the efficiency of your fulfillment process, and giving you time back to focus on other business activities such as marketing and networking.
- You need a solution that can scale with you, so you don’t have to move sites again when your business grows.
- You want to sell goods overseas. A multi-site distribution center can help you to position goods currently, and optimize the last-mile process.
- You want a hands off approach to fulfillment – leaving much of the last-mile supply chain management to a third party.
- You have bespoke fulfillment requirements, such as assemblies, custom packaging, or sustainable carrier options.
How can a distribution center help your business grow?
In the previous section, we briefly mentioned that a distribution center can help you grow your business.
If you were simply interested in learning about the difference between a warehouse and a distribution center, feel free to click away now, or even better, have a look at some more of our interesting articles.
However, if you’re interested in learning more about the ways in which a distribution center can benefit your business, carry on reading.
In a bit more detail, here’s five ways a distribution center can be the shot in the arm to accelerate business growth.
Time is as precious as money, if not more so. And fulfilling orders yourself takes up a lot of it, especially as your business grows.
We’re betting that you didn’t start a business so you could spend a good portion of your week packing orders. It’s the time consuming part, and the boring part.
Outsourcing fulfillment to a distribution center puts a lot of time back into your day, the amount of which will grow exponentially as your business does.
You can then reinvest this time into other business or personal responsibilities, such as building a better brand, engaging your customers, developing exciting new products, spending time with your family and friends, or whatever else you’d rather be doing.
Expertize and network
Supply chain management is pretty complicated, to say the least. This rings especially true when you have customers across the globe, or are trying to keep costs low without compromising on the customer experience.
A distribution center can take on most of this burden for you, and advise you on the parts they aren’t directly accountable for. From helping you to choose the most cost-effective packaging to the most cost-effective carriers, it’s always good to have an expert on your side.
Finally, a distribution center has the infrastructure and resources to pick and pack your orders extremely quickly and accurately. While it might take a few days to dispatch orders yourself, many distribution center can dispatch an order on the same day it’s made.
It’s well understood that if a business wants to grow, it needs to do more than attract customers. It needs to attract repeat customers.
You need more than great products to achieve this. You need to have a great user journey on your website, a quick, cheap, and fast delivery option, ongoing customer engagement, unique and memorable unboxing experiences, and more besides.
That’s a lot to do, a distribution center can help with quite a bit of it.
A fulfillment center will almost guarantee (mistakes do happen) that your customer’s order will arrive on time, well presented, and in good condition. That’s half the battle already.
And, with the time you’re not spending on fulfilling orders, you can make sure the rest of your business is well positioned to delight customers every time they shop with you.
Shipping orders overseas can be a bit of a hassle. Increased costs, different laws, and a host of other barriers can make international trade far from tantalising.
And while we’re not going to sit here and claim that a distribution center will make international trade a headache-free experience, it will certainly make things a lot easier, and a lot more efficient.
A distribution center can manage and advise on all the country-specific things you need to do to be compliant with their laws.
Furthermore, if they have a partner distribution center in one of the countries you want to target, then you can send inventory over there in bulk, making the whole process faster, cheaper, and smoother for your business and your customers.
If you’re early on in your eCommerce journey, you might not have thought about inventory management all that much. But, as you grow, inventory management will rapidly become the monster under your bed… unless you get a solid grasp early on.
Inventory management is essentially ensuring that you have the right amount of stock, and right SKUs in stock, at the right time. The goal of inventory management is to ensure that you can meet customer demand without overpaying on storage costs.
It’s hardly the most glamorous part of running a business, but it’s a vital one. Thankfully, tech-enabled distribution centers come bundled with software that does most of the number crunching for you, allowing you to make data-driven decisions without time-consuming number crunching.
Speak with an industry-leading distribution center today
James and James are an industry-leading distribution center, fulfillment center, 3PL, or whatever you want to call us. With fulfillment centers in the UK, EU, and US, we’ve been helping eCommerce businesses grow since 2010.
If you’d like a no-obligation conversation to allow us to learn more about your business, and for you to learn more about how we can help you, don’t hesitate to contact us.