Warehouse vs Distribution Centre: What is the difference?

November 30, 2022

AGI News

Warehouse and distribution centre, are words that get used interchangeably, but are they the same thing? When does a warehouse become a distribution centre and vice versa? And are their uses evolving over time? Let’s take a look.

What is a Warehouse?

At the very basic level, a warehouse is a building where goods are stored, or more literally, ‘ware’ is ‘housed’. The implication is that of basic operations on goods, such as receiving, identification, verification, storage, and retrieval.

A warehouse might offer some value-add function, such as an area which is refrigerated, for the storage of perishable or temperature sensitive items. It might also be bonded, for tax and duty reasons. A warehouse might even be built to store highly flammable goods, or have additional security when highly valuable items are held.

But in its simplest form, the primary function of a warehouse is the safe storage of goods.

What is a Distribution Centre?

At first glance, a distribution centre (DC) performs a similar function. Goods are received, identified, verified, stored, and retrieved. However, the difference between a warehouse and a distribution centre is that the principal function of a DC is that of order processing and fulfilment, rather than simply storage.

A distribution centre may offer more added value too. It might provide a cross-docking facility, a bulk-break centre, product mixing, and even offer bespoke packaging services. Distribution centres play a vital role in the order fulfilment process, which begins when a customer places an order.

The primary function of a distribution centre is therefore to ship goods efficiently to customers.

So what are the differences between a warehouse and a distribution centre?

Whilst there is undoubtedly some overlap in terms of the function each provide, and indeed in the usage of their names, warehouses and distribution centres differ in the following important ways:

  • Goods are likely to spend less time in a distribution centre than in a warehouse. In fact, one of the key metrics of a good DC is how little time goods spend sitting on the shelves.
  • A distribution centre may offer additional services, such as cross-docking, product mixing, bulk break, and packaging services.
  • As a distribution centre offers more functionality, it is often filled with more advanced equipment than a warehouse. For example, a DC might have automated picking or transportation facilities in place.
  • Distribution centres are the link between suppliers and their customers. The role of the warehouse is less focused on customers and more on the storage of goods.
  • A warehouse is often used internally, within a business. Generally, a warehouse doesn’t serve external customers.

The advent of online shopping, with the expectation of near same-day deliveries, has led to a huge growth in distribution centres. Warehouses still have their place, a good example being the storage of inventory for sale, in readiness of seasonal demand. An inventory of these goods may be built up and stored in a warehouse throughout the year, and then shipped to the distribution centre, once the seasonal demand arrives, for efficient order processing and delivery.

What about Third and Fourth-Party Logistics (3PL & 4PL)?

Another term you may have heard of in relation to warehousing and distribution, is Party Logistics (PL) – 3PL, 4PL, 5PL etc. These relate to the wider logistics chain and how much work is being done, or value added, by a logistics partner. In a 3PL model, the logistics company might be responsible for three layers of value, such as packaging, warehousing, and delivery. At AGI, we can provide a 4PL or 5PL service, where for example, bulk product is picked, packed onto smaller and more manageable pallets, labelled correctly, and then delivered to the customer. A manufacturing business might outsource their downstream logistics in this way, allowing them to focus on their key strengths, and working with a logistics partner they can trust, to do the rest.

How can we help?

Here at AGI, we have a warehouse facility at our Immingham office, with the ability to store and distribute goods on behalf of our customers. We also have strong logistics partnerships in place meaning we can help to facilitate such requirements.

Whether you require local, national, European, or international logistics solutions, we have the industry knowledge, complex network, and experience to provide the best service possible. To find out more about our logistics services and how we can help your business, please get in touch. We look forward to hearing from you.