The terms “warehouse” and “distribution center” are often used interchangeably. However, these are two distinct parts of the overall distribution logistics function. The warehouse offers efficient storage. The distribution center offers a range of order fulfillment functions.
The combination third-party distribution warehouse provides both warehouse and distribution functions in one facility; a place from which wholesale and retail orders are actually shipped. Serving as a core part of a business’ supply chain, the distribution warehouse offers high-tech storage, transportation, cross-docking, order-fulfillment, labeling, packaging, and whatever other services are required to complete the order cycle.
Combining the warehousing and distribution services functions in one location allows companies to operate over a range of distribution models.
The wholesaler is a customer of the manufacturer, buying goods from the manufacturer in larger wholesale quantities. The wholesaler pays the manufacturer for bulk orders. Goods can be shipped to the wholesalers from the third-party distribution warehouse as they would to any other customer. The manufacturer pays the 3PL for its services.
Direct Marketing Models
This active warehousing attitude makes direct factory to retail models practical and direct factory to consumer models work by providing comprehensive logistics in one facility. The distribution warehouse is not passive, but can offer a variety of services in addition to storage throughout the distribution process. The manufacturer pays the distribution warehouse, as a client, for a variety of necessary logistic services.
Home-Based Business Models
The distribution warehouse has created new options for start-up companies, home-based and online businesses. These kinds of business models rarely have the infrastructure to store product, fulfill orders and ship their products. However, these services are available at a distribution warehouse and at a very manageable cost for small businesses.