What is a Distribution Center in E-commerce?
A distribution center (DC) in e-commerce is a warehouse facility used to store inventory and fulfill orders. Distribution centers are responsible for receiving, processing, and shipping orders to customers. A business typically uses automated software and processes to manage inventory levels, store products, and fulfill orders efficiently.
A distribution center is an important part of the e-commerce supply chain and is essential for ensuring product availability, order accuracy, and timely delivery to customers.
Significance of Distribution Center in E-commerce Logistics
The distribution center plays a crucial role in e-commerce logistics, as it serves as the critical link between the seller and the customer. It is the place where the goods are stored, sorted, and shipped out to customers.
- The distribution center is responsible for the efficient movement of goods throughout the supply chain. It helps to reduce inventory costs, improve customer service, and optimize delivery times.
- By streamlining the flow of goods, the distribution center helps to cut costs and increase efficiency.
- Additionally, it allows the seller to provide a wider range of products and services to customers, as well as to track inventory levels more closely in order to ensure that the right products are delivered on time.
Prerequisites to Picking a Distribution Center and How It Works
A few factors should be considered when determining the distribution center. They are –
- A map of the area with proper connection, necessary infrastructure, and reasonable distance from the target population
- Access to a credible market database
- Data on existing distribution centers
- A cost-benefit analysis to determine the cost of land, labor, and infrastructure in each area, as well as the potential revenue that could be generated
- A logistics model and related types of equipment for inventory supply chain operations
Use Case With Distribution Center
Let us assume a company ABC deals with women’s clothing, distributed globally. For easier distribution of manufactured products, ABC leverages multiple distribution centers to increase efficiency in the supply chain. Distribution centers also allow the company to break down large shipments into smaller ones for easier order fulfillment across the globe.
