By Clifford F. Lynch
Assuming that it obtains its members’ approval, the International Warehouse
Logistics Association (IWLA) will soon change its name to the Strategic
Outsourced Logistics Association (SOLA). Though ILWA believes this new label
will more accurately reflect its members’ business, the idea of scrapping the
word "warehouse" has generated some controversy within the ranks. Some
are all for it, arguing that "warehouse" is an outmoded term; others
feel this is nothing more than a word game that will require expensive changes
in letterhead, Web sites and signage.
The current controversy again brings to mind the ongoing industry identity
crisis of warehouse vs. distribution center. You might think that the
differences between the two are so obvious they’re hardly worth mentioning,
but you’d be wrong. Though a leading logistics textbook, which probably should
remain unidentified, states, "The term ‘distribution center’ is
virtually synonymous with ‘warehouse,’" nothing could be further from
What is the difference? Granted, they each have four walls, a roof, floors,
dock space and truck doors. And from the outside, the structures might even look
quite similar. But as the following definition (from Words of Warehousing)
makes clear, what happens inside those four walls is really quite different.
That book defines a distribution center as a "facility from which wholesale
and retail orders are filled," adding that, "The term is used to
describe a high-velocity operation as opposed to a dead storage warehouse."
Though this definition makes the difference pretty clear, a look at the
primary functions of a true distribution center should remove all doubt:
A distribution center offers value-added services. Rather than simply
offering static storage, DCs provide a myriad of services for clients, whether
those customers are external or internal company departments and functions. Over
85 percent of the respondents to a survey of IWLA members said they offered such
services as transportation, cross-docking, order fulfillment, labeling and
packaging. Similar services are available at privately owned and operated
facilities as well. In fact, a well-organized and -managed distribution center
will provide whatever services are necessary to complete the order cycle,
including order processing, order preparation, shipping, receiving,
transportation, returned goods processing and performance measurement.
A distribution center is customer focused. While a warehouse is focused
on the most efficient and cost-effective methods of storing products within its
walls, a distribution center’s sole mission is to provide outstanding service
to its customers.
A distribution center is technology-driven. The distribution center of
today must have in place state-of-the-art order processing, transportation
management and warehouse management systems if it is to scan bar codes, plan
loads, process orders and locate product efficiently.
A distribution center is relationship-conscious. Whether its clients are
outside companies or other company departments, a distribution center must
remain focused on its customers’ requirements. A distribution center is the
principal link between suppliers and customers, and its management must be
conversant not only with the customers’ needs but also with the most efficient
and cost-effective methods of meeting those needs. By contrast, a storage
warehouse is so inwardly focused, in most cases, that there is very little
understanding of what customer service really means.
What should your facility be? Somebody once defined a warehouse as
"inventory at zero velocity." Compare that with the high-velocity
activity level, customer focus and sophistication of today’s distribution
center. Which would you rather be?