C. F. Lynch & Associates

Moving or Storage?

By Clifford F. Lynch

DC Velocity, March 2003

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 the truth.

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?






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