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Benefits and disadvantages of using a distribution center

Benefits and disadvantages of using a distribution center

When functioning properly, distribution centers play a key role in the supply chain and business growth. Do you want to know in detail the advantages and disadvantages of using them? Here we tell you.

The correct operation of your distribution center is key when analyzing the efficiency of the supply chain.

Let’s first look at some of the benefits of using such a center:

You can keep costs down by lowering inventory carrying prices, since distribution centers tend to deal with goods that are stored for short periods of time, unlike warehouses.

Another advantage is shipping speed: A company with multiple distribution centers in a mass market area can potentially deliver to customers faster, saving on shipping costs and improving customer satisfaction.

By centralizing the order fulfillment process, distribution centers can fulfill larger orders with many SKUs more quickly. This is much more effective than placing multiple orders with different suppliers to fulfill a single customer order.

The disadvantages

However, distribution centers are not without their drawbacks. These operations must be executed rigorously to ensure efficient operation:

  • Any small detail that is overlooked can cause unforeseen problems and bottlenecks.
  • Poor communication regarding picking and packing can lead to problems with order fulfillment, and disorganized inventory or warehouse layouts can make it difficult for workers to do their jobs efficiently.
  • Similarly, minor quality control issues can lead to recalls that not only cost a company money but can also affect its reputation.
  • Distribution centers are not immune to natural disruptions that can negatively impact operations, such as severe weather events; transportation disruptions due to accidents or maintenance; and fluctuations in consumer demand, such as those due to recessions or depressions (which can negatively impact operations).

Do you want to know more about the world of distribution and how specialized software can help you in daily management? We tell you all about it in our eBook.