What is a Distribution Center?

A Distribution Center (‘DC’) is a storage facility that is smaller in dimensions than a conventional warehouse. A DC is used for receiving, temporarily storing and redistributing goods in accordance with customers’ orders as they are placed. DCs have become a crucial part of the supply chain for any organization these days.

The rise of supply chain

Some years ago, companies that owned large distribution centers and were able to deliver goods to their customers on the same day they placed their orders were considered to be exceptional. However, this isn’t the case anymore.The business world is undergoing massive transformations. Supply chain is one of the areas where these transformations are happening at a rapid pace. Technology has successfully linked online purchasing with order fulfilment procedures that take place offline. The link has evolved and is now facilitating companies in doing business at an international level, at a greater pace and rapidly responding to customer orders.

What’s all the fuss about?

Storage space is currently a highly sought after asset for businesses. In 2015, rental rates for warehousing shot up by 9.9% on an average, all across the US. In several cities, the massive increase in demand for warehouse / distribution space has resulted in a building boom based on speculation. According to Ryan Bain, who is a vice president at the Coldwell Banker Richard Ellis (‘CBRE’) group, warehouse developers located in Chicago and neighboring areas have come across more speculative projects than they did in the past two decades.

The frenetic increase in demand for distribution space is the reaction to one lone company, that has transformed customer expectations of the delivery of their orders. That company is Amazon. Amazon has been successfully able to build a vast network of strategically placed distribution centers, which allow it to fulfill orders at a rate that is unmatched by other retail service providers. Customers are now used to shorter shipping times when they place an order at Amazon. This has resulted in traditional retail service providers to step up and resort to online platforms and hence, develop the capability to transport goods directly to consumers. According to Karl Siebrecht, who is the CEO of Flexe, supply chains were regarded as nothing more than cost centers. Now Amazon has stepped in and used supply chains as an asset for growth. As a result, the retail industry is in a race to keep up.

For example, Dallas is regarded as a strategic hotspot for retail distribution, given the access it permits to the fourth largest metropolitan area in the US. 14 million square feet of space is now designated as warehouse space and is currently being built upon.

Changes in design

Given the spike in demand, and the finite amount of space that exists, distribution centers have witnessed a radical change in their design. Ceilings would reach a maximum height of not more than 24 feet. Going further back, warehouses would only be located near ports or railroad terminals.

These days there are distribution centers being built that have a clearance for a 40 feet ceiling height. Some DCs have approximately 2,000 parking spaces to accommodate the workforce being employed for the center. Moreover, DCs are now being built close to population centers, to facilitate faster order delivery.