The Role of Warehouses and Distribution Centres

The Supply Chain Management course introduced the warehouse as a place that receives, stores and prepares goods for the next step in the chain. It named four jobs: buffer (holding stock between supply and demand), consolidation (bringing goods from many suppliers together), break-bulk (splitting large inbound loads into small outbound orders) and value-adding services such as labelling and kitting.

This course starts from there and goes inside the building. It is written for the people who run warehouses: supervisors, managers, logistics coordinators and site leads at a third-party logistics (3PL) provider. The question is no longer "what is a warehouse for?" but "how do I run this one well, and how do I fix it when it goes wrong?"

Worked example: what consolidation is worth

A retailer has 30 suppliers and 120 shops. If every supplier delivered to every shop directly, there would be 30 × 120 = 3,600 supplier-to-shop delivery links to plan and receive.

Quorvale Logistics (an invented company) runs a distribution centre for the retailer. Now each supplier delivers to the distribution centre and the distribution centre delivers to each shop. That is 30 + 120 = 150 links. Each shop receives one mixed delivery instead of many small ones, and each supplier makes one larger delivery instead of 120 small ones.

The distribution centre adds handling cost: every item is unloaded, stored, picked and loaded once more. It is worth having only when the savings in transport and receiving effort, and the better service, are larger than that handling cost. All figures are invented for teaching.