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Definition

distribution center

A distribution center is a product storage and shipping building that stores goods a company produces.

Distribution centers are a key part of the distribution chain for products, order fulfilment, and storing produced goods prior to their shipment to wholesale, retail or customers.

Distribution centers also make large scale shipping of products possible to retail and individuals. Well placed distribution centers can simplify and reduce the cost of getting a product to its destination, bulk shipping to the heart of a market, especially when production is not in an advantageous central location. Distribution centers also enable international commerce with greater competition by eliminating taxes, duty, tariffs or VAT charges a customer would have to pay ordering internationally.

Distribution centers often use various equipment in the handling of inventory such as: forklifts, pallet jacks and automated storage and retrieval systems, shipping containers, boxes, cartons and pallets. Distribution centers can be a separate building and staff or may be a part of a manufacturing center and share staff, space, equipment and inventory. They are generally comprised of a receiving dock, a storage area and a shipping area. Depending on the goods a distribution center stores, they may be managed in different ways. Refrigeration is common for perishables in distribution centers, others may be heated.

This was last updated in December 2017

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