Distribution Center
Source：Journal LogisticsRelease：2015-11-12Share：
Distribution Center. Facility or a group of facilities that perform consolidation, warehousing, packaging, decomposition and other functions linked with handling freight. Their main purpose is to provide value-added services to freight, which is stored for relatively shorts periods of time (days or weeks). DCs are often in proximity to major transport routes or terminals. They can also perform light manufacturing activities such as assembly and labeling. A warehouse is a facility designed to store goods for longer periods of time.
Since it would be highly impractical to ship directly goods from producers to retailers, distribution centers essentially act as a buffer where products are assembled, sometimes from other distribution centers, and then shipped in batches. Distribution centers are established in part to deal with to different forms of asynchronisms in freight distribution such as different paces of production and consumption. Distribution centers commonly have a market area in which they offer a service window defined by delivery frequency and response time to order. This structure looks much like a hub-and-spoke network.The wide array of activities involved in logistics, from transportation to warehousing and management, have respective costs. Once compiled, they express the burden that logistics impose on distribution systems and the economies they support, which is known as the total logistics costs. Costs are however not the only consideration in supply chain management since supply chains can also be differentiated by time, reliability and risk level. The nature and efficiency of distribution systems is strongly related to the nature of the economy in which they operate. Worldwide logistics expenditures represent about 10-15% of the total world GDP. In economies dependent on the extraction of raw materials, logistical costs are comparatively higher than for service economies since transport costs account for a larger share of the total added value of goods. For the transport of commodities, logistics costs are commonly in the range of 20 to 50% of their total costs.The emergence of logistics in contemporary supply chains is based upon continuous improvements in transport and inventory management costs, leading to lower cycle and lead times.Cycle time. The amount of time required from the receipt of an order to when this order is completed (assembled) and ready for delivery. Often labeled as the completion rate and is mostly linked with the function of production in the manufacturing sector. Often labeled as the level of responsiveness of production.
Lead time. The time it takes for an order to be fulfilled, which includes preparation, packing and delivery to a designed location. Often labeled as the arrival rate and is mostly linked with the function of distribution, mainly its efficiency and reliability. Often labeled as the level of responsiveness of distribution.
Before the emergence of online purchases, customers were rarely exposed to the concepts of cycle times and lead times since goods were directly purchased at a store. The customer was seeing the outcome of cycle and lead times, but not the process. An online transaction, particularly if it concerns a complex and customizable good (e.g. a computer) commonly includes the time it takes for the order to be ready for shipment and the delivery time from the distribution center to the customer's address.
