May 23, 2025

It’s no secret that, as exciting as growth is, it can add new challenges for businesses. In ecommerce, this is very true. When it’s time to scale retail operations, things can get complicated, especially with logistics. As brands grow, keeping up with demand while scaling fulfillment and maintaining fast delivery becomes increasingly complex. With customers shopping across multiple channels, it’s more important than ever to have inventory in the right place at the right time—all while optimizing for efficiency and cost.One of a brand’s most powerful tools is knowledge. Understanding where and how to receive, distribute, and fulfill orders can be the difference between running a good business and a great one. And that starts with knowing the role each type of facility plays.What is a distribution center? We’ve all heard the terms warehouse, fulfillment center, and distribution center thrown around. But what’s the difference between them? While the terms are often used interchangeably, each is a separate facility that makes up part of a retailer’s supply chain and is used at different stages of growth. They may seem “the same,” but in reality, there are nuanced differences. A distribution center is a facility that typically stores products in bulk (think big pallets and large product quantities) and redistributes them to retailers, warehouses, fulfillment centers, or other distribution points. In other words, distribution centers are a B2B intermediary opposed to a DTC fulfillment function.Not every brand needs a distribution center. But it’s essential to know when and how to use them to create a scalable logistics strategy. Distribution center vs. fulfillment center vs. warehouseDifferent supply chain facilities serve different purposes, kind of like coffee makers. You wouldn’t use an espresso machine to brew a full pot, and you wouldn’t expect a French press to whip up a quick shot. Each facility is built for a specific job and can be vital in building an optimized supply chain that gets products where they need to be as quickly and effectively as possible. In logistics, location is often everything. To determine where products need to be (and when!), a retailer needs to look at each type of logistics center and how it would fit into their overall logistics plan. Distribution CenterFulfillment CenterWarehousePrimary FunctionStores and redistributes products in bulk to other businesses or locationsHandles individual customer orders; picking, packing, and shippingStores inventory for long-term holdingTypical Use CaseB2B, replenishing retail stores or fulfillment nodesDTC ecommerce, small parcel shipmentsOverflow or reserve inventoryOrder typePallet or bulk shipmentsIndividual or small-batch ordersRarely processes outbound ordersSpeed of Product MovementModerate to fast based on transfer schedulesHigh-speed, real-time order processingLow; inventory may sit for extended periodsTechnologyWMS, inventory forecasting toolsWMS, OMS, automation for picking and packingBasic or manual inventory trackingReturns ProcessingLimited; often handled elsewhereFully integrated returns and restocking workflowsTypically not used for returnsBest ForMid-to-large ecommerce brands, omnichannel strategiesEcommerce brands with DTC fulfillment needsBrands needing passive inventory storageStrategic BenefitEfficient regional or retail inventory distributionFast, accurate delivery and optimized customer experienceCost-effective storage with minimal handlingHow ecommerce retailers use distribution centersBrands often use distribution centers as part of their supply chain as their operations become larger and more complex. In general, ecommerce retailers using distribution centers are mid- to large-sized and have:High SKU countNationwide or global presenceRetail/wholesale partnershipsHigh order volumeThese distribution centers serve a variety of purposes, but primarily support multi-channel inventory distribution and omnichannel fulfillment. For some, it acts as a replenishment hub for retail stores or smaller fulfillment centers. It can reduce shipping times by keeping inventory closer to regional demand centers. It can also be used as a way to position goods ahead of time for peak season or product launches. Brands that are smaller (low volume) or DTC-only aren’t likely to use a distribution center.Best practices for using a distribution centerSeveral components make a distribution center more efficient:Inventory Optimization: Just like a fulfillment center, it’s helpful to use demand forecasting and real-time tracking to keep inventory optimized.Integration: Connect ecommerce platforms, ERPs, and any inventory management software to provide real-time visibility and up-to-the-minute data.Strategic Location: Use centers close to demand hubs for faster replenishment.Supplier Coordination: Reliable, upstream communication is critical for ensuring timely, accurate deliveries. This helps get the right products in the right quantities to meet downstream demands without delays or bottlenecks.Cross-docking (optional advanced tactic): Use cross-docking when you need fast turnaround times. Bypass storage and transfer directly to outbound trucks to get goods to their destination faster.Pros and cons of using a distribution center In reality, it’s not necessarily pros and cons, but advantages and disadvantages of using distribution centers. It all comes down to timing and unique business needs. ProsEfficient bulk inventory storage and movementCost savings through consolidated shippingScalability during high-demand seasonsBetter retail support and B2B logisticsOpportunity to segment fulfillment strategies geographicallyConsNot designed for DTC order fulfillmentHigher upfront costs and long-term contractsMore complex inventory coordination across multiple nodesNeed for advanced logistics systems and operational oversightWhat type of facility should I be in? As ecommerce brands grow, so do the stakes in their logistics strategy. While not every business needs a distribution center, understanding its role (and how it differs from warehouses and fulfillment centers) can be key to scaling efficiently. The right distribution center setup can reduce shipping times, support omnichannel strategies, and create a more resilient supply chain. By knowing when and how to leverage one, retailers can stay ahead of demand and build a logistics network that grows with them.Fast growth is a good problem, but if you’re unsure your business is ready for a distribution center, talk to a Kase fulfillment expert today. The team can help build an efficient and effective logistics solution, tailored to your business.

Distribution Center: Definition, Best Practices, and Pros & Cons

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