Distribution center : costs and organisation

Costs

The most efficient method of distribution would be shipping a full truckload or railcar directly from the manufacturer to the retailer. After this, the next most efficient method would be to ship a full truckload to a distribution center, unload full pallets of products and immediately load the pallets onto trucks that are going to individual stores. Both of these methods can only be used on very high volume items. Most products cannot be delivered in this manner and pallets, or even individual boxes, must be broken down and divided.

Once a full pallet must be broken apart, the costs of handling the product can increase quickly. Many distribution centers use large sortation systems with miles of conveyor to move product through the facility and into a truck. They also may have automated equipment for de-palletizing and re-palletizing product. Some of the most sophisticated systems can convey product straight into storage racks and then convey out of the racks to trucks, all automatically. With a wide variety of product sizes and weights, these systems are designed to handle a specific range of products. Very large/small or heavy/light products require varying degrees of manual handling.

As the process of handling involves more steps and is more manual, the cost increases. Storing products instead of receiving and immediately shipping them, adds cost. Firms must determine where lost sales from not having product on the shelves are balanced by the increased handling and storage costs.

Products that cannot be handled by automatic equipment also add costs. Some of the largest products may require more than one person to manually unload and load these into trucks. This process can be very time consuming and costly, and must be offset by higher prices.

Distribution Center Organization

All distribution centers have three main areas and may have additional specialized areas. The three main areas are the receiving dock, the storage area and the shipping dock. In small organizations it is possible for the receiving and shipping functions to occur side by side, but in large centers, separating these areas simplifies the process. Often a distribution center will have dedicated dock doors for each store in its shipping area. The receiving area can also be specialized based on the handling characteristics of freight being received, whether the product is going into storage or is going straight to a store or by the type of vehicle delivering the product.

Other departments that a distribution center may have include:

    * Transportation – arranges and coordinates shipments in and out of the DC

    * Repackaging – breaks open bulk packages and repackages assortments for individual stores

    * Dedicated Product Departments – divisions can be based on handling characteristics or storage characteristics. For example, refrigerated and non-refrigerator

Distribution Centers also have a variety of supporting departments. These include human resources, maintenance/facilities operations, production control and accounting.

Distribution Jobs

A distribution center will have a General Manager that manages the facility. This individual will then have a number of department managers that report directly to them. Each department is then composed of supervisors and warehouse workers. The jobs of a warehouse worker can include:

    * Receiver - unloads trucks, either with or without equiment

    * Pallet Mover - transports pallets with equipment from one area of a plant to another

    * Stocker - puts product into racks, either on forklifts or by hand

    * Order Picker - picks product from the racks to send to a store, either on forklifts or by hand

    * Packer - repackaged product from bulk boxes into assortments for individual stores

    * Shipper - loads trucks, either with equipment or by hand

In addition to these basic job functions, there are a number of other areas of employment in a DC. Inventory management, maintenace, training and housekeeping can all be dedicated job functions.

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