The document discusses the evolving role of distribution centers (DCs) in the supply chain, emphasizing their importance in adapting to the 'new normal' of business operations. It outlines the different types of distribution warehousing and highlights the critical difference between warehouses and DCs, primarily focusing on product movement and service delivery. The piece argues for reconceiving distribution center operations to maximize value-added processes and competitive advantage in the current landscape.

1. SUPPLY CHAIN DIGITAL’S FIVE PART FEATURE SHARES
WITH BUSINESSES HOW DISTRIBUTION CENTERS ARE
IMPORTANT TO THE SUPPLY CHAIN
Warehousing & Storage
COUNT THE WAYS DISTRIBUTION
CENTERS (DCS) ADD VALUE (PART 1)
BY THOMAS L. TANEL
CTL, C.P.M., CCA, CISCM
PRESIDENT AND CEO, CATTAN SERVICES
GROUP, INC.BUSINESS UNIT, ORACLE
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August 2012

2. Warehousing & Storage
Counting the added value of DCS
page 31
I
N RESPONSE TO THE “NEW Normal”, the business
landscape has changed fundamentally; tomorrow’s
distribution environment will be different, but no less
rich in possibilities for those who are looking for ways
to add value. With new trends and an “e-volution” in
moving and storing materials comes the inevitable need
to reconceive how we operate our distribution centers
to stay competitive. Outdated philosophies not based
on the “New Normal” may prevent us from recognizing
and integrating some of the new ways the distribution
facility or DC can add real value to our operations.
OUTDATED PHILOSOPHY
Let’s talk about moving archaic thinking into the second
decade of the 21st century. Let’s talk about the evolution
of distribution as a means of adding value to your
organization.
In another “era,” when I first started out, there were
basically only four types of distribution warehousing
that were thought to benefit an organization:
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Outdated
thinking may
prevent us
from adding
operational
value
August 2012

3. Warehousing & Storage
Counting the added value of DCS
page 33
STORAGE WAREHOUSE
The use of a facility to stockpile inventory for outbound
shipment in a make-to-stock plant environment or
where MRO items are held for consumption, repair, and
service of plant facilities and equipment. The intention
is to have long-term storage.
IN ANOTHER “ERA,” WHEN I
FIRST STARTED OUT, THERE WERE
BASICALLY ONLY FOUR TYPES OF
DISTRIBUTION WAREHOUSING
PRODUCTION WAREHOUSE
The utilization of a facility to hold materials and
components for inventory prior to their need in
processing, production, or manufacturing. The goal is to
level demand.
ORDER FULFILLMENT DC
Storage Warehouse
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A facility that holds inventory to meet customer orders
from stock on hand through product availability and
reasonable order cycle times. The effect is to minimize the
amount of inventory while maximizing the order fill rate.
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4. Warehousing & Storage
Counting the added value of DCS
page 35
SORTING AND CONSOLIDATION DC
Sorting and Consolidation DC
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A facility that serves as a form of terminal,
receiving large loads and then distributing smaller
shipment without holding stocks. Conversely, it
may also serve to assemble small shipments into
larger loads.
As you can see, the conceptual principles behind
a distribution center (DC) and a warehouse are
closely related: both store products. Storage is
the primary differentiator for the processes in
warehouses, and many of the activities encountered
revolve around putting products into storage and
taking them out again, driven by customer orders.
Although the sortation processes and technologies
vary tremendously, Distribution Centers are
characterized by a configurable SKU with a unit
load degradation throughput process, which may or
may not have value-added processing. As depicted
below in the chart’s four scenarios a comparison is
made between pick versus storage requirements.
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5. Warehousing & Storage
Counting the added value of DCS
High Pick & High Storage
This indicates a large and
active warehouse such as a
Distribution Center (DC). In
these situations, high technology automated picking
combined with mechanized
handling and high density
storage justifies itself.
High Pick & Low Storage
With high picking activity
but low storage, the picking
area should be compact
and dense and storage is
dedicated location and simplistic. Some mechanization
or automation of picking may
be justified.
Low Pick & High Storage
Here the requirement is for
high density, random location storage with high bays,
multi-levels and dense packing. Low turnover means
that picking can be manual
or semi-manual.
Low Pick & Low Storage
A simple, small warehouse
requires neither automation
nor sophisticated storage
devices. Stacked pallets,
floor storage or simple
racks and shelves suffice.
Handling is manual.
page 37
The difference between warehouses and DCs,
however, lies in the way they focus on product
movement. Warehousing is “transportation at zero
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FedEx SupplyChain Global Distribution Center
miles per hour”; while distribution moves goods
from source to customer in a nearly continuous flow.
Normally, a traditional DC serves a transportation
function, where larger shipments are more economical
to ship than small shipments, either for outbound or
inbound freight control. A traditional warehouse, on the
August 2012

6. Warehousing & Storage
Counting the added value of DCS
other hand, stresses
storage efficiency and
space utilization rather
than emphasizing the
material handling
and accessibility of
products found in
a traditional DC.
While a warehouse is
focused on the most
efficient cost effective
DC’s place much more emphasis on human resource
methods of storing
effectiveness
products within its
walls, a distribution center’s sole mission is to provide outstanding service
to its customers. The cost structures for these types of operation means that
warehouses place more emphasis on space and equipment investments,
while distribution centers place much more emphasis on human resource
effectiveness in a high velocity operation.
Check back next month to see the second installment of Count the Ways
Distribution Centers (DCs) Add Value by Thomas L. Tanel! scd
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page 39
KEY STATS
BUSINESSES PREVIOUSLY BELIEVED
THERE WERE BASICALLY ONLY
FOUR TYPES OF DISTRIBUTION
WAREHOUSING THAT WERE
THOUGHT TO BENEFIT AN
ORGANIZATION
THE CONCEPTUAL PRINCIPLES
BEHIND A DISTRIBUTION CENTER
(DC) AND A WAREHOUSE ARE
CLOSELY RELATED: BOTH STORE
PRODUCTS
DISTRIBUTION CENTERS
ARE CHARACTERIZED BY A
CONFIGURABLE SKU WITH A UNIT
LOAD DEGRADATION THROUGHPUT
PROCESS, WHICH MAY OR
MAY NOT HAVE VALUE-ADDED
PROCESSINGSITES AND CLIENTS AT
THE RIGHT PLACE AND TIME
August 2012