Warehousing vs. Distribution Centers

When it’s time to expand the shipping and storage capabilities of your evolving business, you may be considering renting a warehouse or setting up a distribution center. Before signing an industrial space lease, it’s important to understand that both warehouses and distribution centers have very different functions and capabilities.

On the surface, it may seem like there isn’t much difference between these two types of facilities. However, understanding how these industrial properties function and knowing which one your business actually needs is crucial for successful and cost-efficient management.

Defining Warehouses

A warehouse is an industrial building that serves as a storage space for inventory, most often on a relatively long-term basis. Items may be stored in a warehouse for a couple of weeks to several months while those products are assembled, consolidated, or retained for various uses.

The primary functions of warehouses include:

• Internal shipping and receiving
• Storing inventory
• Organizing and categorizing inventory

Warehouses are typically used for internal operations and do not act as or interface with shippers forwarding products directly to consumers.

Because warehouses tend to hold inventory for longer periods of time, businesses need to evaluate the square footage and cubic footage of the building to assess whether it will meet the needs for storage space, office space, or even a manufacturing area if necessary.

Defining Distribution Centers

A distribution center is a staging area for products. Unlike a warehouse, very little product actually stays within the building for a long period of time. Instead, distribution centers act primarily as shipping and fulfillment spaces in which inventory from cross-country locations are consistently shipped out to nearby metropolitan areas.

The primary functions of a distribution center include:

• Order assembly
• Labeling and packing inventory
• Inventory shipping
• Transportation of products and goods to consumers

Distribution centers offer a connection point between a company and its customers. These locations fulfill orders and ship them directly to consumers. Because of the complex operational needs of distribution centers, businesses who lease distribution centers usually invest in order management and transportation management technology to keep processes running smoothly.

When considering leasing a distribution center, one of the most important components to consider is the loading capability (i.e. docks), rather than the other attributes of the building itself. Because distribution centers receive and ship out large quantities of products, the exterior of the building and the roadways surrounding it are some of the main factors to consider when making a decision regarding a facility.

Can Any Warehouse Be Used as a Distribution Center?

While property owners may be willing to renovate warehouse spaces to turn them into distribution centers, the costs associated with those renovations—such as installing multiple doors and docks for trucks—are often prohibitive for many businesses.

Unless a business needs to move a large quantity of inventory throughout a large geographic area, such as retailers or e-commerce companies, leasing or operating a distribution center is probably not necessary. Leasing traditional warehouse space is often more cost-effective than leasing a distribution center, and it is often easier to scale warehouse square footage up or down based on your business needs.

If you need both a warehouse and a distribution center for your business, you should consider consulting with a commercial real estate broker or agent who can help you find one or more properties to fit your needs and budget.

Finding the Right Warehouse or Distribution Center

Industrial Investments owns and manages several million square feet of warehouse, industrial and flex rental space throughout the Delaware Valley. We’re committed to providing businesses with the best information and options when it comes to choosing the right warehouse or distribution center for your business.