Throughout the supply chain we find different types of warehouses. First, we distinguish between production warehouses, distribution warehouses and fulfilment centers.
- A production warehouse holds raw materials, semi-finished goods and finished goods. Goods are delivered to and received from a nearby production plant. Finished goods are delivered to customers or other warehouses.
- A distribution warehouse receives goods from various suppliers and ships these to customers (B2B).
- A fulfilment warehouse is a warehouse in an e-commerce environment. It ships goods to end-customers (B2C).
Distribution warehouses can be further classified by the region that they serve.
- A central warehouse holds the centralized inventory for a large region. This centralization allows the region to be served while keeping total inventory low. A distribution center that serves the European continent is also known as a European distribution center
- A local warehouse serves a smaller geography, e.g., a city, region, or one or more (small) countries. Due to its close proximity to the local market, the local distribution center can quickly supply goods to customers. Sometimes the local warehouse only carries fast moving products in order to limit decentralized inventories.
Another warehouse classification relates to the proprietor.
- A private warehouse is operated by the owner of the goods.
- A third party warehouse is operated by a third party logistics provider on behalf of one or multiple clients.
Finally, third party warehouses can also be further classified.
- A dedicated warehouse holds the goods for one client.
- A public warehouse holds the goods for multiple clients.
The Figure below shows the various warehouse types in a typical supply chain structure. We see a central warehouse that is supplied by several production warehouses. The central warehouse then distributes the goods to the local warehouses. The warehouses may belong to the same company or to different companies. Depending on order quantities and the customer’s location, the customer might be supplied from the production warehouse, the central warehouse or the local warehouse.