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September 9, 2021

If a business wants to expand and compete with other brands, it will need more than just inventory storage. They need skills, technology, and procedures that help streamline their e-commerce supply chain. This is where distribution centers come in and take the place of conventional warehousing. E-commerce businesses are relying more on distribution centers that provide value-added services to meet customer demand. However, you may be wondering how distribution centers work. For that matter, what goes into building them?

How do distribution centers work?

A distribution center is a specific type of warehouse. It consists of products or goods for distribution by retailers, wholesalers, or sometimes directly to e-commerce consumers. Often subject to interchangeable usage with “fulfillment centers,” distribution centers manage order fulfillment and other value-added services.

Distribution centers are the logistical hub connecting you and your clientele. These establishments pick up your products from the manufacturer before shipping them to a location capable of housing your inventory. The product remains in the warehouse and receives protection until it is ready to go into the distribution network.

Distribution centers provide a fulfillment infrastructure and state-of-the-art technology. These components are what help online stores offer shipping that is affordable, meticulous, and fast.

Now that you know how distribution centers work, we can get into the topic of creating them.

Design elements

Building construction always begins with a solid foundation. Design-build contractors who specialize in distribution centers are going beyond the traditional concrete pour. Nowadays, they are using new methods of incorporating new functionalities in warehouse design. Examples include the following:

  • High ceilings: Electronic picking equipment generally makes shelving height less of a problem for warehouse staff. With that said, taller buildings – 35-40 feet or higher – are more economical for distribution center owners. Put simply, it is cheaper to build upward than outward.
  • Flatter and smoother floors: Remote-controlled equipment requiring wire guidance on the floor to guide automated picking devices has proven to be a worthwhile investment. Contractors are now focusing on pouring techniques and floor finishing thanks to goals of “floor flatness.” Additionally, builders utilize intricate caulking and sealing systems to remove any bumps and gaps in the flooring system. Overall, a smooth ride will mean less wear and tear on pricey warehouse equipment.
  • Floor space that is versatile: Construction workers are retaining valuable floor space by hanging HVAC systems or conveyance mechanisms on warehouse roofs. This provides companies with more options for reorganization in accordance with specific requirements.

Costs to build distribution centers

Distribution center construction, like with any warehouse construction, costs a chunk of change. Industry giants like Amazon will typically spend millions to build a fulfillment center. However, for companies constructing a more conventional facility, the building costs heavily depend on size. Additionally, there is the style, design and necessary accessories. Altogether, building a distribution center can cost a total of roughly $35-$100 per square foot.

Below are some of the other operational and miscellaneous costs: 

  • Permits
  • Assessment and planning
  • Building materials 
  • Land
  • Design/Architecture
  • Engineering
  • Energy and other soft costs
  • Anything regarding market conditions
  • Contractual costs and fees
  • Labour and construction
  • Equipment
  • Security system
  • Technology integration
  • Project management
  • Consultation
  • Other legal fees and taxes

Specific requirements for the product

To pinpoint the most suitable technologies and processes for your new facility, you need an understanding of your products’ specifications. What needs handling? Furthermore, which of your product’s characteristics could potentially impact how it is handled?

Important factors to consider include size, weight, fragility, and weight distribution. They are especially crucial when it comes time to inventory solutions and handling systems. Questions that need answering in regards to inventory and handling include:

  • How will storing the product work? Furthermore, do you have a planned system?
  • Do different products have dissimilar requirements for storage?
  • In what ways may product specifications limit or impact options for inventory?
  • Where is the product’s center of gravity? Additionally, how could it affect the conveyors, sorters, and gap generation tech?
  • How much does the average tote/case/pallet of product weigh? Moreover, how will this impact the selected technology?

How distribution centers are beneficial

A distribution center will be responsible for packing, labelling, and shipping every customer’s order. This will leave you plenty of time to focus on fulfilling both your growth and sales objectives. Knowing how distribution centers work and how to approach their construction will benefit you in the long run. Our Calgary construction location can provide assistance with project management and consultation if you need help along the way. If you would like to learn more about different types of warehouses, check out our article, Examining Cold Storage Warehouse Cost.