3-11. Types and Function Levels of Distribution Centers
This section explains the classification (types) of logistics within the entire supply chain and differences in characteristics by domain (production logistics vs. sales logistics), as well as the structural impact that the recent expansion of BtoC (mail order) has on logistics costs.
A1 Types of Logistics
A2 Explanation and Key Points
① 5 Classifications of Logistics (Supply Chain Flow)
The flow of goods is broadly classified into the following 5 categories:
Procurement Logistics
Logistics for sending raw materials, parts, and materials from suppliers to factories.
Production Logistics
Logistics for the movement of raw materials within a factory and transporting finished products to warehouses/distribution centers.
Sales Logistics
Logistics for delivering finished products from warehouses/distribution centers to "wholesale/retail (BtoB)" or "end customers (BtoC)."
Waste Logistics
Logistics for disposing of and discarding unnecessary packaging materials, garbage, etc.
Venous Logistics
Logistics for collecting products and materials for recycling, reuse, and returns (likened to veins returning blood to the heart).
② The Decisive Difference Between Production Logistics (Samurai Society) and Sales Logistics (Townsman Society)
The metaphors of "Samurai Society" and "Townsman Society" capture the essence of logistics management.
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Production Logistics = "Samurai Society (Reasonable / Leveled)"
Because it operates based on the factory's production plan, you can systematically control (level out) when, where, what, and how much to transport. It is a world with few plan changes, making it easy to operate under rules that prioritize efficiency.
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Sales Logistics = "Townsman Society (As the Customer Dictates / A World of Fluctuations)"
Because it moves according to the orders (demand) of end users and business partners, the volume fluctuates wildly depending on the day of the week, season, sales, weather, etc. It is an uncontrollable world responding to demands like "I want it right now" or "designated time delivery."
③ The Increase in BtoC (Mail Order) and "Why Logistics Costs Won't Go Down"
Conventional BtoB (Business-to-Business Logistics)
"Consolidated large-lot transport" in case or pallet units from the distribution center to "wholesalers" and "retail stores" was possible.
Expanding BtoC (Mail Order / EC)
This involves "fragmented small-lot delivery" in single items or piece units from the distribution center to "individual homes."
💡 The Mechanism by which Costs Stop Decreasing
1. Rapid Increase in Work Hours: The effort required to pick up products one by one (piece picking), individually package, and inspect them increases drastically.
2. Decline in Delivery Efficiency: Compared to BtoB, which delivers to a few companies using large trucks, BtoC delivers small amounts of goods to countless individual homes, causing costs for vehicle numbers, mileage, and re-deliveries to skyrocket.
A3 Summary
This highlights the structural challenge that "sales logistics (especially BtoC) is highly susceptible to waves of demand (fluctuations), and because lots are becoming smaller, cost reduction has become extremely difficult." Therefore, "how to create mechanisms to absorb fluctuations" and "how to automate and streamline small-lot picking and shipping operations" become critical themes on-site.
B1 Warehouse Characteristics in Sales Logistics
We compare the differences between the two representative hub forms—"Manufacturer's Product Warehouse" and "Retail/Wholesale Distribution Center"—across 5 items, summarizing what kind of improvement approaches (system proposals) are necessary.
B2 Contrast and Explanation by Item
| Comparison Item | Manufacturer's Product Warehouse | Retail/Wholesale Distribution Center (Focus Area) | Explanation & Structural Differences |
|---|---|---|---|
| Purpose of Warehouse | Buffer between production and sales (Product storage) | Sorting for sales stores (Order picking) | While manufacturers are storage-oriented, retail/wholesale are pass-through/picking-oriented, swiftly sorting and sending goods out. |
| Varieties | Hundreds of types (Few additions/changes) | Thousands of types (Constant changes, shipper changes exist) | Retail/wholesale has an exponentially larger number of handled items that swap out frequently, making fixed shelf design difficult. |
| Handled Packaging Form | Pallet Units | Case / Piece Units | Manufacturers focus on large-lot (pallet) handling, while retail/wholesale centers on small-lot (case/piece) work, increasing the ratio of manual labor. |
| Delivery | Long-distance (1 time/day to week) | Short-distance (1-3 times/day, small-lot high-frequency) | Retail/wholesale shipping time schedules are extremely strict to accommodate small-lot, high-frequency deliveries to stores. |
| Approach to Cost Down & Quality Improvement | Aim for labor-saving and improved inventory accuracy through mechanization like automated warehouses | Mechanization is difficult, so aim for improved picking accuracy and efficiency through IT equipment support | Manufacturers easily automate hardware due to fixed packaging and varieties; retail/wholesale requires software flexibility to handle fluctuations and multiple varieties. |
B3 Insights in Logistics Proposals and Improvements
① Proposals for Manufacturer Product Warehouses [Hardware (Logistics Equipment) Focus]
Because packaging forms and varieties are standardized and fixed, this is an area where "labor-saving and unstaffed operations" through the introduction of large logistics equipment like automated warehouses, palletizers, and AGVs easily demonstrate cost-effectiveness.
② Proposals for Retail/Wholesale Distribution Centers [Software (WMS / Operations Support) Focus]
Because of high-mix, small-lot piece shipping and frequent item turnovers, proposals centered on WMS combining handy terminals or digital picking to optimize traffic lines, mistake-proofing (Poka-yoke), and improving work speed are extremely effective.
C1 Management Levels of Distribution Centers
This is a model classifying the introduction stages of IT, equipment, and facilities (maturity of digitalization and automation) in a distribution center into 4 stages: "Level 1 to Level 4."
C2 Management Levels of Distribution Centers (4-Stage Step-up)
| Management Level | Operational Characteristics | IT/Equipment/Facilities Used | Business Opportunities for Manufacturers |
|---|---|---|---|
| (Level 1) Slip-based operation |
"Operations reliant on people (experts)" ・Inspection with paper delivery slips ・Inventory/assortment/dispatch managed by memory or paper |
・PC for slip issuance ・Simple inventory management software |
Proposal to introduce a Warehouse Management System (WMS) |
| (Level 2) WMS Introduction |
"Operations based on data/lists" ・Visual inspection based on lists ・Start of location management/dispatch support |
・Warehouse Management System (WMS) | Introduction of more advanced WMS + work support equipment |
| (Level 3) WMS + Work Support Equipment |
"Mistake-proofing / Real-time operation" ・BCR (Barcode) inspection ・Paperless via wireless LAN/lamp instructions |
・WMS / Barcode system ・Wireless LAN terminals / Picking carts ・Digital picking |
Introduction of automated equipment |
| (Level 4) Utilization of Automated Equipment |
"Labor-saving / Automated operation" ・Inventory management in automated warehouses ・Automated picking, automated sorting |
・WMS / Automated warehouse ・Palletizer / Depalletizer ・Automated sorters / Automated picking |
Proposals for constructing new distribution centers |
C3 Detailed Explanation and Important Business Insights
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Evolution from "People Dependency to Automation" accompanying Warehouse Scale Expansion
As the scale of the warehouse increases, the level advances from Level 1 to Level 4. Level 1 & 2 rely on human judgment; Level 3 prevents human errors using system instructions and work support equipment; and Level 4 reaches full automation by machinery.
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Proposal Areas for Retail/Wholesale Distribution Centers
In sites with many varieties and piece picking, suddenly introducing Level 4 (automated equipment) is difficult. Stepping up from Level 2 to Level 3 (more advanced WMS + work support equipment like handy terminals or digital picking) represents the area with the highest return on investment.
D1 Center Scale and Information System Classification
This systematically organizes the corresponding relationship between the "Equipment / Material Handling Level" depending on the scale and complexity of the logistics center (number of industries, area, number of customers) and the "IT / Information System Classification" that supports it.
D2 Detailed Explanation
① Equipment / Material Handling Level (Pyramid Structure)
- Bottom Tier: Shelves, Carts, Workers (Manual labor-centric operations)
- Tier 2: Cargo Handling Equipment (Equipment like forklifts and conveyors that assist manual labor)
- Tier 3: Single Systems (Standalone automation like automated warehouse only, or sorter only)
- Top Tier: Complex Systems (Advanced integration of automated warehouse + AGVs + automated picking, etc.)
② Information System Classification (4 Layers)
- Accounting System: Top-level core system forming the base for all levels
- Inventory Management System: System to manage theoretical inventory
- Warehouse Management System (WMS): Manages physical items and work logic such as locations and picking procedures
- Work Support System (Wireless LAN): Real-time instructions to handy terminals, etc., and achievement detection (mistake-proofing)
D3 Important Insights for Practical Operations and Improvement Proposals
1. The "Work Support System (Wireless LAN)" is the Keystone of On-site Improvement
Even in sites that do not introduce automated equipment, simply introducing a "Work Support System + Wireless LAN" dramatically improves work accuracy and productivity.
2. Preventing Mismatch Between Capital Investment (Hardware) and System Investment (Software)
The approach with the highest return on investment is to first digitize the site by introducing "WMS + Work Support System (Handy/Wireless LAN)" as a set, matched to the physical level of the site.