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A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products to be re-distributed to retailers or wholesalers.

Distribution centers are the foundation of a retailing network. They allow a retail location to stock vast numbers of products without incurring an explosion in transportation costs. The way a typical distribution network operates is to have centers setup throughout a commercial market. Each center will then service a number of stores. Large distributions centers for companies such as Wal-Mart service 50-125 stores. Suppliers will ship truckloads of products to the distribution center. The distribution center will then store the product until needed by the retail location and ship the proper quantity.

Because a large retailer might sell tens of thousands of products from thousands of vendors, it would be impossibly inefficient to ship each product directly from each vendor to each store. Many retailers own and run their distribution networks, while smaller retailers may outsource this function to dedicated logistics firms that coordinated the distribution of products for a number of companies. Third-party logistics providers like USA Logistics in Chesterton, Indiana, Echo Global Logistics based out of Chicago, IL, or Ozburn-Hessey Logistics can provide these services. A distribution center can be co-located at a logistics center.

The food distribution system of the United States is dominated by distribution centers, which have helped to cut the cost of supplying food and made it a small percentage of the total cost of living.

Large distribution centers might receive and ship more than ten thousand truckloads each year, with an individual store receiving only a couple trucks per week up to 20, 30 or more per week. The distribution centers can range in size from less than 50,000 square feet (5,000 m²) up to the largest approaching 3 million square feet (180,000 m²).

Although the primary role of a distribution center is to receive large quantities of products and ship small quantities to individual stores, an important secondary role is storage. Many retailers have prioritized having as many items in stock at one time as possible. To conserve space, minimize inventory costs and maximize the variety they offer, the retail might only stock one or a few items of a particular product. This requires the ability to ship a replacement quickly once an item is sold. By keeping product on hand in the distribution center, the retailer can ship a replacement almost immediately after a product is sold.

In addition to shipping quickly, preparing for busy shopping seasons requires retailers to stock up on product ahead of time. For many retailers, the Christmas shopping season is the busiest of the year. Ahead of this time, a distribution center might double the amount of inventory on hand and then draw this level down through the shopping season. This strategy is especially important for imported items. With lead times measured in weeks or months, stocking these products in a distribution center is often the only way to maintain in-stocks at the store. New seasons, holidays or special promotions may also prompt a retailer to store specific items prior to a large rollout or demand forecast.

The most efficient method of distribution would be shipping a full truckload or railcar directly from the manufacturer to the retailer. After this, the next most efficient method would be to ship a full truckload to a distribution center, unload full pallets of products and immediately load the pallets onto trucks that are going to individual stores. Both of these methods can only be used on very high volume items. Most products cannot be delivered in this manner and pallets, or even individual boxes, must be broken down and divided.

Once a full pallet must be broken apart, the costs of handling the product can increase quickly. Many distribution centers use large sortation systems with miles of conveyor to move product through the facility and into a truck. They also may have automated equipment for de-palletizing and re-palletizing product. Some of the most sophisticated systems can convey product straight into storage racks and then convey out of the racks to trucks, all automatically. With a wide variety of product sizes and weights, these systems are designed to handle a specific range of products. Very large/small or heavy/light products require varying degrees of manual handling.

As the process of handling involves more steps and is more manual, the cost increases. Storing products instead of receiving and immediately shipping them, adds cost. Firms must determine where lost sales from not having product on the shelves are balanced by the increased handling and storage costs.

Products that cannot be handled by automatic equipment also add costs. Some of the largest products may require more than one person to manually unload and load these into trucks. This process can be very time consuming and costly, and must be offset by higher prices.

All distribution centers have three main areas and may have additional specialized areas. The three main areas are the receiving dock, the storage area and the shipping dock. In small organizations it is possible for the receiving and shipping functions to occur side by side, but in large centers, separating these areas simplifies the process. Often a distribution center will have dedicated dock doors for each store in its shipping area. The receiving area can also be specialized based on the handling characteristics of freight being received, whether the product is going into storage or is going straight to a store or by the type of vehicle delivering the product.

Other departments that a distribution center may have include:

• Transportation – arranges and coordinates shipments in and out of the DC
• Dedicated Product Departments – divisions can be based on handling characteristics or storage characteristics. For example, refrigerated and non-refrigerated [Meat & Produce, Frozen, Dairy/Deli, Dry] each of the three areas have both shipping and receiving departments as well.

Distribution Centers also have a variety of supporting departments. These include human resources, maintenance/facilities operations, production control and accounting.

A distribution center will have a General Manager that manages the facility. This individual will then have a number of department managers that report directly to them. Each department is then composed of supervisors and warehouse workers. The jobs of a warehouse worker can include:

• Unloader - unloads trucks and breaks down pallets as needed, with various pieces of power equipment
• Receiver - inventories and tags unloaded pallets using a mobile cart computer unit and printer
• Hauler - transports received pallets with equipment from the receiving dock to the storage racks
• Putaway Driver - puts product into racks with forklift
• Replenishment Driver - Pulls product from the racks and places into the "pick slot" with forklift
• Orderfiller - picks product from the "pick slot" by hand and moves with power equipment
• Loader - wraps the orderfilled pallets and loads trucks, using equipment

In addition to these basic job functions, there are a number of other areas of employment in a DC. Quality Assurance (Inventory Mgmn't), Asset Protection (Loss Prevention), Quality Control, maintenance, and housekeeping can all be dedicated job functions.