Everything You Need to Know about Logistics Centers
A large building with a steel structure and metal shelves filled with goods — this image likely comes to mind when someone mentions a “warehouse.”And rightfully so, because essentially, that’s what a warehouse is. But what do we envision when we hear the term “logistics center”? Probably a similar picture, right? However, there are significant differences between a warehouse and a logistics center, though both are large buildings with metal shelves for storing goods. In today’s article, we will explore what a logistics center is, how it functions, and why it is such an important component of an uninterrupted supply chain, especially for the e-commerce industry.
Logistics centers have become a permanent feature in countries with service-based economies. Just visit the outskirts of most large urban areas, and you’ll see these characteristic large halls with steel structures bustling with semi-trucks delivering and receiving loads.
The role of logistics centers in ensuring the uninterrupted flow of goods within an effective supply chain is crucial in the modern economy. If you liken the supply chain to the bloodstream, then cargo is the oxygen, trucks are the blood cells transporting it, logistics service providers are the brain, and the logistics center is the heart of the whole system.
Logistics Center and Warehouse: Are They Any Different?
As we noted at the start, to a layman, a logistics center and a warehouse might seem the same, especially from the outside: just a large metal hall with rows of shelves inside, so what’s the difference besides the name, right? The reality is much more complex.
A warehouse is a facility used to store goods in a specific area. Goods are delivered to and collected from such a warehouse. Products are stored there until they are moved for further distribution. A warehouse can be a relatively simple structure in technological terms, or it could be equipped with advanced systems, such as temperature control or automated robots to handle warehousing operations. Its main purpose is simply to store goods before they move on to customers.
In contrast, a logistics center’s main distinguishing feature is its function and the degree of complexity of the logistics processes taking place there. While a warehouse focuses on storage, a logistics center handles the entire logistics process.
It’s important to note that a warehouse is an element of a logistics center, i.e., its warehousing function is part of a broader function of the logistics center. A warehouse can function independently (used solely to store goods), but a logistics center cannot operate without a warehouse.
In summary, logistics centers offer many more functions than traditional warehouses, focusing more on managing and optimizing the entire logistics process.
What is a Logistics Center?
A logistics center can be defined as a business entity that owns land and infrastructure necessary to provide logistics services. The center collects and ships goods, stores them, packs them, provides customs services, and manages returns. Depending on the type of logistics center, there may be additional, more specialized functions.
The infrastructure of a logistics center typically includes warehouses (and storage yards), truck parking lots, container terminals, reloading platforms, customs service points, and office facilities where the administrative work is carried out.
The daily operation of a logistics center involves proper work organization carried out by an experienced crew working in shifts, allowing the facility to operate nearly 24 hours a day.
The effective functioning of a logistics center is ensured by the use of order management software (OMS) and warehouse management systems (WMS), which together create a digital information and transaction infrastructure.
Logistics centers are strategically located near road, sea, rail, and air transport routes, often near or on the outskirts of the largest urban agglomerations.
Types of Logistics Centers
Logistics centers can be classified based on several criteria. First, consider the aspect of the spatial organization of the fulfillment center. It may be concentrated, meaning all the center’s facilities are located in one area and operate under the same organization indicated by one owner. Another organizational form is a modular center: individual components (modules) operate in one area but belong to different owners. It’s also possible for parts of a logistics center to be remote from others but still belong to one owner and operate within a unified organization, known as a dispersed model.
Logistics centers can also be divided based on the size of the area they occupy. For example, an international center covers up to 150 ha and has an operational range of up to 800 kilometers, a regional center covers up to 50 ha with a range of 100 km, and the smallest, a local logistics center, covers 10 ha with a range of 10 km.
Another classification of logistics centers is based on the type of transport they serve. If a facility handles logistics processes involving the transport of cargo using two or more means of transport, it is referred to as an intermodal logistics center. If operations use only one form of transport, like trucks, it is a non-intermodal center.
Logistics centers can also be categorized according to the industries they serve, such as e-commerce companies, the textile industry, publishing, and the food industry.
Functions of Logistics Centers
As mentioned earlier, a logistics center is a business entity that provides a range of logistics services, which can be divided into three main groups:
Logistics functions: This is the broadest and most essential category of functions of a logistics center, including the receipt and shipment of cargo, warehousing, inventory management, and order management (including picking, packing, and handling returns and complaints). Depending on the industry served, this group can also include more specialized functions, such as washing and ironing for a textile industry center or on-site printing for the publishing industry.
Auxiliary functions: This group includes customs services, insurance services, and freight forwarding.
Additional functions: These activities are not the core activity of a logistics center but result from its infrastructure and capabilities, providing an additional source of income. This includes the sale of fuel, repairs of commercial vehicles, and even renting office space to external entities.
In the near future, logistics centers may expand to include production functions on a larger scale, thanks to the development of artificial intelligence. AI-controlled algorithms will be able to measure online interest in a product and initiate its production (using advanced 3D printers) when an increase in demand is noted. This will speed up the product’s route to the customer, as it will not need to be transported from a distant factory to a logistics center in the first stage of the load journey.
How Does a Logistics Center Work?
In simple terms, the operational process of a logistics center involves:
- Accepting loads of goods delivered to the center and entering them into the warehouse management system, after checking the cargo documentation.
- Sorting goods and storing them in the warehouse in areas appropriate for the given type of goods.
- Processing orders: picking, labeling, packaging, and preparing for shipment.
- Handling returns: accepting and processing returned goods and preparing them for shipment to the supplier/manufacturer.
- Loading shipped cargo onto means of transport for delivery to destinations or return to the supplier.
Inventory levels are constantly monitored (and replenished, if necessary), and the flow of information between individual departments of the logistics center and external partners is maintained to ensure the efficiency and lack of disruptions of the entire process.
In a globalized service-based economy, logistics centers are key to ensuring its functioning. They optimize delivery processes, which not only shortens transport times from the manufacturer to the end recipient but also reduces operating costs for companies involved in the process. Thanks to the functioning of logistics centers, the efficiency and reliability of the supply chain also increase, allowing companies to respond faster to changes in market conditions or customer preferences. Additionally, logistics centers are at the forefront of implementing modern technologies in the logistics industry, with widespread use of solutions such as automated warehouse management by robots and advanced data analysis. Around the corner, there are more and more applications of AI tools to further improve the logistics processes carried out by the center.