The death of the DC
The role of distribution centers is facing challenges in keeping up with the increasingly digital and data-driven retail industry. As logistics technologies continue to advance, third-party logistics providers can offer better delivery experiences and control costs. Compared to internal facilities, these outsourced suppliers are often better equipped, able to be more flexible, scalable and resource-efficient.
Improved transparency and control
By using third-party logistics service providers, retailers can fully optimize their supply chain and achieve greater transparency and control. Outsourced providers use advanced technologies to conduct more rigorous process evaluations, monitoring and optimization. They can also provide a more consistent and reliable experience across the industry. By collaborating with these specialized suppliers, retailers can focus on core business rather than expending too much effort on logistics.
Greater flexibility
Outsourced logistics also allows retailers greater flexibility. If suppliers cannot meet changing needs, retailers can more easily switch to other suppliers. Using third-party suppliers also allows retailers to provide or expand services on-demand without expensive infrastructure investments. This is especially important in environments with high uncertainty.
Reduced role of internal DCs
Overall, as outsourced logistics services and retail industry digitization advance, the role of internal distribution centers is declining significantly in the overall logistics infrastructure. This reduced role does not foretell total elimination but indicates distribution centers should be designed based on cost-effectiveness rather than transaction inertia. Internal distribution centers must operate in a more professional and scalable manner to realize retailers’ logistics strategy. Otherwise, their role may further decline.
