4 Distribution Center Examples and How They Work (2026) – Shopify

As a brand scales, the cracks in a manual fulfillment strategy begin to show. Inventory goes missing, shipping costs rise, and delivery times slip. 

The solution for many is moving fulfillment to a distribution center (DC). The market sees this value, as JLL’s 2025 US Industrial Tenant Demand Study highlights that demand from 3PLs, logistics, and distribution companies increased 13% year over year. 

Whether you build your own or work with a logistics partner, a DC keeps inventory flowing to customers. Ahead, you’ll learn how they work through four real-world distribution center examples. 

What are distribution centers?

Distribution centers are facilities where products are stored after they’re made but before they’re shipped. Their goal is to move products to the next destination, like stores, customers, carriers, or other nodes in the supply chain. 

This happens on a tight schedule, so workflows, layout, labor planning, and warehouse management systems are designed around throughput, or the rate at which products move through the warehouse. 

DCs are active places. On any given day, a number of activities happen inside them:

• Receiving inbound pallets and cartons
• Verifying counts and conditions
• Putting inventory away into pick locations or cross-docking directly to outbound staging
• Picking and packing orders, adding inserts, and confirming order contents
• Printing and applying shipping labels and carrier manifests
• Processing returns by inspecting, restocking, and refurbishing

In 2026, throughput is more tech-driven. Warehouses are adopting AI-enabled vision systems to reduce save time otherwise spent manually scanning and improve cycle counting and accuracy. Gartner predicts 50% of companies with warehouse operations will leverage AI-enabled vision systems by 2027.

DCs are the central cog in the fulfillment process, actively managing the flow of receiving, packing, and shipping goods with speed and accuracy. Daily operations are demand-driven, which means work is scheduled based on real-time orders and store-replenishment needs. That’s one of the reasons they differ from traditional warehouses that primarily store inventory. 

Distribution center vs. warehouse

To the untrained eye, a warehouse and distribution center look the same—large buildings filled with racks and inventory. But for a retailer, they serve two different purposes:

• A warehouse is built for storage density. Goods go there to wait. It’s characterized by bulk handling, longer dwell times, high storage costs, and fewer touches per unit. You optimize a warehouse for cost per square foot.
• A distribution center focuses on throughput. It’s where goods go to move. Operations skew more toward active fulfillment—pick, pack, and ship. You optimize a DC for accuracy and speed. 

Here are the main differences between the two.

With the rise in ecommerce share, businesses are being pushed toward faster, DC-style fulfillment models. If you treat a storage-heavy warehouse like a DC, you risk inventory inaccuracies. 

A warehouse can tolerate slower reconciliation, but a high-volume DC exposes errors immediately. Mispacks and missing scans show up faster when orders are constantly consuming inventory. 

Why do companies use distribution centers?

There is a misconception that a DC is just a fancy warehouse. But if you’re treating a DC like a storage locker, you’re neglecting its true purpose and the efficiency gains it offers. 

For high-growth brands, a DC is a response to growth. When you are small, you can get away with playing inventory Tetris in your back room or in a small warehouse. As you scale, space constraints and SKU growth will break smaller fulfillment models. 

There are many signs of this breakage. You hit a point where staff spend more time hunting for items than packing them, or where daily order volume is high enough that batching and standardized pick paths are a must. You might find yourself fulfilling a single order from three different locations (a store, a back room, and an overflow unit). You pay for three shipments to fulfill one customer.

So, companies turn to DCs because the benefits are clear:

• Faster delivery promises: Amazon reported 30% year-over-year growth in same- or next-day items delivered in 2025. DC coverage helps you expand fast shipping coverage. 
• Higher fulfillment and in-stock performance: A 2025 peer-reviewed study found fulfillment rate improvements exceeded 10% after optimizing DC allocations. 
• Lower cost-to-serve: Parcel shipping keeps getting more expensive. One 2025 parcel rate impact report noted small-parcel shipping costs are 35% higher than 2020.

One of the most overlooked benefits of a DC is how it helps your store replenishment. Without a DC, your retail stores are inundated with shipments from dozens of suppliers. Store staff spend hours receiving, checking paperwork, and managing the inevitable lost cartons. 

A DC shields your stores from that mess. Suppliers ship in bulk to the DC, where goods are received, checked, and organized. The DC then sends fewer, more controlled replenishment shipments to the stores. At a certain scale, brands move from one facility to multiple distribution centers so inventory can sit closer to demand and shorten delivery times.

Once you accept that you need a DC, the next decision is ownership. Do you lease the building and hire the staff, or do you outsource to a third-party logistics (3PL) provider? A 3PL is the fastest route to an operational DC and is often less risky. 

If you need to spin up a new node in a different country to handle international expansion, a 3PL can do it faster than you can secure real estate. If leadership wants to focus on product and marketing, not logistics, it’s time for a 3PL. 

How distribution centers work

Every facility is unique, but the core operations of a distribution center generally fall into six categories.

1. Inbound and outbound logistics management 

The main job is to manage inbound and outbound logistics for all trucks, trains, and shipments entering and leaving the DC. This requires precise timing. 

For example, you can’t have 50 trucks show up at once if you only have 25 bays. You stagger appointments—15 in the morning, 20 in the afternoon, and some in the evening.

DCs also manage shipping to stores, retailers, and other places. This involves routing decisions: What’s the best path to get somewhere? That can include how to move hazardous or oversized products, or how to pack the trucks so products move in and out more easily. 

Many are also investing in robotics to assist workflows. The International Federation of Robotics reports more than 102,900 units sold in transportation and logistics applications in 2024.

Finally, the inventory is ready to ship. Pick tickets might show which orders are headed to Miami, to Tokyo, and to Los Angeles. Everything is divided up and ready to be shipped to the right destination.

2. Receiving and verifying product

Another key job is to receive and verify incoming shipments. This might involve scanning RFIDs and UPCs to confirm the product actually came. DCs now use computer vision to confirm barcodes/labels, reduce mis-scans, and speed verification, especially during peak seasons.

That’s how consumers can track their packages—because DCs are checking on these things. Some DCs go into the bigger boxes to physically verify what was received.

3. Cross-docking for efficiency 

Retail distribution centers are also designed to support efficiency techniques such as cross-docking. They might see trucks come in from Calgary, Seattle, and Dallas, then route that inventory to different outbound destinations. 

When they all come in, the team will cross-dock and switch the goods to go to their destination. This makes sure you don’t have to send three separate trucks to Chicago instead of one with all the correct products.

4. Strategic product storage

The most common thing one thinks of when discussing DCs is product storage. That’s why Amazon does so well—they have distribution centers spread across the world. When a consumer buys something, it doesn’t come from 20 states over, or another country; it might be located right next door. The goal is to route the order to the nearest distribution center with available, accurate inventory.

This also impacts retail efficiency. If you’re in a big city like Houston or Los Angeles where real estate is so expensive per square footage, every square foot used to store inventory in the back room is space you’re not using to sell. 

Many DCs are moving to less expensive areas. JLL reports that the Southeast now dominates, serving 24.1% of total national demand, while Phoenix has seen manufacturing surge 385% since 2020 as the city has become a reshoring hub. A DC stores product in these strategic nodes, allowing you to replenish stores overnight versus holding dead stock in expensive retail square footage.

5. Preparing merchandise for the floor

DCs can also deliver merchandise floor-ready. For example, some DCs might deliver clothes folded or already on the hangers, so staff can take them and place them in the store, ready to sell. This can include getting the sticker price and price tags already in place.

Examples of distribution centers

A distribution center serves many purposes, including a fulfillment center, a replenishment hub, and a returns processing center. It depends on what your retail operation wants to achieve. 

Here are four scenarios to show how different types of DCs can be used to meet different needs.

DTC apparel brand

A DTC apparel brand selling tees, denim, and outerwear might manage anywhere from 300 to 8,000 SKUs once size and color variants are accounted for. 

Considering an estimated 19.3% of online sales were returned in 2025, returns can consume as many resources as outbound shipping. In this case, the DC could act as a reverse logistics expert on top of its standard fulfillment processes. It provides services like returns inspection, re-bagging, and restocking into pick location, as well as photo stations for damage documentation and quarantine shelves for items requiring liquidation decisions. 

Omnichannel retailer

An omnichannel retailer with a growing physical presence and online store needs a DC that does two jobs:

• Manages store replenishment with case packs and seasonal resets
• Provides fulfillment services with branded packaging

With this model, the DC is the hub for inventory management, and your stores are the selling nodes. The layout includes a replenishment staging area organized by store route with a small-parts pick zone for individual ecommerce orders. 

Paired with Shopify’s locations and inventory transfers, the DC can reserve inventory at the origin location and send it to a destination store, while tracking that movement between locations. 

Shopify tracks inventory separately for each location. Once a product is assigned to multiple locations, the DC can replenish stores without blurring DC and store stock, thereby improving inventory accuracy. 

B2B parts distributor

A parts distributor selling to repair shops and contractors operates differently from DTC brands. Accuracy is more important than a pretty unboxing experience. A wrong part number leads to returns and potentially a lost account. 

The DC’s job here revolves around batch picking, zone organization, and strict carton-or-pallet logic. A workflow will batch by route or customer type, pick-to-totes, and verify before palletizing for less-than-truckload (LTL) shipping. 

Perishables and cold chain 

For brands shipping meal kits, specialty foods, or temperature-sensitive supplements, the DC is more controlled. Operations must comply with the FDA’s requirements to prevent food from becoming unsafe during transport by requiring sanitary practices. 

So, a cold-chain DC operation will have tight staging rules, validated packing workflows, and temperature-appropriate handling. On top of that, the FDA’s Food Traceability rule enables faster identification and removal of potentially contaminated foods, which is why cold-chain and perishable DCs focus on lot/traceability discipline.