Fulfillment Centre vs. Warehouse: What’s the Difference?

If your eCommerce business is growing to the point where you can no longer handle all of the orders on your own, it may be time to scale your shipping, warehousing, and fulfillment processes. All of this may necessitate the use of warehouses and fulfillment centers. But what are these things exactly? And what's the distinction between them? Continue reading to find out.

What is the purpose of a warehouse or fulfillment center?

Before we get into the differences between fulfillment centers and warehouses, let's first understand why an eCommerce business would need to use them in the first place.

Warehouses and fulfillment centers serve as the backbone of a supply chain.

At their most basic, they provide a location for all of your products/inventory. However, as we'll see later, depending on whether it's a distribution or fulfillment center, they can do a variety of other things.

What exactly is a warehouse?

A warehouse is typically a large structure designed to store large quantities of inventory.

Inside a typical warehouse, you'll find forklifts, large industrial shelves piled high with goods and plenty of workers wearing high-visibility jackets.

Many eCommerce retailers find that leasing warehouse space in conjunction with other eCommerce companies - or using a warehousing provider on their behalf - is more cost-effective.

A warehouse provides a place to store your inventory, but that's about it. When you sell to a consumer or another business, you must pick, pack, and ship your orders.

You must either do this directly from the warehouse or regularly collect inventory from your warehouse and then fulfill orders from your home or office.

As you can imagine, this is inefficient, which is why fulfillment centers were created.

What exactly is a fulfillment center?

A fulfillment center is essentially a warehouse that offers a variety of fulfillment services.

A third-party logistics provider typically runs fulfillment centers (also known as a 3PL).

A 3PL fulfillment center stores an eCommerce retailer's inventory and fulfills orders on its behalf. Fulfillment centers have grown in popularity in recent years because they offer eCommerce retailers a complete end-to-end solution.

Fulfillment centers relieve the burden of receiving, storing, picking, packing, and shipping products. By delegating these tasks to logistics professionals via a fulfillment center, eCommerce businesses can concentrate on their primary goal: marketing and selling their products.

What exactly is the distinction between a warehouse and a fulfillment center?

On the surface, warehouses, and fulfillment centers are both large structures where inventory is stored, but as you've probably guessed, there are several key differences between the two.

Storage

Yes, both warehouses and fulfillment centers store inventory, but there is a significant difference in how they do so - duration.

Typically, warehouses are used for long-term storage. For example, if a garden furniture retailer decides to buy stock on a yearly basis, the stock will be stored in a warehouse until it is ready to be sold.

Inventoy

On the other hand, fulfillment centers have a high inventory turnover. Inventory is rarely kept in a fulfillment center for over a month (usually there for much less time).

Some larger eCommerce retailers will use both a warehouse and a fulfillment center within their supply chains. The majority of their inventory will be kept in a warehouse before being delivered to a fulfillment center as orders come in.

Rotation pace

Warehouses and fulfillment centers operate in very different ways. Warehouses are typically slower-moving environments where inventory is received and shipped out in bulk, with few other services provided.

A fulfillment center is a much faster-paced environment where inventory is received, quality-checked, stored (for a limited time), picked, packed, and shipped to customers. As you might expect, all of these services necessitate more personnel and a much higher inventory throughput.

Shiping

Shipping As previously stated, there is a significant difference in the frequency and volume of shipping that occurs between a warehouse and a fulfillment center.

On a monthly basis, a warehouse may receive large bulk orders via road transport or rail. This bulk inventory may then sit in the warehouse for months before being shipped to a physical store or sent in smaller batches to fulfillment centers.

Meanwhile, a fulfillment center will typically receive inventory weekly, if not daily, with couriers and other shipping companies arriving throughout the day to ship completed orders to customers.

How do fulfillment centers operate?

Fulfillment centers handle everything from when an order is placed with an eCommerce retailer online to when the package arrives at the customer's door.

• In general, the fulfillment process looks like this:

• The goods are delivered to the fulfillment center.

• The inventory is then quality-checked and stored.

• Orders are processed through an eCommerce store.

The order's items are selected and packed in accordance with the specifications of the eCommerce store.

A shipping company then ships the order from the fulfillment center to the customer.

The fulfillment center also handles any returns (with the items returned to inventory if suitable).

Other value-added services provided by fulfillment centers include customer service (e.g., running call centers on behalf of their eCommerce clients), delivery tracking and notification, subscription box fulfillment, and so on.

If you run an eCommerce store, it's obvious that fulfillment centers, as opposed to traditional warehouses, provide a complete solution for order fulfillment.

What are the advantages of utilizing a fulfillment center?

If you're still not convinced that you should use a fulfillment center to fulfill orders from your eCommerce store, here are a few more advantages of doing so.

Consider going global

Fulfilling international orders can be difficult, as anyone who has tried will tell you.

However, with over 2 billion people shopping online globally, it can pay to offer international shipping.

Choosing a fulfillment center with international shipping services allows you to sell your products to more people quickly and easily.

A high-quality fulfillment center will have extensive experience shipping goods around the world, as well as a thorough understanding of the various tax and regulatory hurdles you'll need to clear.

Make some room

Many eCommerce companies begin in a garage, basement, or bedroom. However, as the company grows, space can quickly become an issue.

Working with a fulfillment center can help you free up valuable space in your home or office.

In fact, you can probably avoid dealing with inventory entirely. Many fulfillment centers welcome finished goods directly from manufacturers. As a result, you can have your suppliers ship your products directly to your fulfillment center, which will then ship them to your customers.

Expertise

Let's face it: you may be an eCommerce store expert, but you're unlikely to be an expert at logistics as well.

Utilizing a fulfillment center gives you access to potentially decades of logistics and transportation expertise. Fulfillment centers, in addition to having experienced staff, have typically invested in specialized equipment, and software, and have built long-term relationships with shipping companies.

All of this means they can deliver your products on time, efficiently, and affordably.

Leave it to the professionals when it comes to fulfillment!

Scale

You'll also be in a better position to scale your eCommerce business if you have a team of dedicated experts handling your fulfillment.

Remember that in the world of eCommerce, customers expect their orders to be fulfilled quickly. If you try to scale your business while still handling all of the orders yourself, something will go wrong at some point, disappointing customers and damaging your reputation.

You'll be much better able to handle larger volumes of orders or seasonal peaks if you use a fulfillment center.

Scale economies

If you want to do your own fulfillment, you'll need to invest in warehouse space, shipping partners, staffing, software, and other resources.

Instead, you can collaborate with a fulfillment center and reap the benefits of economies of scale.

Because fulfillment centers frequently deal with multiple eCommerce stores, they can invest in large warehousing space, negotiate great bulk deals with shipping partners, and do a variety of other things. In other words, they operate on a large scale, which will benefit you!

Orders that are made to order

So far, how have you been delivering your products to customers? We're willing to bet it's mostly in generic packagings, like brown boxes and padded envelopes...

A good fulfillment center, on the other hand, will give you the option of sending your orders in custom packaging. They will take your inventory and pack it in custom packaging for you before shipping it to the customer.

In today's highly competitive retail environment, seemingly insignificant touches like personalized packaging can greatly increase customer loyalty.

Concentrate on what is important

It's unlikely that supply chains and logistics were among your interests when you launched your eCommerce store. However, as your store grows, you'll find that it consumes more time.

Instead of focusing on your next big product launch or experimenting with ways to improve your website's conversion rate, you'll end up taking calls from disgruntled customers who haven't received their orders.

Using a fulfillment center relieves you of supply chain and logistics headaches, allowing you to focus on what matters most: growing your eCommerce business.

Enhance your customer service

Are you available to take calls from customers at any time of the day? Do you have the technology to provide real-time delivery tracking alerts? If not, partnering with a fulfillment center will most likely benefit you.

"It's easier to keep an existing customer than to gain a new one," as the old adage goes. By utilizing a fulfillment center that can provide customer services such as phone support and delivery tracking, you will increase your chances of retaining customers and building a loyal customer base.

Today, outsource your fulfillment

If you're still doing your own fulfillment, it's time to consider outsourcing to a dedicated fulfillment partner like 3PL.

We have years of (award-winning!) experience providing leading brands with multi-channel eCommerce fulfillment.

Contact us today to learn how Shiply Hub can transform the fulfillment of your eCommerce store.

Speak with Shiply Hub today to learn how you can transform your fulfillment.