What Is a Fulfillment Center? 10 Benefits of Using One (+ Warehouse Differences)
As the owner of a small or medium-sized eCommerce company, you're not just a business leader, but a juggler! You have calls to make, calls to answer, bills to invoice, marketing plans to execute... and on top of that, your garage—often the first warehouse a business ever manages—is at capacity and orders keep on rolling in.
How are you expected to pack and ship items expeditiously with everything else that’s on your plate? For many eCommerce companies, the answer is to partner with a warehouse or a fulfillment center.
Now, it’s not unusual to hear someone refer to a warehouse as a fulfillment center, and vice versa. While both involve large buildings housing a variety of goods, they are in fact quite different animals. So, before diving into the benefits of a fulfillment center, let’s take a look at both types of facilities.
What Is a Warehouse?
When you think of a warehouse, your mind probably conjures up an image of a large space with shelves that reach to the ceiling, with forklifts occasionally bustling about to get at products or to move them around. That’s pretty accurate!
In a warehouse, goods are typically stored in bulk for an extended period of time, or until they are needed. For example, consider a company that produces Halloween masks. For 11 months out of the year, these items aren’t in demand, so the company stores them in a warehouse to save space within their own facilities. Operationally, a warehouse may see little activity from day to day, only coming to life when new inventory is added or transferred out.
Most warehouses serve wholesale retailers or B2B orders involving large quantities of products; they typically do not ship products to external customers or end-users. Aside from being a space-saver, warehouses help businesses save money; rather than having to purchase their own warehouse and hire staff to manage it, business can rent space and share the costs with other companies.
What Is a Fulfillment Center?
A fulfillment center may look a lot like a warehouse and store goods for other companies, but that’s where the similarities end. Where warehouses store products for a long period of time, fulfillment centers typically store fast-moving products that are frequently being shipped out. The job of the fulfillment center is to get products to customers or end-users as quickly as possible.
Fulfillment services work with retailers, e-commerce companies, corporations, and others to fulfill both B2B and B2C orders, shipping goods to end-users. For example, when you order a new pair of shoes online, they are probably going to be shipped from a fulfillment center rather than from a warehouse. Of course, a big shoe retailer may store extra pairs in a warehouse, and then ship shoes from the warehouse to a fulfillment center every couple of months.
Unlike the mostly static atmosphere of a warehouse, fulfillment centers are a hotbed of activity! People work, often around the clock, processing, packing, labeling, and shipping orders to customers. There’s also incoming inventory to deal with and managing customer returns. To ensure a smooth process, good fulfillment centers are outfitted with the best technology for processing orders, managing inventory, organizing transportation, and more.
It’s important to understand that fulfillment centers can also double as warehouses; however, warehouses do not act as fulfillment centers. One final thing to note: fulfillment centers are sometimes referred to as distribution centers. These two terms are, in fact, interchangeable!
How Does a Fulfillment Center Work?
Now that you have a better understanding of what makes a fulfillment center different from a warehouse, how exactly does one work? An order fulfillment center allows a company to hand off the responsibilities and costs associated with warehouse management in order to focus on other aspects of their business (AKA, all those other balls up in the air).
The fulfillment center receives, picks, packages, and ships products. It also takes care of, and absorbs the cost of, any inventory problems, such as:
- Mispicks, in which the incorrect product is selected to fulfill an order
- Misships, in which the wrong item is sent to a customer
To ensure everything runs smoothly, reputable fulfillment centers are outfitted with the best technology—technology a small or medium-sized eCommerce seller may not be able to afford—for processing orders, managing inventory, organizing transportation, and more.
Another reason eCommerce retailers like a fulfillment provider is because they can make shipping faster and returns easier. Major shipping couriers often negotiate pricing with fulfillment centers due to the high volumes of business they receive; these savings are usually not available to smaller eCommerce businesses. This allows the company to offer free shipping, or expedited shipping, to customers, which is very important in today’s on-demand world.
In addition, returns can be sent to the fulfillment center rather than directly to the eCommerce business, saving them from the hassle and the need to charge restocking fees.
Benefits of Fulfillment Centers for Ecommerce
Order fulfillment centers offer many benefits to physical and virtual retailers. We covered some of this in the section above. If you want more detail, check out our blog, 10 Reasons to Use a Fulfillment Center for Your Ecommerce Shipping. In the meantime, here is a quick look at our top ten fulfillment center benefits.
Outsource storage, packing, and shipping to an experienced 3PL to get instant access to employees who know the business and use top-notch equipment.
Take orders from all over the world using a fulfillment center with an international network that understands the rules and regulations of other countries.
Take your business (and all the packaging supplies) out of the garage, basement, or attic—saving space while becoming more organized in the process.
Easily manage returns, exchanges, and refunds with a fulfillment center offering 24/7 support through email or phone.
Narrow your focus to the most important activity—growing your business—and let your fulfillment center handle the rest!
Be prepared for increases in order or perhaps even a massive seasonal influx of orders; then scale back when business is slow.
Take advantage of the fulfillment center’s courier discounts and their ability to ship from multiple locations so your packages cross fewer shipping zones.
Create your own custom shipping boxes, coupons, and inserts—upgrading your packaging to make it fresh and exciting fur customers.
Eliminate overhead costs such as space, quality control, hiring employees, buying packing supplies, and performing your own shipping through economies of scale.
Utilize the 3PL’s state-of-the-art software for inventory management and tracking and share the expense with other businesses.
Fulfillment Center vs Warehouse: Which Is Right For Your Business?
To recap: A warehouse is generally used as a long-term storage solution. Meanwhile, a fulfillment center provides temporary storage for items that will soon or frequently be shipped out to customers. Warehouses are often owned or used by an individual company or business, while fulfillment centers are usually run by a third-party logistics (3PL) company that services multiple merchants (exceptions include eCommerce industry giants, such as Amazon, who operate their own network of fulfillment centers).
And, while a warehouse is used only for storage, a fulfillment center handles all stages of fulfillment, from picking and packing orders to negotiating rates with couriers.
So, the question remains, which is right for your business – a warehouse or a fulfillment center? If you’re a big operation and need to store a large number of products for any length of time before shipping out to another business, a warehouse is a good, cost-effective option.
On the other hand, if you’re a small to mid-size operation and you’re finding yourself spending too much time packing up boxes and shipping out orders, outsourcing order fulfillment through a fulfillment center can really ease the burden!
Another thought: If you’re running out of storage space (or garage space, as this is often the case for home businesses) a warehouse might be an option; but, if you move product with a relative frequency, a fulfillment center is probably the better choice as it can house your goods and offer packing and shipping services.
With a full, specialized staff of fulfillment experts, a fulfillment center can also typically get your product into the hands of your customers quicker, and with better packing and presentation to improve the customer experience and help ensure future order placements.
Examples of Companies Using Fulfillment Centers
The global fulfillment services market is growing steadily and is expected to reach a value of $55.6 billion by 2021 according to Beroe Inc. Today, with COVID-19 driving eCommerce sales to new heights (total online spending in May hit $82.5 billion, up 77% year-over-year, according to Forbes) more and more companies are turning to fulfillment centers to handle the influx of orders.
Two companies that have turned to The Fulfillment Lab are Lifesprout Bio and BeBella Cosmetics. Here’s what they had to say!
"A major upgrade to [TFL’s software] really changed the game for reporting for us… Because they have various facilities worldwide, it allowed us to go global while still maintaining a good delivery time." - Jimmy, Lifesprout Bio
"We have been in business for 4 years and have grown from an operation of $50,000/mo to $500,000/mo. I would not have been able to do so without having The Fulfillment Lab in our corner." - Justin, BeBella Cosmetics
Warehouses and fulfillment centers each have their specific purpose. If you're a business owner and are tired of the burden of storing, packing, and shipping products, The Fulfillment Lab is a fulfillment company that can help! Our fulfillment services include:
- Reliable global fulfillment and eCommerce fulfillment
- 14 total fulfillment centers (2 domestic and 12 international) for faster deliveries
- Expedited shipping options with delivery guaranteed in 3 days or less
- End-to-end visibility throughout our entire fulfillment process
- Proprietary, easy to use fulfillment software
- Customized packaging for limitless branding potential
- Dynamic integration with every major eCommerce system
A fast, simple, and reliable order fulfillment process is possible! Contact us today to learn more.
Frequently Asked Questions (FAQs)
What is a warehouse?
A warehouse is a building used to store goods for long periods of time. It may be company-owned or rented through the third-party.
What is a fulfillment center?
A fulfillment center stores goods that are being shipped out frequently. Employees are always busy processing, packing, labeling, and shipping orders to customers, along with managing incoming inventory and customer returns.
How can I find a fulfillment center near me?
There are many fulfillment centers around the world. The Fulfillment Lab operates a global network of 14 fulfillment centers so we can help you with your eCommerce fulfillment needs.
What is fulfillment software?
Fulfillment software automates inventory management, creates picking lists, assists with packing, shipping, and tracking processes, and more. It can be purchased but is often quite expensive; many small and medium-sized eCommerce businesses will instead use a fulfillment center and leverage their software.
Are warehousing and fulfillment the same thing?
Not quite. Warehousing is the act of storing an item for a long period of time; fulfillment is the act of taking stored items and shipping them out as orders come in.