What Is a Fulfillment Center and How Can It Benefit My Business?
As the owner/proprietor of a small or medium-sized eCommerce company, you're not just a business leader, but a multitasker (AKA, a juggler). You’ve 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 fulfillment center.
What is a Fulfillment Center vs. a Warehouse?
Before we delve into the specifics of a fulfillment center, it’s important to be clear on the differences between a fulfillment center and a warehouse, as the two terms are often, and incorrectly, used interchangeably (we cover this in more detail in our blog, What is the Difference Between a Warehouse and a Fulfillment Center?).
To put it simply, 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.
One final thing to note: fulfillment centers are sometimes referred to as distribution centers. These two terms are, in fact, interchangeable! You didn’t think we’d add to the confusion, did you?
How Does a Fulfillment Center Work?
Now that you have a better understanding of what makes an order 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 fulfillment centers are that 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.
How Can a Fulfillment Center Benefit My Business?
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.
- Experience. Outsource storage, packing, and shipping to an experienced 3PL to get instant access to employees who know the business and use top-notch equipment.
- Reach. Take orders from all over the world using a fulfillment center with an international network that understands the rules and regulations of other countries.
- Space. Take your business (and all the packaging supplies) out of the garage, basement, or attic—saving space while becoming more organized in the process.
- Service. Easily manage returns, exchanges, and refunds with a fulfillment center offering 24/7 support through email or phone.
- Focus. Narrow your focus to the most important activity—growing your business—and let your fulfillment center handle the rest!
- Scalability. Be prepared for increases in order or perhaps even a massive seasonal influx of orders; then scale back when business is slow.
- Shipping. Take advantage of the fulfillment center’s courier discounts and their ability to ship from multiple locations so your packages cross fewer zones.
- Customization. Create your own custom shipping boxes, coupons, and inserts—upgrading your packaging to make it fresh and exciting fur customers.
- Operations. Eliminate overhead costs such as space, quality control, hiring employees, buying packing supplies, and performing your own shipping through economies of scale.
- Technology. Utilize the 3PL’s state-of-the-art software for inventory management and tracking and share the expense with other businesses.
Do More with The Fulfillment Lab!
If you’re looking for an innovative, customer-centric fulfillment lab that understands and works with the unique needs of every client, look no further. Not only can we help you do everything discussed in this blog, but our fulfillment marketing services will help you to::
- Promote your brand by creating a memorable customer experience
- Build a loyal customer base and stand out from the competition
- Boost revenue from repeat customers while attracting new ones
Ready to get started? Contact us today to learn more!