The flow of content:
Oftentimes, it is confusing between warehouses, distribution centers, and fulfillment centers. People tend to think of distribution centers and fulfillment centers as an alternative name, a synonym of the warehouse. This is not true at all. In fact, both distribution centers and fulfillment centers are completely different operating processes than that of warehouses. In this article, we will take a deeper look into these centers, know their pros and cons, and also understand the differences between them and a warehouse.
What fulfillment centers do?
Fulfillment centers focus on quickly delivering goods to individual customers and offer services often related to this goal in particular. Unlike warehouse, a fulfillment center is operated by third party logistics(3PL) and provides all kinds of services related to operational functions such as inventory storage, freight transportation, cross docking handling and order fulfillment. All the picking and packing is generally done by the fulfillment centers along with custom packaging(birthday present wraps, gift wraps, etc.) if the customer orders for it. They may also have a dedicated customer service team that handles customer requests for you so that you can focus on more pressing business processes. Fulfillment centers can also save you on your shipping charges as they typically serve many clients at the same time.
Difference between fulfillment center and warehouse
The most significant difference between fulfillment centers and warehouses is the extent of their operations and the type of customers they serve.
|Fulfillment centers are designed to serve customers directly. Better known to work with e-commerce business and B2C||Warehouse operations generally serve B2B customers|
|operations||Fulfillment centers intend to store inventory for a minimal amount of time or till the time they can ship orders directly to the customers.||Warehouse is the storage house of giant stocks of items. Thus, the majority of logistics operations that take place at warehouse concern a freight carrier or an intermodal provider|
|goals||The goal of fulfillment centers is to keep a minimal amount of in hand inventory, processing ecommerce orders, and try to get rid of it as soon as possible.
Fulfillment centers are not designed for prolonged storage of inventory.
|The goal of the warehouse is a safe long time storage solution of your inventory, typically several months to a year.|
From the differences spotted above, it is evident to say that every fulfillment center can be called a warehouse, but a warehouse can never be called a fulfillment center. This is simply because warehouses don’t handle order processing while, on the other hand, a fulfillment center, even though they can store inventory for a short period of time, handles order processing and customer service at the same time.
Pros of fulfillment centers
Focus on core business processes
The responsibility of a fulfillment center is to deliver goods to your customers. By outsourcing this mundane work, your company will likely have more time on hand to focus on core business processes. Not only this, fulfillment centers “fulfills” a lot of obligations that otherwise your business needed to address.
Free up your inventory space
If not for a long time, fulfillment centers still offer a pretty decent short time inventory storage option for your main warehouse. This is especially helpful in those sales seasons where you need to meet up with the customer’s expectations, and usually, suppliers are all packed. So, instead of relying on the scheduled arrival of your reordered demanding product, you can have some extra free up shelves to store your most demanding products.
Located close to customers for short shipping times
Staying on top of the business food chain is not an easy task. Especially when your consumers nowadays are starting to believe that same day delivery is important. Same day!!! Yes, you heard me right.
Warehouses are located on the outskirts of the city. As such, whenever you receive an order and wish to fulfill it, the transit time, of course, is going to take a long time. Fulfillment centers are located close to the cities and usually have multiple stores operating at the same time. This is a more fast, efficient and effective way for order processing.
May offer a customer service division to offer you
Retail business is not only all about sales. But marketing your brand and focussing on customer relationships also. The famous principles of inbound marketing (attract – engage – delight) works like a charm in this industry.
But oftentimes, we need to focus on the business processes so much that we forget about these things. Many fulfillment centers can serve as your customer service center on the frontlines to ease this burden from your shoulders.
Lowers your shipping costs
Outsourcing delivery of goods to your customers not only gives you peace of mind and frees up your human resources but also lowers your shipping costs. This is because fulfillment centers don’t serve only one client at a time but rather a bunch of clients. Therefore, the shipping cost is lowered.
Hassle free picking and packing
Fulfillment centers not only help in delivering your product to your customers but also take care of all your shipping problems. That includes picking up the inventory from your warehouse and packing it before delivering to your customers.
Shipping labels and offer custom packaging
When picking and packing are done, shipping labels come into play. For those of you who don’t know, shipping labels consist of all the crucial key details regarding the package i.e., receiver’s name and address, email, tracking number, package weight, etc.
Now you might wonder, do you need to take care of shipping labels? Absolutely not!
Fulfillment centers are the one stop solution for all your shipping needs. They address your shipping labels duty too. Also, sometimes a customer might request for custom packaging for special occasions. Such requests are also entertained for delightful customer experience.
Will deal with reverse logistics
Retail sales are not always as easy as it seems. Sometimes retailers have to deal with product returns due to transit damage, faulty product, delivery of the wrong item, or simply because the order failed to deliver on time. Consumers nowadays are growing impatient and returns in the retail industry are becoming a bigger issue to address.
One of the advantages of having a fulfillment center for your retail business is that it addresses and deals with reverse logistics. This means, all those mundane tasks of putting the returned products through QC check and refurbishing/discarding them based on the quality check is now done by fulfillment centers.
Lowers your overhead costs
Handling your order fulfillment by yourself will cost you with fixed overhead costs. Warehouse rent, equipment, indirect labour, etc are the names of the few. As your order volume increases, the cost per order might also go up along with these fixed costs. Outsourcing your order fulfillment to the fulfillment center is a way to escape from those overhead costs.
Cons of fulfillment centers
What has its perks has its own cons too. If you are willing to trade off certain cons, a fulfillment center is the right choice for you. Below are the few cons of using a fulfillment center to cater to your order fulfillment needs.
Loss of control
If you have started your business from ground zero, it may be difficult for you to digest the fact that an entire branch of your business will now be handled by a third party logistics company. Some ecommerce business owners find it difficult to give control of their fulfillment operations. Ultimately, it requires that you trust your fulfillment partner, that you’ve done your due diligence to ensure it’s a reputable, financially-stable company, and knowing that all of your demands may not be met.
Lack of customization
It is not uncommon for business owners to want to add some time of customization into their fulfillment process. Say, for example using branded boxes, adding a personalized letter or using custom packing materials. However, when you outsource the fulfillment process to your logistics partner, you have to sacrifice some of the customization.
What distribution centers do?
A distribution center combines some of the capabilities of traditional warehouses with few of fulfillment center capabilities. Often located near major markets to make shipping easier, distribution centers are used to store large quantities of your inventory for a short period of time. They have the ability to ship items in bulk to other locations, especially other retailers who may sell your products to end consumers.
Unlike fulfillment centers, distribution centers mainly serve B2B customers. This means that you have a limited ability of shipping directly to your customers. If your primary concern is serving b2b customers and moving your inventory closer to the shipping points, the distribution center is the best fit for you.
Difference between distribution centers and warehouses
|Distribution centers generally serve B2B customers||Warehouse operations although serve B2B customers, but can handle few B2C customers as well|
|operations||The flow through a distribution center is much greater than a flow velocity through the warehouse. The operations at a distribution center are much more complex than that at a warehouse. As a result, the distribution centers are equipped with the latest technology for order processing, warehouse management, transportation management etc.||Warehouse is the storage house of giant stocks of items. Thus, the majority of logistics operations that take place at warehouse concern a freight carrier or an intermodal provider|
|Business role||A distribution center is a bridge between a supplier and its customers. The role of the distribution center is to meet customer requirements||The role of a warehouse is to store products efficiently.|
Pros of distribution centers
Deliver bulks quantities of goods from business to business
If your business is primarily focused on dealing with b2b customers, you are here for a treat. One of the advantages of having a distribution center is being able to deliver bulk quantities of goods to your customers.
Help you position your inventory close to target markets
The whole flow of the product is like this. The item from your warehouse goes to your distribution center and from your distribution center goes to different fulfillment centers.
If your business primarily deals with supplying goods in bulk quantities to other retailers who deal with end customers, you should get yourself a distribution center. It’s probably going to be close to your target markets i.e. other fulfillment centers.
Ideal for goods that do not require finishing and individual packaging
Dealing with picking and packing is not so fun to deal with for many retailers. If you are one of them, then a distribution center is a good option for you. Distribution centers don’t deal with individual packaging of products, but the products are sent in palettes to the fulfillment centers.
Cons of distribution centers
Less frequency of shipping times
This is more of both an advantage as well as a con. Distribution centers allow you to distribute large quantities of products at one time, but you can’t do it more often. The shipping frequency is far less than those of fulfillment centers. That means you need to be prepared in advance on what to ship and what not to ship till the next shipping cycle.
If your business is well structured, normally, this won’t be an issue. However, if you feel that you are dealing with unpredictable environments, using a distribution center could be a con.
Little ability to interfere directly with your end customers
Distribution centers restrict your involvement into the fulfillment process. You can’t tweak the customer experience or work with customized packaging, as we discussed earlier in the case of fulfillment centers.
Often confused to be the same, warehouse, distribution center, and fulfillment center are all different based on the scope of operations that they execute. Based on your business requirements, you can choose appropriately. With this, I am summing up the article. Hope I helped you in clearly defining why these terms are different from each other. In case you got any other interesting query regarding the topic, please let me know in the comments section down below and I will be addressing it ASAP.