A fulfillment center relieves businesses, particularly e-commerce retailers, of the need to store, manage, and ship their own inventory. Outsourcing these tasks to a third-party logistics (3PL) provider enables businesses to focus on value-added activities that can move the business forward.
What Is a Fulfillment Center?
A fulfillment center is a storage facility where a 3PL provider stores merchandise and fulfills orders for e-commerce stores. Once a consumer makes a purchase, the 3PL provider picks, packs, labels, and ships the item to the consumer.
Depending on the 3PL provider, a fulfillment center may process both business-to-business (B2B) and business-to-consumer (B2C) orders.
How Does a Fulfillment Center Work?
Modern fulfillment centers are equipped with modern technologies to streamline operations and reduce errors. Automating the fulfillment process gives them full visibility, control, and documentation of operations in real time.
Once a customer confirms their order, that information is sent to the fulfillment center. It tells them to pick, pack, and ship the desired product. After they ship out the product, tracking information will be sent to the seller and consumer so that they know where their package is located.
Advantages of a Fulfillment Center
Managing an entire warehouse and fulfillment process can be more costly and laborious than it is worth. If a merchant can no longer keep up with their orders, it might be time to use a fulfillment center.
Here are a few advantages of utilizing a fulfillment center.
- Frees up space
Some merchants may not have the physical space to store and process their inventory. Some of them operate from their home basement, garage, or attic. By outsourcing inventory storage and management to these facilities, businesses can free up space in their workplace. They can save a lot of time and costs and focus on other aspects of the business.
- Improves customer service
If small to medium-sized businesses don’t have the workforce to carry out the fulfillment process, they can hire fulfillment centers to handle it for them. They can efficiently manage the flow of orders. They can also ship out products on time.
- Distributed inventory
A 3PL provider might have fulfillment centers at various locations. By distributing inventory to different locations, merchants can keep their products close to the majority of their consumers. This means products can get delivered faster to consumers. At the same time, this significantly reduces shipping costs.
- Cut costs
Fulfillment companies can get large discounts from shipping carriers such as FedEx and UPS because they pack and ship out large volumes of orders regularly. They can pass these discounts along to businesses, allowing them to reduce shipping costs.
Aside from that, hiring fulfillment companies means merchants can leverage their expertise and knowledge without the hefty costs of managing and staffing their own fulfillment operations.
Fulfillment Center vs. Warehouse: What’s the Difference?
The terms fulfillment center and warehouse are often used interchangeably. In general, both refer to storage facilities that can hold inventory for all kinds of retailers. However, they have very different functionalities and operations.
Here are the key differences.
- Long-term vs. short-term storage
Fulfillment centers are designed for fast inventory turnover. Ideally, items shouldn’t stay on the shelf for over a month because merchants will end up paying high warehousing fees. In a warehouse, goods and products are meant to be stored for an extended time.
The main role of a fulfillment center is to make the fulfillment process more manageable for 3PL providers. At these facilities, workers are constantly processing, packing, and shipping orders out to consumers. They can handle hundreds or thousands of e-commerce orders daily.
Warehouses, on the other hand, are more inactive. Not a lot of activity happens on a day-to-day basis on a warehouse floor because it’s intended mainly for storing inventory. Items are added and moved whenever necessary.
- Frequency of shipment pick-ups
At fulfillment centers, shipping carriers may pick up shipments every day to ensure that orders are delivered to consumers on time. Depending on the services of the company, they may have scheduled pickups for domestic, as well as international orders.
Warehouses require less frequent pickups. It’s more cost-effective to ship out all the items at the same time. Sometimes, freight companies will insist on a particular time and date for pick-ups, which might cause delays in deliveries.