A fulfillment center is a location that a business hires to outsource their order fulfillment. This third-party logistics (3PL) provider fulfills the orders placed by customers and big box stores from the business. Fulfillment centers tend to be larger in scale than typical warehouse centers individual businesses may rent for inventory storage. Fulfillment centers are also much more elaborate than warehouses, as they deal with your business’s inventory, including storage, restocking, and shipping. Fulfillment centers are able to send packages directly to customers or retailers. Overall fulfillment centers handle everything related to shipping and warehousing inventory.
Often, the term fulfillment center and warehouse are used interchangeably in the ecommerce world, when in fact there are many more differences than people may think. Although similar in some ways, each facility has different long-term goals and services that can affect your business in different ways.
Differences Between Fulfillment Centers and Warehouses:
The most noticeable differences between fulfillment centers and warehouses are the services they provide.
Fulfillment centers carry a lot more responsibility for your business than warehouses do. Yes, both warehouses and fulfillment centers store your inventory, but in a fulfillment center, it shouldn’t be on the shelf for more than 30 days. This is because it is one of the jobs of the fulfillment center to send out your inventory as quickly as possible, wherein warehousing its main function is just to store inventory. It is also a job of the fulfillment center to manage your inventory, meaning managing how much of the product to purchase and keep stocked. Proper management of inventory will limit the overall storage your fulfillment center will actually need as the product should be selling fairly quickly.
While warehouses deal mainly with the storage of a business’s inventory, fulfillment centers are responsible for many more services. Some additional services fulfillment centers provide that differs from warehouses are:
- Shipping orders
- Customer Service
- Pick and Pack
- Pre-shipping management
How fast products are shipped:
As warehouses mainly provide storage services, they are not as involved in the ecommerce community. Fulfillment centers have much better relationships with shipping companies as they themselves deal with many aspects of pre-shipment such as creating packing labels and packaging the product. Typically, fulfillment centers have many more scheduled pickups than warehouses would have. This means your product will be shipped at a much faster rate. Similarly, fulfillment centers offer customers the different option of speeds to ship their items. This can include overnight shipping, next day shipping, and two-day shipping. Customers like multiple options of shipping speeds as it means they are able to receive their packages quicker. Fulfillment centers are equipped with the necessary equipment and software to make that faster shipping possible for your business.
How Does a Fulfillment Center Operate?
Fulfillment centers focus on multiple aspects of storing and preparing inventory before it is shipped to the customer. They specialize in warehouse and shipping management, while taking care of all the logistical processes needed to get the customer their order. Overall, fulfillment centers handle the order fulfillment processes.
Fulfillment centers store and manage a business’s inventory before it is ready to ship. This includes having proper 3PL software like Cart Rover to keep track of both inventory and what the customer ordered. Keeping all systems up to date is essential to know what and how much product you have to sell. If all systems are not integrated, customers may be purchasing products that are actually sold out or unavailable. Systems that are not integrated can cause unhappy customers as they will have thought they purchased an item for next day shipping, when come to realize it’s out of stock and they will have to look elsewhere.
Fulfillment centers also prepare all products for shipping. Software is able create the proper shipping labels as well as communicate to workers how to package the item for safe shipping. This software is also able to tell workers where exactly in the fulfillment center the product they need to ship is located. This can contribute to efficient and quick shipping time of products out to customers.
When inventory is low, fulfillment centers are also responsible for communicating how much more product is needed to be purchased. They also are responsible for receiving new inventory and storing it on shelves in its necessary places.
Lastly, fulfillment centers are responsible for handling problems between customers and products. This can include returns, questions on merchandise, and pricing information. If an item a customer ordered must be replaced or returned, fulfillment centers are responsible for re- entering that return into their system and putting it back on the proper shelf for storage until it is purchased again.
Benefits of a Fulfillment Center:
Below are some of the advantages ecommerce companies have with fulfillment centers
Helps your business focus on the big picture:
Managing inventory and shipping of your products can be very costly and time consuming. There are so many tasks involved with shipping products to customers and retailers that companies typically outsource these processes. This allows businesses to focus on other aspects of their company such as product management, marketing, and just overall growing your business. Leverage our back office services and this newly available time will help your business become more strategic and less operational. A strategic and efficient business will help your business grow and generate more money.
Eliminates need for long-term storage and timely packing processes:
It is the goal of a fulfillment center to store your inventory short term. Product shouldn’t be on the shelves longer than 30 days as customers should be purchasing and receiving their items in a timely manner. Managing an ecommerce warehouse can be very costly and stressful, Outsourcing these tasks to experts can help make your business much more efficient. Fulfillment centers are also equipped to keep up with your business’s growth. This includes ordering and storing more inventory that is expected to be purchased by customers. Fulfillment centers have the right tools to be able to handle this order volume increase and continue shipping packages daily to their correct destination. Fulfillment centers handle everything warehouse and shipping management, so you’re able to focus your time more effectively in growing your business.
Modern day fulfillment centers rely on integrations & technology to keep their centers running smoothly. Every step of the order fulfillment process will be documented in the centers systems. This keeps all parties up to date on what step the order is in through the fulfillment process. Businesses are able to keep track of the status of their customers orders without having to physically be there. Fulfillment centers also integrate this technology with the ecommerce platforms and marketplaces. This integration allows orders by the customers to be sent directly to the fulfillment center, meaning quicker sending out of their products. Similarly, the buyer’s information is automatically sent to the fulfillment center to be created into a shipping label.
Fulfillment centers are used by ecommerce companies to manage the steps involved with order fulfillment. This 3PL provider handles inventory, shipping, and customer satisfaction management. Your fulfillment center is responsible for keeping up with your business’s order volume as well as keeping enough inventory to be able to fulfill those orders. Next, they are in charge of picking the correct items from storage and packing them safely and with the correct labels so they are able to be shipped to customers. Lastly, your fulfillment center manages customer returns. This can include restocking the shelves with the returned items or properly replacing and reshipping merchandise that was sent out as a mistake. Outsourcing all aspects of your order fulfillment can leave you with more time to focus on growing other parts of your company.
Is A Fulfillment Center Right for My Business?
To make the decision regarding if a fulfillment center would benefit your business or not, you need to look at a variety of factors. Things like the number of orders you’re receiving per day, along with the number of SKUs you’re dealing with, and how much packaging and shipping is costing all contribute to this question of if you should begin working with a fulfillment center. To really get an idea of what you need to look out for, we can break each of these portions of your business down into sections to see how a fulfillment center can help you.
Number of Orders Per Day
The first and foremost factor to look out for would be the number of orders your business is currently dealing with. If you have a large volume of new orders coming every day, and your operation is still small enough where you can’t quite afford to dedicate an entire portion of your worksite to boxing and shipping, then a fulfillment center may prove to be helpful in your situation. Outsourcing the tedious process of shipping and packing is certainly beneficial to a business that isn’t used to a high volume of orders that is suddenly being hit with it. A warehouse team that is made specifically to churn out your many orders is something that many businesses would benefit from, and that’s exactly what a fulfillment center can provide. This leads us into another reason why a fulfillment center may be a good option for some, the cost of packaging and shipping products.
Savings - Time and Money
When it comes to packaging and actually shipping your products to your customers, or to a business with the intention of selling mass amounts of your product, you need to be ready to spend some money on the shipping process. Once you spend money acquiring the goods needed to ship your products in, you then need to worry about storing the shipping material and paying employees to actually package products and get them ready to be shipped. A fulfillment center takes all of those issues away. Rather than letting the bills pile up and forcing yourself to keep track of many little costs here and there, you can simply hire a fulfillment center and only worry about their bill and rates. Fulfillment centers are meant to cost less than the cost of doing the packaging process on your own. They will often offer bulk savings on every portion of the packaging process to give you breathing room and save you money. They also are performing the packaging process itself, saving you time during the busy hours of the day. If you feel as though your shipping costs are getting out of hand, a fulfillment center may be the right decision for you. Finally, we can talk about the analytical portion of hiring a fulfillment center, and how they help you manage your many different SKUs.
Number of SKUs
Many businesses that are based in ecommerce have a number of products in their inventory. With many products, comes many different packaging and shipping needs. The packaging something needs to be shipped in will change depending on the product’s size, shape, and fragility. If you have a business that sells a multitude of products, large and small, then a fulfillment center can come up with unique solutions to package your goods and can handle the process entirely at their own facility. A fulfillment center can also help you keep track of the many different products you’re dealing with and can prevent any of them from fall to the wayside. Fulfillment centers can be incredibly useful for someone who has organizational and packaging needs.
What’s the Bottom Line?
If you find yourself identifying with any of these struggles, whether you sell tires or health supplements, a fulfillment center inquiry might be a good investment for you. Hiring a fulfillment center saves your company time, and money, while also allowing it to focus on improving its products and focus on other company needs. Whether it’s organizing your wide variety of products, or helping out with the shipping process, a fulfillment center has something to offer any business. Each business is unique in what they do and what they ship, and a fulfillment center won’t be the right call for all of them. However, in the cases listed above, you might just find yourself better off if you choose to hire one to help you out.