What’s the difference between fulfillment centres and warehouses?
The world of supply chain processes is quickly evolving. Nowadays, you cannot just have your entire business running from a warehouse. We can honestly say, that the days of handling all needs in a warehouse are both inefficient and fail to meet customers’ basic expectation for an omnichannel service.
Supply chain leaders are faced with the prospect of evaluating the use of a fulfillment centre vs. warehouse. They need to understand the challenges in choosing the right fulfillment facility for their organization’s needs.
Supply chain leaders may lack the existing resources to launch a new fulfillment centre in critical areas. This is because certain locations may already be home to numerous warehouses, presenting other challenges in securing trucking space for shipping. Furthermore, some may believe that fulfillment centre and warehouses are two terms used interchangeably for any activity involving order fulfillment. These facilities have key differences that affect performance and customer experiences.
How does a fulfillment centre operate?
A fulfillment centre is the hub for all of the logistics processes required to get a seller’s product to their customer. This is also known as the order fulfillment process.
Inventory is stored conveniently in a fulfillment centre in preparation to fill the customer’s orders. After a customer completes a purchase, inventory is picked from the fulfillment centre shelves, packed, and then prepared for shipment.
These business-to-consumer (B2C) orders are often shipped directly to an individual home. Fulfillment centres can also be used for B2B orders, often a large volume product that is sent out to larger retailers.
When a seller outsources their product fulfillment to a 3PL (third-party logistic), the 3PL handles the processes on the seller’s behalf. This can include storage, receiving, packing, and shipping, negotiating lower shipping rates, handle high-volume needs and often lower fulfillment costs other order fulfillment services.
When a seller outsources its fulfillment to a third-party, it can make it easier to manage inventory. It also saves time to allow the seller to focus on more important business tasks, and even improve customer satisfaction.
So what are the key differences?
The decision between using a fulfillment centre versus a warehouse will affect every organization engaged in any form of e-commerce. A warehouse stores inventory until it is needed to fill either store replenishment orders or consumer orders.
As a result, warehouses tend to be highly industrialized, not designed for customer visits. On the other hand, a fulfillment centre is any facility responsible for the process of handling an order and getting it to consumers.
Therefore, all warehouses are basically fulfillment centres, but not all fulfillment centres are warehouses. This is the key to understanding the main differences between them.
Here are a few things you should know:
- Both are usually large buildings that are capable of holding inventory for many businesses.
- Warehouses are used as a long-term storage solution, while fulfillment centres offer temporary storage for products that will soon go out for delivery to customers.
- Warehouses only handle storage of customer products; fulfillment centres handle all stages of order fulfillment, including negotiating rates with courier services.
- Warehouse operations are mostly static, while at fulfillment centres, operations are more complex and in constant motion.
- A warehouse is often used by an individual company or business; a fulfillment centre can offer its services to multiple merchants who need to fulfill customer orders.
Additionally, fulfillment centres offer a number of services that warehouses don’t, such as:
- Pickup of products for individual customer orders
- Gathering of inventory
- Order packing
- Shipment labelling
- Managing customer exchanges and returns
- Ability to guarantee next-day or same-day delivery in various locations.
As you can see, both have their advantages and disadvantages and their uses. The most important aspect to keep in mind is, as we said – a warehouse can be a fulfillment centre, but a fulfillment centre can’t be a warehouse.
Ideally, it would be best to have both a warehouse and a fulfillment centre. But if you’re just starting out, a warehouse that acts as a fulfillment centre and an actual warehouse could be the best budget-minded option.
To sum up
The goal of a warehouse is to safely and efficiently store inventory for an extended amount of time, typically several months to a year. A warehouse is generally limited to housing no more than a handful of different inventories, for an extended period.
The goal of a fulfillment centre, on the other hand, is to fill and ship orders in the least amount of time possible.
As an eCommerce merchant, the success of your online store depends on the overall satisfaction of your customers. Understanding the difference between warehouses and fulfillment centres will go a long way in helping you work towards fulfilling customer orders efficiently and ensuring their satisfaction.