People in eCommerce often use the following terms interchangeably: fulfillment center, warehouse, distribution center, and 3PL. While there is some overlap, they do have distinct meanings. Here’s what you need to know when comparing a fulfillment center vs. a warehouse.
Fulfillment center vs. warehouse: What is the difference?
A warehouse is simply a large building used to store products. There are many types of warehouses, including eCommerce fulfillment warehouses and distribution centers. However, the term warehouse usually refers to a building with a very different function than a fulfillment center. Here’s the difference between a fulfillment center vs. a warehouse.
What is a warehouse?
Warehouses store products. They can be used for long-term storage or as short-term places to hold inventory. Some companies own and operate private warehouses; others rent space in a public warehouse. Bonded warehouses can be used to store imported goods before the importer pays the duty.
Warehouses are generally static spaces, with few employees and not much movement of goods in and out on most days. The exceptions are warehouses that provide other services, such as fulfillment or distribution (which we’ll dive into below).
What is a fulfillment center?
Fulfillment centers move products. A fulfillment center is a place of high activity; while it does have shelves for storing goods, the purpose of a fulfillment center is shipping orders, not long-term storage. Fulfillment centers are bustling with workers who process inbound inventory, pick products to fill orders, package and label shipments, and ship them to customers. They serve as a supply chain link between manufacturing and the end consumer.
Fulfillment centers can also be called order fulfillment centers or 3PLs. Some large corporations have dedicated fulfillment centers; most eCommerce companies use the services of a third-party logistics company and rely on its fulfillment centers.
The goal of a fulfillment center is to move products quickly in and out. Items that sit on the shelves lose value and ultimately become a drag on your eCommerce enterprise. The business model of a fulfillment center focuses on providing pick and pack and other fulfillment services.
The most pivotal difference between fulfillment centers and warehouses is in how they earn profits. Fulfillment centers are profitable only when your product is moving through the doors, off the shelves, and to end customers, while warehouses profit from the exact opposite: storing product as it sits on the shelves.
Distribution center vs. fulfillment center
A distribution center is a large warehouse that moves goods in and out like a fulfillment center. However, the distribution center has a different place in the supply chain and another purpose entirely. While a fulfillment center processes and ships orders to consumers, a distribution center is a waystation within the wholesale portion of the supply chain where manufacturers deliver products to be distributed to retailers.
Items that come into distribution centers often spend even less time in the warehouse than inventory in a fulfillment center. Since these products already have another destination, most stock leaves distribution centers almost immediately after arriving.
What is a fulfillment warehouse?
A fulfillment warehouse is another term for a fulfillment center. Third-party logistics companies, or fulfillment companies, operate fulfillment warehouses. Not all warehouses are fulfillment centers, but all fulfillment centers can also be called fulfillment warehouses.
Fulfillment center services
Fulfillment centers can provide a wide range of services. Some fulfillment centers handle specific products such as clothing, food products requiring cold storage, hazardous materials, or bulky items.
A fulfillment company can provide extra services that add value. Here are some of the services Red Stag Fulfillment provides to our clients.
Pick and pack fulfillment services
Pick and pack fulfillment services are the core benefit that all fulfillment centers provide. When a customer places an order on one of your eCommerce platforms, the 3PL generates a pick list for that order. A picker takes the list and collects the items for the order from the warehouse shelves. Pickers rarely pull one order at a time; for efficiency, most warehouse management software will generate a set of pick lists centered in one zone of the fulfillment warehouse. The picker will pull several orders at the same time.
The next step is the packing station. A packer double-checks the order before putting it into the correct size box. They add infill to keep the order safe during shipping, tape the box, and place a label on top.
Packed boxes go to the shipping station. Most fulfillment centers have daily pickups by major carriers like FedEx, UPS, and USPS so that they can ship orders on a predictable schedule. The carrier takes the order from the fulfillment center to the end customer.
Some fulfillment centers can ship large orders for you via freight. Less than truckload (LTL) freight is a great way to send a large B2B or wholesale order. LTL freight services are also useful for oversized shipping for items such as bicycles. Freight delivery can save you money when you ship large items or large quantities.
At Red Stag Fulfillment, we use cross-docking to get backorders out quickly. When we receive a container of backordered products, we label those orders on the receiving dock. Boxes go directly to the shipping dock without the extra steps of shelving and picking. Cross-docking can save a day or more in customer order cycle time — precious time when filling backorders.
Kitting and assembly
Kitting services allow you to provide just-in-time customization while still outsourcing your fulfillment. Kits are collections of items that your customers order together, and some 3PLs (including Red Stag Fulfillment) can pre-package kits, giving each group of products a new SKU. Kitting is a particularly vital service for subscription box businesses, but it provides benefits in a variety of situations, including package consolidation.
Your inventory management is one of the keys to profitability. Well-managed inventory keeps your money flowing and your items in stock. Work with your 3PL to develop a winning inventory replenishment plan.
Advantages of outsourcing your fulfillment to a 3PL
Many eCommerce companies start with self-fulfillment and outsource when the operation gets too big to manage in-house. Working with a 3PL gives you significantly more logistics capacity, but that’s just the beginning of the benefits of working with a fulfillment center. Here are some additional advantages of outsourcing your logistics.
Volume shipping discounts
Fulfillment centers send thousands of packages with the major carriers, so they can get volume shipping discounts that your company might not qualify for on its own. At Red Stag Fulfillment, we pass those discounts on to our clients, so you save on shipping when you use our fulfillment services.
Location, location, location
Fulfillment centers are often located in spots that can reach a wide geographic area quickly. You might want to work with one fulfillment warehouse or place your products in fulfillment centers around the country. In either case, outsourcing allows you to place your products in the optimal locations to reach your customers quickly. For example, Red Stag Fulfillment’s warehouses in Knoxville, TN, and Salt Lake City, UT, can ship to 96% of U.S. addresses in two days or less.
Flexible storage space
When you rent your own warehouse, the overhead is a fixed cost. However, when you work with a 3PL, you can flex the amount of shelf space you use. If your sales volume spikes, you can quickly expand. During a slow season, your storage area shrinks and you only pay for the warehouse space you use. With a 3PL, you get exactly the warehouse space you need.
Add expertise to your business without adding employees
When you onboard with a new logistics company, it’s like adding a whole new team of fulfillment pros. You don’t have to deal with the administrative headaches and overhead of hiring and managing personnel — that’s a service your 3PL takes care of. And you benefit from professional fulfillment services from a trained staff that picks and packs orders all day long.
State-of-the-art order processing services
When you choose one of the best 3PLs, you get cutting-edge order processing. Your fulfillment center will use the latest equipment and procedures to ship your orders quickly and accurately. Red Stag Fulfillment’s 2021 report card showed our near-perfect service record in on-time shipment, order accuracy, and inventory accuracy.
How can a fulfillment center help you grow your business?
What’s holding back your eCommerce business? If it’s fulfillment, then working with a professional fulfillment center could be the answer. Excellent order fulfillment is a crucial driver of customer satisfaction for every eCommerce store. When you’re ready for excellence, give Red Stag Fulfillment a call.
More about fulfillment centers:
- Which Online Businesses Benefit from the Use of a Fulfillment Center?
- 5 Ways Your Holiday Fulfillment Center Can Make the Season Merry
- Should ECommerce Use A Direct Fulfillment Center?