{"id":7756,"date":"2018-12-19T19:25:03","date_gmt":"2018-12-19T19:25:03","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/blog\/amazon-fulfillment\/fulfillment-center-difference-warehouse\/"},"modified":"2021-05-15T14:54:47","modified_gmt":"2021-05-15T21:54:47","slug":"fulfillment-center-difference-warehouse","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/blog\/fulfillment\/fulfillment-center-difference-warehouse\/","title":{"rendered":"What is a Fulfillment Center and How is it Different From a Warehouse?"},"content":{"rendered":"

The terms warehouse and fulfillment center (sometimes referred to as a distribution center) are often used interchangeably when discussing logistics and supply chain<\/a><\/span> management, but depending on the circumstances each term can mean something different. At their most basic level, both are large buildings that can hold inventory for all types of businesses that sell physical products whether through an online store such as shopify, or a brick and mortar retailer. Despite this similarity the services provided and the way they are utilized can be quite different. This guide will describe the functions and purposes of each, helping you better understand which option might be the right for your individual business needs.<\/p>\n

A warehouse is cost-effective storage for product inventory<\/h2>\n

When using the term warehouse, it refers to the place where a company stores products for sellers for an open-ended period of time. It is a large facility or industrial space that houses inventory to be sold. It can contain large containers, shelves, storage bins, and pallets filled with products each identified by their own unique sku (or stock keeping unit), as well as equipment like forklifts that are used to move the inventory around.<\/p>\n

The main businesses that work with warehouse providers primarily do wholesale or B2B (business-to-business)<\/a> orders in large volume. Some e-commerce\u00a0companies own and operate their own warehouse(s) to store their excess inventory until it is ready to be shipped, while others rent out the warehouse space depending on their storage needs.<\/p>\n

Depending on location, renting warehouse space is usually a more cost-effective solution for small to mid-sized sellers for ecommerce\u00a0fulfillment although that can depend on the available space and rent terms.<\/p>\n

Smaller sellers, or those just starting up might decide to lease a space that is smaller and less expensive, such as local storage units if they don\u2019t have the in-house fulfillment<\/a><\/span> space to maintain their inventory. This can help keep the needed products close by their own location in a more cost-effective space.<\/p>\n

What is a fulfillment center?<\/h2>\n

A fulfillment center is the location where a\u00a0third-party logistics (3PL<\/span>)<\/a>\u00a0provider fulfills customer orders placed through an ecommerce\u00a0store for ecommerce\u00a0businesses. It is often larger in size and scale than a typical warehouse that an individual company might own or rent. The main function of a fulfillment center is to ship orders to customers and assist sellers in managing the entire vital, yet often difficult fulfillment operation.<\/p>\n

How does a fulfillment center operate?<\/h2>\n

So many factors go into warehouse management, and because of that smaller details can get overlooked and wind up causing unforeseen problems and supply chain bottlenecks.<\/p>\n

A fulfillment center is the hub for all of the logistics processes required to get a seller\u2019s product to their customer. This is also known as the order fulfillment\u00a0process.<\/p>\n

Inventory is stored conveniently in a 3PL\u2019s fulfillment center in preparation to fill \u00a0customer\u2019s orders. After a customer completes a purchase, inventory is picked from the fulfillment center shelves, packed, and then prepared for shipment.<\/p>\n

These business-to-consumer (B2C) orders fulfilled by a 3PL are often shipped directly to an individual home. Fulfillment centers can also be used for B2B orders, often a large volume product that is sent out to larger retailers.<\/p>\n

When a seller outsources their product\u00a0fulfillment to a 3PL, the 3PL handles the processes on the seller\u2019s behalf. This can include storage, receiving, packing, and shipping<\/a><\/span>, negotiating lower shipping rates, handle high-volume needs and often lower fulfillment costs other order\u00a0fulfillment\u00a0services.<\/p>\n

When a seller outsources its fulfillment<\/a><\/span> to a 3PL it can make it easier to manage inventory, save time to allow the seller to focus on more important business tasks, and even improve customer satisfaction.<\/p>\n

What are the main differences between fulfillment centers and warehouses?<\/h2>\n

As stated earlier, while often used interchangeably there are several significant differences between a fulfillment center and a warehouse and the roles each play in the process of getting products to customers.<\/p>\n

The main role of a warehouse is simply to store inventory, while a fulfillment center is designed to enhance the customer experience around the process of ordering and having products delivered on time. This is possible because sellers store their inventory in a 3PL fulfillment center located near their customer, helping to reduce shipping time and provide cost\u00a0savings.<\/p>\n

Long-term vs. Short-term Storage<\/h2>\n

A warehouse is a part of a 3PL\u2019s fulfillment center, where it stores a seller\u2019s inventory, however the main goal of a fulfillment center is to easily manage the processes that happens between the time a customer places an order and the order is delivered to their home or business.<\/p>\n

In a best case, inventory will not be in a fulfillment center for longer than 30 days. If inventory needs to be in a fulfillment center longer, this might be considered long-term storage, and most 3PLs will charge a higher warehousing fee. \u00a0Ideally the seller and 3PL will be in close contact often about inventory levels. It\u2019s important for a seller to maintain an appropriate amount of their products, relative to how often customers are making orders, so that the 3PL fulfillment center has enough product on hand to meet customer demand.<\/p>\n

Facility Operations<\/h2>\n

A warehouse tends to be inactive because it\u2019s used purely for storing inventory. An order\u00a0fulfillment center is quite the opposite, bustling with activity constantly. A 3PL provides end-to-end order fulfillment\u00a0solutions\u00a0 and at its fulfillment center including:<\/p>\n