Fulfillment Center 101: What You Need to Know

As your ecommerce business grows, storage becomes more of a pain point. It’s always an exciting prospect to expand your product line, increase your inventory, and keep up with rising demand. That is, until you realize that your current storage shrinks the more your inventory grows! This is where a fulfillment center comes in. 

Access to a fulfillment center can happen through an ecommerce storage solution. They help you manage inventory and oversee this critical part of the supply chain. It could be just what your ecommerce business needs to take the next step! Keep reading to learn more about fulfillment, warehousing and to learn about the strategic benefits of utilizing a fulfillment center. 

What is a Fulfillment Center?

A fulfillment center is the base of operations from which a third-party logistics company (3PL) fulfills a business’s customer orders. While every fulfillment center operates differently, they all work to accomplish the same goals. They work to handle everything from warehousing, inventory management, picking, packing and shipping for your business. A 3PL provider’s main priority is to get the right orders into the hands of the right recipients. They do this as efficiently as possible so that you can focus on other areas of your business. 

Some fulfillment service providers have multiple facilities for your business to utilize, too. This can help you get geographically closer to where your customers are in order to serve them more efficiently. This can open up opportunities for more competitive shipping rates and faster shipping speeds that can rival large competitors. 

As we’ve already mentioned, all fulfillment centers operate a little bit differently. Generally, this is their fulfillment and shipping process: 

  1. The 3PL provider will receive your ecommerce inventory and strategically store it to maximize efficiency and organization. 
  2. When an order comes through on your ecommerce site, your 3PL provider is prompted with the details of the order. This is typically done through software that integrates with your ecommerce platform.
  3. The item or product is then picked, packed and prepared for shipment.
  4. Orders are labelled, picked up by couriers and shipped to the customer based on the shipping requirements.
  5. Some 3PL companies will also handle your reverse logistics. 

At this point, you might be thinking: what’s the difference between a fulfillment center and a plain old warehouse? While ecommerce warehousing is a part of a business’ partnership with a 3PL, there are notable differences between warehousing and fulfillment centers that you should know about. 

What is The Difference Between a Warehouse and a Fulfillment Center?

Oftentimes, the terms “fulfillment center” and “shipping warehouse” are used interchangeably. And while they are closely related, there are key distinctions you need to understand before making decisions for your business. In summary: 

  • Warehousing is a term that only refers to storing physical inventory in a physical space. 
  • You get access to a fulfillment warehouse as one part of the end-to-end fulfillment process that includes inventory management, picking, packing and shipping. 

If you can’t decide whether your business just needs warehousing or more all-inclusive fulfillment services, consider the following: 

Short-term vs. Long-term Inventory Warehousing

A dedicated fulfillment center can be an ideal choice for turning out inventory faster in comparison to simply storing inventory at a shipping warehouse. The role of a warehouse may better suit ecommerce merchants looking to simply store inventory for the long-term (more than a month, for example). 

Using a fulfillment center for long-term storage as you would with a traditional warehouse may not be the greatest idea. Fulfillment centers are ultimately about having ready access to inventory for the purposes of shipping it quickly to customers. In a fulfillment warehouse, the turn-around time for inventory is generally quicker. Merchants that store inventory in a fulfillment center long-term will likely end up paying higher warehousing fees. 

While it can be tricky to ensure that your fulfillment center always has the right balance of inventory on-hand, they are the best option if your ecommerce business relies on getting inventory out the door quickly and into the hands of customers. 

Not only should ecommerce merchants consider the length of their inventory storage, but they should also consider the frequency of order pickups by shipping carriers. 

Order Pickup & Shipping Frequency 

Because of the nature of fulfillment centers, your orders may need to be shipped out daily or even more frequently. This is especially relevant if you offer same-day shipping or next-day shipping by a certain time each day. If you’re looking for a 3PL provider who can execute according to these shipping demands, a fulfillment center is the solution for you.

Warehousing, on the other hand, does not offer this same advantage. Shipping from a warehouse typically involves shipping freight and packing many orders onto large pallets. Freight companies will then pool shipments from other merchants together in a process called  PTL (partial truck loading). While shipping freight in this way can be more cost-effective than more on-demand fulfillment services, it comes at the cost of longer shipping times for your customers. At a time when faster shipping matters so much to the customer experience, the shipping warehouse route may not cut it for your business. 

What are The Benefits of a Fulfillment Center?

Now that you understand what a fulfillment center is and how it differs from a warehouse, let’s break down the benefits of outsourcing your order ecommerce warehousing, fulfillment and shipping to a fulfillment center.  

It Can Help You Take Hours Back & Focus On What You Do Best

As your ecommerce business grows, it’s inevitable that you will have less and less time to focus on order fulfillment and shipping; you need those precious hours to focus on marketing strategy, staffing, product development and more in order to achieve your business goals. Not to mention the fact that over time, the logistics of fulfillment and shipping can become increasingly complex and time consuming. 

Order fulfillment and shipping is an incredibly important part of the customer journey, and it can be a stressful one, too. So for ecommerce merchants looking to grow and scale, leaving this part to the pros can be paramount. Ultimately, it will help you better allocate time and resources so you can focus on other areas of your business. 

You’ll Be Working With a Team of Dedicated Experts 

It takes a lot of hard work and expertise to streamline the fulfillment and shipping process. From hiring and managing an expert-level staff, to optimizing key steps in the supply chain and troubleshooting, it’s a process that can take years to get right. When you work with a 3PL provider out of a dedicated fulfillment center, they will handle the steps at every stage of the process, including:

  • Hiring and managing expert-level staff
  • Receiving your inventory and warehousing it using smart inventory allocation tools 
  • Picking, assembling, packing and labelling orders
  • Maintaining relationships with shipping carriers and negotiating rates 
  • Shipping out product from various locations close to your end customers
  • Managing the reverse logistics process 

Sure, your business could manage all of these responsibilities in-house, but why risk the challenge and the investment? Is it the best use of your time or energy and will you get the immediate results you’re looking for? When you partner with a 3PL, you’ll gain access to invaluable expertise and tech-enabled solutions right out of the gate.  

You Can Optimize Fulfillment & Shipping With Tech-Enabled Solutions 

In-house shipping or freight shipping from a warehouse can make it difficult to compete with large competitors that boast faster shipping times. While they may be more cost-effective at the time, negative customer experiences can lead to longer-term consequences. Get things done the right way with fulfillment technology experts who can offer:  

  • Tech-enabled inventory management that integrates with your ecommerce platform 
  • Real-time order management and delivery tracking 

All in all, even small- to medium-sized ecommerce companies will find that the right 3PL partner helps them execute more efficiently, free up time and storage space, and serve customers better with optimizing, tech-enabled solutions. 

How Do You Access a Fulfillment Center?

Whether you’re looking for long-term or short-term storage, PTL shipping or fast, individual parcel shipping, there are a variety of options out there depending on your business’ needs. Rent out warehouse space in order to store your inventory, or partner with a 3PL provider that will handle your end-to-end logistics, including warehousing. Regardless of what you choose for your business, there are ways to eliminate your storage woes and streamline your supply chain so you can focus on other key areas of your business! 

Interested in accessing the services of a fulfillment center? It all starts with finding the right 3PL provider. Regardless of whether you’re in growth mode or simply looking to gain a competitive edge with your end-to-end logistics, the right 3PL will assess your unique needs and provide next steps and quotes based on factors such as your monthly shipping volume.