Although people unfamiliar with the finer points of the logistics industry often use the terms “fulfillment center” and “warehouse” interchangeably, they’re far from being one in the same. Though they are related, in that they both play an important role in the larger supply chain and may have some overlap in terms of the services they provide, warehouses and fulfillment centers each serve distinct functions.
We’re here to clear up any confusion between the two and to help you understand why it’s vital that B2B and B2C businesses have fulfillment centers dedicated to managing order fulfillment.
Warehouses are large buildings that serve as secure, long-term storage facilities for both raw materials and finished goods. These buildings typically span thousands of square feet, are often simple in design and provide a controlled environment for inventory organization and management. Warehouses play a pivotal role in supply chain management, enabling businesses to optimize inventory levels and enhance overall operational efficiency by serving as a centralized location for receiving, sorting, storing and dispatching goods.
Warehouses are a cost-effective storage solution for businesses with lower sales volumes, providing long-term storage and optimized inventory management. Many warehouses offer flexible storage options, such as bulk storage or pallet storage, and have the ability to break down larger quantities of products into smaller quantities for easy distribution.
There are many different types of warehouses, each designed to suit a particular need. These include:
Compared to traditional warehouses, which primarily serve the purpose of providing long-term storage, distribution centers serve as a waypoint in the movement of goods to either fulfillment centers or customers. As a result, distribution centers optimize for rapid inventory turnover and proximity to transportation routes and utilize more advanced technology, including automation, to streamline the distribution process.
Warehouses provide a variety of services, such as short- or long-term storage, inventory management and value-added services. Examples of value-added warehousing services include:
A fulfillment center is a facility that specializes in fulfilling customer orders, particularly for online stores or eCommerce companies. As such, they handle every aspect of order fulfillment, including receiving goods from suppliers or from a warehouse, picking and packing orders and shipping goods to their final destination, whether that’s a retail location or an end consumer’s front doorstep.
In addition to providing full-service operations, including rapid order processing and expedited shipping times, many fulfillment centers have eCommerce expertise to help their clientele navigate complex online order processing and deliver the scalability to accommodate seasonal demand.
Much like warehouses, there’s a different type of fulfillment center to suit almost every need, including:
It’s worth noting that some fulfillment centers serve multiple functions — for example, a facility might fulfill both eCommerce and traditional retail orders. These types of facilities are generally known as hybrid fulfillment centers, or multi-channel fulfillment centers.
Fulfillment centers offer a long list of services, including receiving and inventory management, short-term storage, order fulfillment, drop shipping and last-mile delivery. In addition to traditional fulfillment services, many fulfillment centers also provide value-added services, such as:
The key distinction between warehouses and fulfillment centers is that fulfillment centers typically offer a wider range of services. While warehouses provide long-term storage and, in some cases, value-added services, fulfillment centers cover every aspect of the order fulfillment process, including receiving and storing inventory, picking and packing orders and handling last-mile delivery.
Depending on the facility, some fulfillment centers even go a step further by managing reverse logistics, which involves bringing individual products or entire orders that end consumers choose to return back into the facility to either be repackaged or destroyed.
Other difference between these facilities include:
|Primary Function||Long-term storage||Order fulfillment|
|Primary Goal||Providing secure storage for raw materials and finished products||Processing orders as quickly and efficiently as possible|
|Clientele||Primarily B2B businesses||B2B or B2C businesses|
|Location||Strategically located to optimize space and cost, often in more rural areas||Strategically located to expedite last-mile delivery, often in or near major population centers|
|Inventory Turnover||Low turnover||High turnover|
|Pickup Frequency||Infrequent pickups, usually weekly or monthly||Frequent pickups, sometimes multiple per day|
|Carrier Relationships||No carrier relationships||Extensive carrier relationships|
|Customer Focus||Minimal customer involvement, so little focus on customer experience||Major focus on customer experience and satisfaction|
Because fulfillment centers and warehouses serve distinct purposes, it isn’t so much a question of whether you need one or the other, but rather why your business needs both. Warehouses are often the first stop in an item’s logistics journey; finished products are sent from a manufacturing facility to a warehouse for storage until future notice.
When a company needs to replenish its available inventory, it will transport goods from its warehouse to a fulfillment center for processing and shipment, whether that’s to a brick-and-mortar retail location or on to the end consumer. In some cases, warehouses even serve as overflow facilities for fulfillment centers to avoid stockout.
By using both a warehouse and a fulfillment center, businesses can balance their long-term storage needs against their rapid order fulfillment requirements, effectively manage inventory levels, satisfy customers and optimize logistics operations.
Legacy Supply Chain is a full-service, third-party logistics company that provides our clients with the expertise, technology and world-class customer service to confidently navigate supply chain complexity with ease. Whether you’re looking for dedicated contract warehousing, omni-channel distribution, eCommerce fulfillment or any other logistics services, we deliver over 40 years of on-the-job experience to help you optimize operations and build dependable connections with your customers.
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