Fulfillment Center vs Warehouse: What Are the Differences?

Fulfillment centers and warehouses may have overlapping features. But they are very different service centers in the eCommerce supply chain. But we have frequently seen these terms being used interchangeably on the internet.

So much so, that new entrepreneurs can get confused while selecting one of these two services. We decided to clear the air once and for all.

What is a Fulfillment Center?

As implied by the name, a fulfillment center is a place that “fulfills” orders for eCommerce sellers. It is a one-stop shop for all the processes that take place after an order is placed by the customer on your eCommerce store.

So, your order will be received at the fulfillment center. Then your products will be inspected, picked, packed and labeled. When all of this is complete, the order will be handed over to last-mile provider like FedEx or USPS for shipping.

At the end of it all, you’ll receive an email from your 3PL partner with confirmation that your product has been dispatched to the customer. There are a few key processes in a typical fulfillment center workflow.

Receiving – You will ship the inventory to the fulfillment center using a freight shipping platform or your logistics providers. The warehouse manager will receive the inventory, count it and verify all details before logging it into the software.

Storage – The inventory will then be sent for storage in pallets, bins or shelves with an RFID label. The warehouse manager will use this label management software to keep track of the location and volume of each product in the warehouse.

Order Picking – The order picking process is the most important part of a fulfillment center workflow. When your customer places an order, the order picking software will prompt the warehouse staff to pick the correct quantity of products from storage for the order. There are skilled and trained workforce called Pickers who go around the center picking orders all day and consolidating them. The order is then put in a shipment packaging box and a shipping label is printed for it.

Packaging – Once the product pick is complete, warehouse staff will pack and label each order before sending it for shipping. Many fulfillment centers offer custom packaging as well as value-added services like marketing material inserts.

Shipping – After the order is picked, packed and labeled, it will be handed over to the courier service for shipping.

As you can see, the entire supply chain workflow in a fulfillment center will be completed through 3-4 key processes.

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What is a Warehouse?

A warehouse is basically a place for inventory storage. It can be used by the customers for stocking their own products or by third-party logistics companies (3PLs).

Since it is a specialized storage solution, it is more cost-effective for that purpose. A warehouse facility will allow you to buy and store inventory as and when required. The 3PL warehouse will monitor the stock levels for you, alerting you if the quantity dips too. But you will still have to ship it to the fulfillment center for order fulfillment.

What is the Difference between a Warehouse and a Fulfillment Center?

As we said, warehouses and fulfillment centers can have overlapping features. But there are differences between them, which should make it easier for you to separate the two.

  1. Warehouses are more static, while fulfillment centers are a hotbed of activity. Fulfillment centers have more workforce, multiple automated processes and equipment. Warehouses on the other hand have forklifts and people moving heavy equipment around.
  2. Warehouses can store large quantity of inventory for prolonged durations, while fulfillment centers are not ideal for long term storage. Instead, they are designed to clear inventory at a quick rate. Storage in a fulfillment center is very expensive. The rule of thumb is that you do not store inventory for more than 90-days in a fulfillment center. Else you are losing money.
  3. Warehouses are generally used by B2B businesses. It’s not that B2C businesses do not use warehouses. Many retail brands own and operate their own network of warehouses. But it’s preferred by brands who store inventory in bulk and like more control over the fulfillment process. Fulfillment centers are used by D2C and B2C brands that would like to outsource the order fulfillment process while focusing on generating sales.

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Both warehouses and fulfillment centers have their own sets of pros and cons. As a business, it’s important for you to understand the role that each one is playing in your supply chain.

We hope that this blog article made it easier for you to identify the differences between a warehouse and a fulfillment center.

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