Warehouse vs Fulfillment Center: Which Should You Choose (2020 Updated)

“Same same, but different”, a widely spoken slang by vendors across Asia in an attempt to sell something featuring the same functionality or other features with something else but differ in details, it can also be applied to the terms fulfillment center and warehouse that have been used interchangeably but with obviously different meanings. Both terms refer to storage space for businesses that sell products, however, the uses and services provided are a world apart. In this post we’ve broken down each option to help decide which is the best eCommerce shipping solution for your business.

What is a warehouse?

Speaking of warehousing, it usually refers to a large storage center or industrial space designed to store products in bulk for an extended period of time. Leasing storage space from warehousing providers that are more leaning towards businesses involved in large quantities or B2B orders is a common approach. Some large retailers usually have their own warehouse, while small retailers might just rent space or storage units with other eCommerce sellers in a shared warehouse.

What is a fulfillment center?

A fulfillment center refers to the physical location where a fulfillment service provider fulfills customer orders for e-commerce sellers. It’s designed to get rid of the lion’s share of the work for e-commerce sellers and fulfill the orders in a timely manner.

How do fulfillment centers work?

The operation of fulfillment center is dedicated to getting online orders to your doorstep, also known as order fulfillment. The inventory of eCommerce seller is strategically stored in a third party fulfillment center. After making sales online, the fulfillment center picks, packs and ships the goods on behalf of the sellers. Most China fulfillment centers can fulfill both B2B and B2C orders, targeting at either businesses or individual consumers.

When an eCommerce seller outsources the e-commerce fulfillment to a third party fulfillment center, usually the fulfillment center takes care of everything on the seller’s behalf from start to finish, including inventory management, return of goods to negotiating rates with carriers.

Outsourcing to a third party fulfillment center is a more cost effective way to manage inventory and save the sellers lots of hassles so they can focus on more strategic tasks like marketing, improving performance of products and customer service.

What are the differences between warehouse and fulfillment center?

Supply chains have evolved so much during the past two to three decades that traditional warehouses used to stockpiling inventory then ship out in a few months is not completely fit for modern supply chain which is able to predict product demands, sales and act accordingly. Let’s look at a few differences that set traditional warehouse and 3pl fulfillment center apart.

* A warehouse is usually served as storing purpose while a fulfillment center offers more value added services like receiving products, warehousing, packing, shipping, handling of return goods, management of inventory, etc.

* A warehouse tends to store goods for longer period of time while compared to a fulfillment center. Thus, the flow velocity through fulfillment center is greater than the one of a traditional warehouse.

* A fulfillment center is more like a bridge between the suppliers, eCommerce seller and customers, while a warehouse is only used to store goods efficiently. The role of fulfillment center is to efficiently meet customer expectations.

* A distribution center is dedicated to retail and wholesale orders, while a warehouse usually doesn’t serve external customers.

* A distribution center is usually equipped with latest technology for order processing and inventory management, thus, the operations are much more complicated, while the management of traditional warehouse is quite simple.

What are the benefits of distribution centers?

Third party distribution centers do come with a few perks, which make it a popular choice by eCommerce sellers.

Eliminate hassles of packing, shipping and inventory management

Managing a physical warehouse is not easy unless if you’re willing to spend loads of time picking, packing boxes, and running to the post office every day. A fulfillment center greatly cuts off all the lion’s share of the work, therefore, you don’t have to worry about packing supplies, the queues in the post office, etc.

Focus on more value-added tasks

With all the order fulfillment tasks outsourced, now eCommerce sellers have more time and energy to focus on other value-added tasks to help them scale, like marketing, improving performance of the products, customer service, etc.

Lower costs

With an outsourced fulfillment center, it’s more cost effective as you don’t have to pay warehousing fee or hire employees to take care of the inventory. Besides, a fulfillment center usually handles operations for a significant number of eCommerce sellers and they ship a whopping number of orders every day, therefore, some of them are chosen as strategic partner of international carriers, and are offered better rates for international shipping.

Expertise and experience

Logistics can be a daunting task, and fulfillment centers nowadays tend to keep technology at the core of their fulfillment service, which means every process is automatically, simultaneously recorded for eCommerce business, i.e., the integration with eCommerce platforms enables each sales order to be automatically sent to fulfillment center to be picked, packed and shipped. Afterwards, a tracking code is sent back to the eCommerce store where the customer and seller can check the status of shipping.

Managing your inventory in a cost effective and timely manner is essentially important for any eCommerce business. Though warehouse and fulfillment center are “same same, but different”, the need for a simple storage space to just store your goods is different from the need for an order fulfillment center that handles your logistics, inventory and consolidate your orders. The differences directly affect the decision you would make, a warehousing company that can store large volume of inventory for a longer period of time or a fulfillment center that fills the obligation to receive, pick, pack and ship the orders on your behalf.

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