The Fundamental Difference Between Fulfillment Center & Warehouse Explained

One of the most crucial things to keep in mind when starting an eCommerce business is figuring out the entire delivery system and how your consumers will get their purchases delivered to them. You can pick between fulfillment centers and warehouses as your alternatives. On a broader level, fulfillment centers and warehouses frequently perform the same function, which is to store and distribute inventory. While discussing logistics and distribution management, the terms are generally interchanged. Despite their similarities, the usage of each facility and the services offered, as well as the manner in which they carry out activities, might vary significantly. As a result, deciding between a fulfillment center and a warehouse might be challenging. This article delves into the operations and performance objectives of fulfillment centers and warehouses, allowing you to select the best solution for your company’s requirements.

What are warehouses, and when do they come in handy?

Warehouses are mainly used for storing and managing products. They are used for both long-term and short-term inventory storage. The majority of warehouses are huge and have a simple design. They’re often found in industrial areas on the extreme ends of metropolitan areas. A warehouse typically stores the inventory for a significant duration of time. On most days, warehouses are static locations with very few workers and little flow of products in and out. For smaller eCommerce businesses, renting warehouses is usually less expensive than purchasing one. If they don’t have enough space at home, some may opt to lease less expensive warehouses, such as local vaults or inventory storage units. This allows them to store some stock on hand and acquire more as it becomes depleted.

Large amounts of inventory are brought in, relocated to other locations when needed, and then relocated when needed. Warehouses do not double as fulfillment centers, but fulfillment centers can. Warehouses are usually more focused on wholesale operations or B2B orders involving big volumes of inventory. Bigger businesses have warehouses to store their excess inventory. A warehouse may be the solution for your eCommerce business if you just need to store excess inventory till they’re needed and smaller storage options aren’t working.

What are fulfillment centers, and what do they do?

A fulfillment center, like a warehouse, is a big structure that holds inventory for a company. It also fulfills a variety of other functions. Before a product is delivered, it is generally stored in a fulfillment center for a short timespan. They handle B2B and B2C orders in collaboration with stores, e-commerce firms, businesses, and others. A fulfillment center’s job is to help speed up the delivery of products to customers who have recently placed orders. Unlike warehouses, stock in a fulfillment center isn’t kept for extended periods of time because the main function is to get the products to the customers quickly and efficiently.

Instead of being transported from a warehouse, individual orders are typically shipped from a fulfillment center. If you have additional inventory in a warehouse, they can be transferred from there to a fulfillment center, where they will be processed promptly before being delivered to the customer. A warehouse does not service external customers, but a fulfillment center mainly focuses on servicing external shoppers. The activity level in fulfillment centers is usually high. They’re always processing, packing, and shipping orders to clients around the clock. Businesses that may not have the time or resources to store, process, and deliver orders may consider using fulfillment centers.

What’s the Difference? Fulfillment Center vs. Warehouse

The most notable differences between warehouses and fulfillment centers are the scope of the internal activities and the customers they are aimed to serve.

Prospective customers: The majority of warehouse operations cater to business-to-business (B2B) clients. Fulfillment centers, on the other hand, are built to handle direct-to-consumer and online orders, also known as eCommerce and B2C.

Services: Fulfillment firms aim to store stock on hand for as little time as possible, fulfill orders, and deliver them directly to customers. Warehouses, on the other hand, usually keep large quantities of inventory for prolonged periods of time. Typically, businesses keep the excess inventory in warehouses and transport smaller quantities to fulfillment centers as needed.

Objectives: The objective of a warehouse is to store inventory for several months to even a year or more in a safe and orderly manner.  In most cases, a warehouse only holds a few different types of inventory for a long period of time. On the other hand, the objective of a fulfillment center is to handle orders as quickly as possible. Fulfillment facilities aren’t designed to keep inventory for more than a few months.

Pick-up facilities: There is a consistent flow of inventory in and out of fulfillment centers that begins when customers place orders. As a result, in order to ensure on-time delivery to customers, shipping companies increase their frequency of pickups. In contrast, because a warehouse is primarily utilized for prolonged storage, pickups are scheduled less often and sellers and buyers have less choice when it comes to shipping options.

Fulfillment Center vs. Warehouse, which is right for you?

Before making this selection, consider your storage and shipping requirements if you’re a small or medium-sized business or store. It may be time to consider outsourcing your fulfillment process if you find yourself spending a lot of time packaging boxes and shipping orders.

Furthermore, depending on your current facilities, you may be running out of storage capacity. A warehouse might be an inexpensive and effective solution if you simply need more space to keep your inventory. A warehouse may make more sense as your business grows and you need extra storage, but in today’s age of the skyrocketing eCommerce industry, a fulfillment center offers far more versatility and can handle several functions from one location. Customers seek the convenience of quick shipments without incurring additional costs. A warehouse simply lacks the capacity to provide speedy, flexible fulfillment in a long-term manner as it is just meant for storage.

Wrapping Up

As an e-commerce store, it is critical to manage your inventory effectively in order to maximize your budget and better serve your customers. The type of service required by any eCommerce seller determines what works best for them. If the business still does its fulfillment in-house, a warehouse provider that merely stores inventory for a low cost could be useful. Working with a fulfillment center, on the other hand, is arguably the ideal option for helping a seller build their business if they require a quick turnaround for large orders. If you have any questions regarding fulfillment centers and warehouses, please let us know in the comments section below.

Further Reading

How to Make an Accurate Shipping Estimate? Calculate Shipping Costs and Compare

Which is the Best Shipping Carrier? USPS vs UPS vs FedEx

How to Ship from the USA to Australia?

Inventory vs. Stock – What is the Difference? Does it Matter?

Optimizing Warehouse Efficiency: The Power of Pick and Pack Processes