What Is a Fulfillment Center & Why Is It Important?
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A fulfillment center handles the logistics of getting products from the seller to the customer as a part of the supply chain.
When looking for a warehousing solution, this will often include the use of a fulfillment center. These centers are part of the supply chain that can help get products from the seller to the customer. They process and ship the products that customers have ordered as a third-party solution.
The fulfillment center is a hub that can provide the services of packaging, addressing, and shipping products for an e-commerce seller. Fulfillment centers can streamline and simplify the selling process, providing a physical space to store goods and manage the logistics behind getting sold products to customers.
What Is a Fulfillment Center?
The main goal of a fulfillment center is to quickly turn inventory over, acting as a central location and bridge between the seller and the buyer. Fulfillment centers are typically busy processing orders, packaging them, addressing them, and shipping them out to customers.
A fulfillment center is run by a third-party logistics (3PL) provider and acts as the logistics hub. Online retailers can rely on fulfillment centers to get their products out to customers in a timely fashion, helping to manage the complicated process of fulfilling orders.
How Fulfillment Centers Work
A fulfillment center is part of the supply chain that can manage order fulfillment through a 3PL for ecommerce and online retailers. This center can handle and process both B2B (business-to-business) large orders and B2C (business-to-consumer) orders. The 3PL completes the fulfillment process on behalf of the store owner or seller.
A fulfillment center works as follows:
- The customer places an order with an online retailer.
- The order is sent to the fulfillment center for processing.
- The workers in the fulfillment center pick the order, package it, address the package, and ready it for shipment.
- The product is then sent directly to the consumer.
The fulfillment center will perform the following:
- Store inventory
- Manage the stored inventory
- Process orders
- Package, address, and label shipments
- Negotiate shipping costs with shipping companies
- Ship products to customers directly
Benefits of a Fulfillment Center
A fulfillment center and 3PL can save online retailers time and simplify the fulfillment process, allowing them to focus on other business needs. The 3PL can take over the order processing, storage of inventory, and direct shipping.
Using a fulfillment center can ensure that products get to your customers quickly, which can increase customer satisfaction and lead to increased revenue and more sales.
There are many additional advantages to using a 3PL and a fulfillment center, which include the following:
Physical Storage of Inventory
Most online retailers do not have a brick-and-mortar establishment with the physical capacity for storing all their products. A fulfillment center can provide a location to safely store inventory and manage the packaging, labeling, and shipping of this inventory as well.
Expert Management of Order Processing and Fulfillment
A 3PL will be well-versed in order processing and fulfillment. Fulfillment centers are able to manage peak seasons and deal with orders quickly as they come in. This can streamline the fulfillment process.
Fulfillment centers can also be closer to your customers. Because of this, they can offer same-day and next-day shipping as well as potentially lower shipping costs.
A fulfillment center operates primarily to expedite the fulfillment process. Since this is their sole focus, retailers can be confident that customers will be satisfied.
Automation of Warehousing & Fulfillment
Many fulfillment centers use a high level of technology to automate the fulfillment process and document the steps in this process in real time. This can ensure that e-commerce businesses know the status of the order and their inventory without needing to be physically present.
The automation industry continues to evolve and work with fulfillment centers to ensure swift and simplified order fulfillment.
Fulfillment Center vs. Warehousing Solution
A fulfillment center does act as a storage facility for inventory; however, it is different than a warehouse.
The goals of each facility are different. For instance, a warehouse serves to store products, while the intention of a fulfillment center is to quickly get products to customers.
A fulfillment center involves a complex operation. It is a busy environment that handles all of the logistics of order processing and fulfillment.
A warehouse, on the other hand, is more static. It does not offer many services other than receiving, storing, and transferring inventory out of the facility.
Fulfillment centers are more apt to have more frequent shipping options than a warehouse. This is because they work to get the products directly to the customer as quickly as possible.
Warehouses do not prioritize shipping in the same way. They often have a less frequent shipping and pick-up schedule than a fulfillment center does.
Fulfillment Center FAQs
How are orders processed in a fulfillment center?
After a customer makes an order through an e-commerce store, the e-commerce platform will send the details of the order to the fulfillment center. The staff there will be alerted to retrieve the products, pack them, label them for shipping, and send the package out. Tracking information will then be sent back through the e-commerce platform and shared with the customer.
How do I determine how much space is needed at a fulfillment center?
There are three main factors when deciding on the amount of square footage you will need at a fulfillment center: the number of unique SKUs you have, your order volume, and your growth plans. You need to have enough room to store SKUs separately, scale to your order volume, and keep up with your expected growth.
Can a fulfillment center offer expedited shipping?
Yes. Depending on the location of the fulfillment center and their location in relation to your customer, they can offer same-day, next-day, and two-day shipping.
Does the fulfillment center take care of inventory management?
Yes, the fulfillment center will receive the inventory from the retailer, sort it and store it in its respective place, and keep track of how many units of each product are on hand. Automation systems can help online retailers to track their inventory in the fulfillment center and restock as needed. This simplifies the process for retailers.
References
Warehouse Automation Vendors and Fulfillment-as-a-Service. (February 2021). Robotics Business Review.
