The Main Differences Between a Fulfillment Center and a Warehouse
Business
When it comes to selling products, storage is a major stop that the package makes en route from the factory (or individual artisan, if the product is a hand-made watch, let’s say) to the customer.
The way business owners and different manufacturers approach the question of storage is a matter of pricing and practicality.
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Typically, renting a warehouse pays off more than buying a brand-new one, for example.
Now, since many products are marketed and sold online, the question of storage for the goods has become a tad more complicated.
As a business owner, do you just dump all of your scented soaps in a warehouse you’re renting and then hope your potential customers who buy it online live close to this large building? If not, you’ll have to charge a lot more for delivery, which won’t make the customer that happy.
Now, one of the solutions to this conundrum is the appearance of the so-called fulfillment centers. These vast buildings are similar to your general warehouses but with considerably more assets, employees, and some pretty advanced automated systems.
In this article, we’re going to highlight the main points of differentiation between a warehouse and a fulfillment center. As you will see, although these two are the same at the basic level, the few differences that are present here are rather important.
Read on to learn more.
What is a warehouse?
First things first, let’s put things into perspective by looking into what a warehouse is as opposed to a fulfillment center.
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A warehouse is a large object that is used to, well, house ware – as its name suggests. Plush toys, car parts, cosmetics, canned food, computers, clothes, tools, you name it – warehouses are designed for storing all kinds of objects for extended periods.
In terms of size, warehouses are typically massive, with some having more than a million square feet of storage space. There are tall and wide shelves everywhere, which are stocked with the help of forklifts and conveyor belts.
Warehouses also contain a small part with offices and changing rooms for the workers, as well as a canteen where the workers can have their lunch break.
When it comes to the work process itself, a warehouse is typically split into four sections – receiving, storage, picking, and dispatching units. On top of it all, modern-day warehouses also feature advanced CCTV systems as well as alarms to discourage intruders.
A company may rent or buy a warehouse so they can stock their products and keep them in a safe place until they’re needed. In this respect, warehouses offer a rather simple way of storing goods, as there is no need for advanced business-related processes such as packaging and shipping. This would also be the biggest difference between a warehouse and a fulfillment center.
Also, despite their working principle being rather simple at its most basic level, there are many warehouse storage ideas that you can apply to your business plan and accommodate your company’s needs.
What is a fulfillment center?
As we said in the paragraph above, warehouses offer only a basic level of item storage and represent a location that needs to be taken into account when it comes to moving ware from the manufacturer to the end user.
A fulfillment center is like a warehouse on steroids and with a brain of its own, so to speak.
Warehouses are typically used by one or a couple of renting businesses for the purposes of storing their goods for longer periods (half a year or more).
Fulfillment centers, on the other hand, are a more dynamic version of the warehouse – the goal is to get a product as quickly as possible to the customer and do so as efficiently as possible.
To make this happen, these large storage buildings need a complex system of conveyor belts, packaging departments, as well as advanced transportation setups for quick dispatching of orders.
For this reason, fulfillment centers tend to be considerably busier than warehouses, with much more workers who typically work in three shifts to be able to get to every order on time. One similarity that warehouses and fulfillment centers have in common is that they both can be used by B2C and B2B businesses.
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That said, when it comes to certain smaller B2C businesses that operate mostly online, for example, fulfillment centers offer them a support structure that they wouldn’t otherwise have.
For example, if someone orders a homemade perfume online from an eCommerce website, the owners of the site can direct their product to a fulfillment center, where it will be packaged, stored (if necessary), and shipped off and transported to the customer when needed.
For this reason, the ware that’s stored in fulfillment centers typically doesn’t stay there for long (one month tops), which makes this arrangement a perfect option for small marketers and eCommerce companies.
Now let’s take a look at the most important differences between a warehouse and a fulfillment center in more detail.
The Key Differences Between Warehouses and Fulfillment Centers
From Bart Simpson buying an empty warehouse to Amazon owning their own warehouses across the US and abroad – keeping your equipment and products in stock in large amounts and for protracted periods is nothing new.
What is new about these fulfillment centers, however, would be the important role they play as 3PL solutions for eCommerce businesses and other manufacturers that don’t have storage capacities of their own.
What ‘3PL’ stands for here would be ‘third-party logistics,’ which refers to the outsourcing of the entire logistics process that’s crucial for being able to run a company. There is an increasing number of companies and individual manufacturers who are able to make goods that sell well on the Internet. That said, scaling up your successful eCommerce startup comes with certain logistical challenges.
The thing is, storing those goods, as well as packaging them and selling them can significantly reduce the amount you earn after the product is finally at your customer’s doorstep. This is where fulfillment centers come in.
Rather than dealing with the often costly logistics of running a small business (especially if you’re doing business predominantly or even entirely online), outsourcing the logistics to a third party can be a massive cost-cutting asset.
Here are the three most important ways in which common warehouses differ from fulfillment centers.
Long-term and short-term storage
As mentioned above, the warehouses are designed for a product-storing marathon, while a fulfillment center sets up your product for a swift spring race to the customer.
While fulfillment centers typically look quite like common warehouses, they come fully equipped with considerably more high-tech packaging, sorting, and transportation equipment.
Static storage vs. nimble operations
Warehouses offer huge amounts of free space for storing your unused or out-of-season products for years if necessary.
At the same time, fulfillment centers offer a laundry list of services and operations that pretty much mean that you don’t have to do anything in terms of logistics as a small business owner.
Crucial parts of the shipment process, such as kitting and assembling different items, packing boxes, labeling them, as well as shipping them off, and managing returns, are all taken care of by the fulfillment center.
Carrier pickup frequency
When it comes to warehouses, receiving new ware doesn’t happen that often and when it does, this ware is there to stay for a while.
With fulfillment centers, on the other hand, the deal is that they have a developed relationship with multiple carriers that come to pick up packages on a daily basis and often multiple times a day. This enables fulfillment centers to dispatch the boxes quickly and efficiently at all times.
Conclusion
When it comes to running an eCommerce website, the logistics of shipping your product worldwide can throw quite a spanner in your otherwise clean business dealings. For this reason, teaming up with a fulfillment center can be a great option.
On the other hand, if you’re a business owner with a lot of assets that you need to store for extended periods, either renting or buying a warehouse is certainly the best option overall.
Author bio
Travis Dillard is a business consultant and an organizational psychologist based in Arlington, Texas. Passionate about marketing, social networks, and business in general. In his spare time, he writes a lot about new business strategies and digital marketing for FindDigitalAgency.
Business
The Main Differences Between a Fulfillment Center and a Warehouse
