A warehouse and a fulfillment center are often confused with being the same but actually are two very different entities. The confusion arises mostly because they are both large establishments used for holding inventory for retail and logistics businesses. But there are major differences in the services provided by both and the scenarios in which they are used.
To understand the differences between a fulfillment center and a warehouse better, let us look at each of these separately.
What is a warehouse?
A warehouse of a business is usually a large storage space or area that is designed for bulk storage of products, over long periods of time. A warehouse is generally filled with a variety of equipment such as long rows of shelves and stacking bays, forklifts, containers and huge packages of products.
The basic functions that take place in a warehouse daily are very simple. Inventory is added to the warehouse, moved around to make space for new packages, and picked up when it is to be shipped.
Warehouses are often associated with wholesale businesses or B2B establishments that deal with large quantities of products. Businesses may have their own warehouses or may rent warehousing spaces to be shared with other businesses.
What is a fulfillment center?
A fulfillment center is also a large business establishment used to store inventory, just as a warehouse does. The difference is that a fulfillment center serves many other purposes apart from just storing inventory. A fulfillment center is also sometimes called a 3PL provider or third party logistics provider. It generally stores products for a shorter period of time before being shipped out for delivery. Fulfillment centers work with both B2B and B2C companies such as retailers, e-commerce companies, small businesses and so on. The aim of the fulfillment center is to get product out to customers when an order is placed or when delivery is scheduled. Products don’t sit in a fulfillment centre over an extended period of time, unlike warehouses.
Retail orders are generally shipped from fulfillment centers tor customers or from a warehouse to a fulfillment center first and then to customers. A warehouse does not ship products directly to individual customers.
Fulfillment centers are busy places as there is constant inflow and outflow of products throughout the day. Unlike a warehouse that remains more or less dormant most of the time, a fulfillment centre is bustling with activity. They are constantly receiving new inventory, packing and shipping orders to customers and handling returns.
So, a fulfillment center can be considered as a warehouse, but the converse of this is not true.
Fulfillment centers vs. Warehouses
Now that we know what a warehouse and a fulfillment center are, you can find out which one would better suit your business’ needs.
The key points to consider when comparing a warehouse and a fulfillment center are the following:
Customers – Warehouses cater mostly to B2B customers. They do not ship small quantities of products to individual customers. Fulfillment centers, on the other hand, ship products for both B2B and B2C clients. They are designed to fulfill direct-to-customer orders for retailers and e-commerce companies.
Operations – Warehouses deal with large quantities of products for storage. Most of these products are shipped in and out shipping pallets and are carried out by a freight carrier or an intermodal provider. The frequency at which shipments flow in and out is very less.
Fulfillment centers on the other hand deal with smaller packages and shipments come in and move out more frequently. Most retailers use a large network of fulfillment centers at different locations to ship their products to customers world over. A fulfillment center stores inventory for a limited time before it is shipped out.
Purpose – The purpose of a warehousing service is to store inventory over extended periods in large storage areas safely. This storage period can be months or even years. A warehouse is generally used to store a limited variety of products as it deals mostly with business entities.
The purpose of a fulfillment center on the other hand, is to pack and ship orders to customers in minimum amount of time. Fulfillment centers are not meant to store inventory for more than a few months.
Which one is best for you?
Now, whether your business needs a warehouse or a fulfillment center for its storage and order fulfilling, is a decision only you can make. Your storage and shipping needs are the factors that will determine what you need.
If you own a small or medium-sized business that deals directly with individual customers, you will need to ship out products frequently and fulfill small orders much faster. This is mostly how it is in case of retail businesses and e-commerce companies. But many a times, there are certain B2B companies too that require frequent shipping. In case your business doesn’t require products to be stored for longer durations, a fulfillment center will work best for you. You can also consider outsourcing the fulfillment process if the need arises.
For businesses that need space to store products for a longer time though, warehouses are most suited. Warehouses can be owned by the business or maybe leased for a period from another warehousing company. If you don’t need a large warehouse yet, you can also consider renting smaller storage facilities for your products.
Speaking of warehouses, here’s a Warehouse Safety Checklist – 5 Items You Should Have.