The way a business uses its order fulfillment facilities is one of the most important parts of its distribution network. This is especially true if the company does business over the Internet.
Without a doubt, making sure customers get their orders on time is one of the best ways to make them happy. And the best way to do this is to choose a fulfillment center that meets your customers’ needs. After all, one of the benefits of shopping online is having access to a wide range of products, which will only be the case if these products can be packaged and shipped efficiently.
What’s a Fulfillment Center?
Before e-commerce, companies kept goods in warehouses and sometimes sent them out from there. As e-commerce grew, some warehouses stopped shipping to save money as e-commerce grew. We need a place where people can do different things on a whole new level. This is a center for sending packages.
A third-party logistics (3PL) provider stores and sends out online orders from customers for e-commerce merchants at the fulfillment center, which is a physical location with a warehouse.
For instance, Amazon has fulfillment centers that help Amazon sellers fill online orders. This service is called “Fulfillment by Amazon” (FBA). This is great for smaller e-commerce stores that don’t want the worry and extra work of managing the last link in the outbound supply chain.
Also, it’s important to remember that not all fulfillment centers only do B2C (Business-to-Customer) work. Some centers only work with businesses to businesses (B2B), while others may be part of a network. A good example is a large wholesaler that fills these orders through a 3PL provider and sells a variety of products to small retail stores with physical locations.
How a Distribution Center Works
Most of the time, a fulfillment center is a busy place where products are processed, picked, packed, and sent to customers around the clock. They also get inventory and have people pick up items, pack boxes, label products, ship orders, and handle returns.
The fulfillment center has invested in cutting-edge technology to keep track of inventory, process orders, organize shipping, and do other similar tasks so that they can all be done quickly and well. A fulfillment center is the best choice if you don’t have the resources to store, package, and ship orders quickly. How does a fulfillment center work?
Send the products to the warehouse.
If the fulfillment center is going to help you fill an order, it needs to hold your stock. This means that you need to send the goods to the center to be stored after you have predicted the demand and decided which orders the center needs to fill.
When a fulfillment center gets goods from a supplier, it usually uses an SKU to keep track of them (stock-keeping unit). Every project must be kept track of by the 3PL company that runs the fulfillment center.
The fulfillment service provider also keeps you up-to-date on the products, which is also important. Consistent communication in real time makes sure that your inventory management system is always right, even when you aren’t watching the goods.
The fulfillment center will then keep your product until it is needed. This could mean that they are sitting on shelves or trays, or that they are being kept in a certain way (refrigerated, for example) until they are needed.
Customers place their orders
When a lot of orders come in, your fulfillment center needs to get to work. The best centers will handle orders quickly and keep you and the end customers informed at every step.
This could mean sending an order confirmation message right away and then keeping the customer up to date. For example, the center should tell you and your customers when orders are picked up and sent, and it should also give you an idea of when the orders will arrive.
A big part of order fulfillment services is picking. Most of the time, the fulfillment center uses cutting-edge sorting and packaging technology to make sure that every order is made and shipped correctly. They will also package your order in your own boxes or the way you tell them to.
Shipping and delivery Are Arranged Fulfillment centers try to get goods to their destinations as quickly and cheaply as possible.
The fulfillment center will make connections with major carriers and courier services that already exist so that your order can use them. This means that shipping costs will go down because of economies of scale, and your customers will have more delivery options.
Now you know that “fulfillment center” means to have a third party handle the process of filling orders. But if you are just starting out and want to start your own online business, this expensive outsourcing cost could cost you a lot of money. Then dropshipping, a way of selling that doesn’t require a warehouse or a stock of goods, will make your e-commerce journey easier.
Warehouse vs. Fulfillment Center
People often mix up the two terms, which might not be too surprising since they both have some of the same goals.
Fulfillment Center Deliver Products
There is a lot going on at the fulfillment center. Even though the fulfillment center has shelves for storing goods, its main job is to deliver, not to store. There are a lot of people working in fulfillment centers. They take care of incoming inventory, pick products to fill orders, package orders, and ship them to customers.
Some big companies have their own fulfillment centers, but most e-commerce businesses use the services of third-party logistics (3PL) companies to do their jobs. The fulfillment center’s goal is to quickly get products in and out. The companies that own the items on the shelves lose money on them.
Fulfillment services work with retailers, e-commerce companies, and corporations to fulfill B2B and B2C orders and ship goods to end users. For example, when a customer orders a new piece of clothing online, it might be sent from a fulfillment center instead of a warehouse. Large shoe stores can certainly store extra shoes in warehouses and send them to fulfillment centers every few months.
Products are kept in warehouses.
Most of the time, the word “warehouse” is used to describe a building that has a very different purpose than a “fulfillment center.”
Warehouses can be used to store things for a long time or just for a short time. Some big companies have their own warehouses where they can store their goods. Others rent warehouse space from the government.
Imported goods can be kept in a bonded warehouse until the taxes are paid by the person who brought them in. Warehouses are usually still places with few people working there and not much coming and going most days.
Most warehouses work with wholesale retailers or business-to-business (B2B) orders that include a lot of products. Most of the time, warehouses don’t ship goods to outside customers or end-users. Businesses don’t have to buy their own warehouse and pay people to run it. Instead, they can rent space and split the costs with other businesses.
The Good and Bad of a Fulfillment Center
By outsourcing the order fulfillment part of online shopping, you and your business can get many benefits, such as:
- The fulfillment centers might have more than one physical location in key spots in different states or countries. Because of this, they can do jobs for much less than you could if you did all the work yourself.
- For new routes, they will use special software that gives them the ability and knowledge to get preferential rates or negotiate lower freight rates.
- Operating Costs: If you use a fulfillment center, your operating costs will go down by a lot. You can use the money you save on warehouse space and staff costs to find a good fulfillment center.
- Space: The biggest e-commerce companies may have huge warehouses, but most, and even some of the oldest brands, have much less room. This makes it very hard to store inventory, which makes it hard to sell things and make money.
- You can get rid of many of these problems if you use an order fulfillment center. Don’t forget that this isn’t just about how much space the product takes up; it’s also about how much space is needed for the packaging and shipping materials, like foam packaging, boxes, and cartons.
- Focus on What’s Important: Order fulfillment is important, but it can take a lot of time and keep you from paying attention to other parts of your business. By using the fulfillment center solution, you can keep focusing on the most important parts of your business, like finding and selling products, building brand awareness, and bringing in new channels and customers.
- Doesn’t it all sound easy? You outsource business processes, which lets you focus on running and growing your e-commerce business. But, as with any business decision, there are some things to think about before using a fulfillment center.
- Lack of Control: When you use a fulfillment center, you are outsourcing. By definition, this means that you don’t have any say over how each order is picked, packed, or shipped. If you give up that control, you can’t make sure your customers have the best experience possible.
- You have to be able to trust the fulfillment center you are sending your work to. Integration of systems and regular communication can help in this way. The best fulfillment centers keep you up to date on the status of your order and give you real-time updates on their stock. You’ll feel like you’re giving up less control this way. But you are only told what will happen, and you give the fulfillment center the power.
- Quality of Service: When you use a fulfillment center, you trust the company that runs it and have a great customer experience. Errors can lead to sub-par experiences.
- Staff at the center might pick the wrong orders or not pick them at all. This is sure to make your customers angry. But if you handle order fulfillment on your own, mistakes like this can and will happen.
- Lack of Transparency: We’ve said many times that the best fulfillment centers keep in touch with their clients all the time. But if there isn’t this constant communication, using a fulfillment center can make it hard to know what’s going on.
- You won’t be able to keep track of orders and stock without updates and information from the fulfillment center. This could mean that you can’t keep customers updated on their orders or that you’re overselling products you don’t actually have in stock. All businesses want to avoid these problems.
- Now you have a full picture of what the fulfillment center is like. You may have noticed that sending order fulfillment to a fulfillment center lets you hand over the costs and responsibilities of managing your warehouse and focus on sales. If you have a lot of money to start with, you should use a fulfillment center.
Distribution centers and fulfillment centers are usually part of supply chains. Goods pass through distribution centers because they change how they are moved. In contrast, fulfillment centers store products until they are sent to customers.
Most people who buy and sell online need a fulfillment center, not a distribution center. However, these businesses need to find the right order fulfillment service provider that is fast, effective, reliable, and efficient.