With the advent of online shopping, e-commerce stores have to leverage efficient processes and facilities to meet customer demand and ship products on-time to enhance the customer experience. Thus, it’s not uncommon for companies to take advantage of warehouses and fulfillment centers to achieve these goals. However, fulfillment centers and warehouses do not always share the same qualities and have stark differences. Thus, it is key for logistic coordinators and shipping managers to know the difference between the two. Here are a few key factors to consider:
Fulfillment Centers and Warehouses Aren’t the Same (But Still Share Similarities)
Fulfillment centers are physical spaces that not only house inventory but they also provide an end-to-end solution for handling the packing, shipping and delivery of the product. On the other hand, a warehouse’s primary purpose is to store inventory. The main difference between fulfillment centers and warehouses is that one holds inventory while the other also handles the fulfillment or full process of getting the product to the customer.
While fulfillment centers and warehouses have clear differences, there are a few key aspects that they share. For instance, both warehouses and fulfillment centers help companies achieve their operational goals of storing inventory that is to be shipped to customers.
Know the Differences:
Fulfillment centers and warehouses have their own advantages and disadvantages that are worth considering. Here are some key benefits and downsides of each:
Advantages of Fulfillment Centers. Fulfillment centers offer a variety of advantages businesses can leverage, including flexibility during fluctuations in sales due to seasonal shifts and lowering shipping costs. For example, fulfillment centers help lower shipping costs because of the fulfillment centers’ proximity to the customer. The closer they are to the customer, the less it will cost to ship a product to that customer. Also, companies can leverage the scalability of fulfillment centers to grow in multiple markets as their business grows. For instance, a company can use fulfillment centers to grow its customer reach in a new market, such as in the Southern region of the country or in a new country.
Disadvantages of Fulfillment Centers. One of the main downsides to utilizing a fulfillment center for shipping products is that a company may have less control of the overall process. For example, companies that outsource the packaging, housing and shipping of the product may not be able to control how well the workers in the fulfillment center package the item. This can hinder the customer experience if a fulfillment center employee packs the product incorrectly where it may be damaged during the shipping process.
Benefits of Using a Warehouse. Warehouses are ideal for housing inventory. Warehouses also offer more control over logistics thanks to its ability to centralize the process. A centralized location also makes it easy to control fulfillment issues and better manage customer service. For instance, a logistics coordinators can better inform operations and customer service managers on the status of the product fulfillment when products are housed in the warehouse.
Warehouse Downsides. With a warehouse, you now have to hire and manage your order fulfillment. When companies leave their shipping to one location, they lose out on cost-savings. That’s because all of their inventory is located in one facility. However, customers may be spread throughout the country or around the world. Without being strategically located near the customer, companies can easily increase their shipping costs.
So, if your products are hard to come by or have unpredictable ebbs and flows, you may consider storing over several smaller warehouses throughout the country, rather than 1 large building.
Both fulfillment centers and warehouses have differences that companies should be aware of if they want to improve or enhance the customer experience. Thus, it’s crucial for logistics coordinators to use a robust technology and shipping solution, such as ShipWorks, to automate processes and work best for the type of facility they are using. By understanding the business goals and customer needs, enterprises and its leaders coordinating the logistics of their operations can choose the best facility to help meet their needs.