When you plan to put up an eCommerce business, one of the crucial things that you must consider is how your customers will get their orders. You have two warehouse options to decide on- fulfillment centers and distribution centers.
Since these two warehouse options store and ship products, they become confusing to other people, and sometimes they are interchangeably used in logistics and supply chain management. The difference between a distribution center vs fulfillment center depends on the given situation. Each of the terms may refer to something different. Thus, choosing between a fulfillment center and a distribution center is quite challenging.
Explore the functions, purposes, and differences between fulfillment centers and distribution centers so you can settle for the best option suitable for your business.
Fulfillment Center
By definition, a fulfillment center is what we know as a third-party logistics warehouse that receives, processes, and fills the customer’s orders in the place of the eCommerce retailers. When managing an inventory with a fulfillment center, you will either receive or review the goods first before sending them to the center. You can also opt-in to let the manufacturer send them directly to the center.
The fulfillment center directly sends orders to the customer’s address. They are capable of processing high volumes of goods for business to customers and business to business. Streamline optimization, planning, and communication with carriers are significant in fulfillment centers to avoid delays in delivering the packages. Coordination between the truck drivers and the warehouse workers is crucial to get the boxes ready on time.
Benefits of Using Fulfillment Centers
Fulfillment centers have plenty of activities to accomplish. Working from time to time, processing, packing, and sending orders to the customers is the usual routine for this warehouse option. Listed here are some of the benefits or advantages of using fulfillment centers.
Experience in Fulfillment Centers is Seamless
You are not looking for a fulfillment expert. Instead, you are trying to run a business in the best way possible. If you outsource your storage, packages, and shipments to a proficient and renowned fulfillment center, you gain employee experiences and the software and equipment that they use. Partnering with a fulfillment service provider can make your fulfillment process seamless.
Free Up Your Working Spaces
Your working spaces might often become unorganized due to the mess of packing supplies like bubble wrap, boxes, and the like. Fulfillment centers can help you unload all of these things off to your service provider, focusing on the more critical aspects of your business, keeping your customers happy and satisfied.
Discounts for Your Shipping Costs
Several fulfillment centers have national and global facilities networks that result in bulk delivery discounts that can benefit your business. If you house products with more than one fulfillment center, chances are fewer zones will cross to get your products to your customers, which can result in savings or even free shipping offers.
Customized Packaging
Good fulfillment centers think in and out of the box. With customized packaging, you can create your personalized shipping boxes, inserts, or coupons. With this, your packaging makes your products pleasing and exciting every time someone makes a purchase.
Reduced Operating Costs
Outsourcing your fulfillment can eliminate the overhead costs such as rent space, quality control, hiring of employees, packing supplies, and shipping. You can begin to share your space and resources with thousands of sellers. With your economies of scale, you can get the best possible prices and terms and generally pay for only one flat fee.
Distribution Center
By definition, a distribution center is a facility that receives, temporary stores, and distributes goods according to orders received. They are an integral component of distribution chains for products, order fulfillment, and produced goods before shipping these goods to wholesale or retail customers. Thus, distribution centers serve as the bridge between suppliers and customers.
Distribution centers play a significant role in processing and managing orders. They ensure efficiency in order processing by using the latest technology.
Benefits of Using Distribution Centers
Distribution centers often have air conditioning or refrigeration systems to preserve the stocked goods. They stand as having dependence on the demand in the market. Distribution centers serve as the foundation for the supply network since only a single location is allowed to have a massive stock of multiple products. Listed below are some of the advantages of a distribution center.
Customer’s Convenience
The manufacturers can’t open each grocery store and serve the customers. The distribution center is more convenient for the customers and the organization since many customers are way more than the number of distribution centers your organization needs to manage.
Retailers can Purchase in Small Quantities
Not all retailers are already capable of buying the entire bulk. Distribution centers help retailers break up more minor bulks for their business, allowing them to sell individual products to the customers. With this, customers can already purchase the goods in small quantities.
Direct Contact with the Customers
Since they can directly interact with the customers, retailers can provide vital information for improving the product. It can boost product sales since retailers have direct contact with the customers, and they can even ask for feedback from them and pass this feedback to the organization. Distribution centers play a significant role in this process since the organization can now take input from the customers, which is usually impossible to achieve without the center’s help.
It saves time and Money.
Since distribution centers are specialized centers due to their nature of performance and operations, they can lower the cost maintained by the organization. Besides being cost-saving, distribution centers also save time. The delivery time also becomes much faster, and bulk shipments are broken down into smaller shipments to cater to the number of customers.
How does the Distribution Center Differ from the Fulfillment center?
Listed below are the pros and cons or the difference between distribution centers vs. fulfillment centers.
Distribution Centers
Pros
- They have the ability to deliver bulk quantities of goods from business to business.
- They are capable of storing vast amounts of inventory at once.
- They can offer long-term storage even at low costs
- They can help you position inventories closer to your customers or target market.
- The overall price is lower compared to fulfillment centers.
- It is excellent for goods that do not need finishing or individual packing.
Cons
- Since goods are to ship in bulk, there are fewer frequent shipping times.
- The goods are not packaged at the center since they are delivered from one place to another or simply delivered in palettes.
- Shipments may take longer since they are located further from the market.
- The ability to directly interact with customers is low or almost impossible.
- They only offer fewer services.
Fulfillment Centers
Pros
- They are capable of delivering the goods directly to your customers.
- They can save space occupied by your inventory.
- Since their location is nearer to your customers, they can offer shorter shipping times
- They have highly-trained staff that receives and handles your merchandise safely and properly.
- They can customize, pick, pack and label the products for you.
- They have an available customer service division that you can use.
- They offer reverse logistics and manage your returns.
- With their outsourcing logistics needs, you can focus more on your business’s strengths.
Cons
- They only have limited storage space available.
- Because of the limited space, the center offers only short-term storage for your products.
- The unsold inventory becomes more expensive to store.
- They are not capable of shipping large amounts of goods in bulk.
- Compared to a distribution center, a fulfillment center is more expensive because of its location and the additional services.
Wrapping It Up
While there are differences between a distribution vs. a fulfillment center, they both have complementary capabilities. Many people think that these two terms are interchangeable, but in reality, they differ considerably, and each of them has their benefits and services to offer. You should carefully choose between them and consider the things that each center provides in place of your business needs.
Fulfillment centers and distribution centers are both integral components of our present-time e-commerce logistic infrastructure. Each center serves a particular set of business needs. Generally, if your business is small or is still in its starting point, it surely does not have its customer service division and merely relies on the direct delivery of goods to your customers. With this kind of scenario, you may need what the fulfillment centers offer. On the contrary, for larger businesses capable of shipping items in bulk between locations, choosing distribution center services is a better choice. Nonetheless, the decision you will make always ensures that you select a trustworthy and competent logistics provider when shipping your orders. It will help you save time, gain customers, and boost your business.
