Posted - April 19, 2022

Fulfillment Centers vs. Warehouses: How Do They Differ?

The delivery and logistics industry can be very complex to understand. A lot of activities must happen smoothly and effectively to get your products from the supplier to your warehouse and eventually to a customer’s address.

Fulfillment centers and outsourced warehouses serve as key components of the logistics process. But what are fulfillment centers and warehouses, what services do they perform, and how do they differ? 

It is easy to confuse fulfillment centers with warehouses, especially because both involve packing, storage, and potentially delivery. However, after taking a closer look at the two options, you will notice that there are some distinguishing factors. 

Here, we explore what fulfillment centers are, their benefits, and how they differ from traditional warehouses. 

What is a Fulfillment Center?

Often referred to as Distribution Centers (DCs), fulfillment centers are spaces where retailers, manufacturers, and other organizations store their inventories before distributing them to their customers. They form the last stage of product distribution to end customers, making them extremely vital in the overall customer experience. 

In addition to receiving and storage, fulfillment centers help e-commerce merchants and manufacturers by handling all the picking, packaging, fulfillment, and shipping of orders to end customers. This helps alleviate the pain and pressure of performing these tedious tasks in-house.

Common services offered by fulfillment centers include:

  • Receiving products from suppliers and manufacturers
  • Inventorying and warehousing products in their physical warehouse
  • Picking, packing, and shipping orders to customers
  • Kitting and light assembly services to support the fulfillment function
  • Handling and processing customer returns
  • Managing inventory and order information online via reporting
  • And in some cases, like OSW, offer superior customer care support services

What Are the Different Types of Fulfillment Centers?

All fulfillment centers generally provide the same set of core services to help companies deliver packages both locally and internationally. In terms of these core services (receiving, storage, fulfillment, and shipping), most fulfillment centers do not differ much. However, some fulfillment centers specialize in certain aspects of fulfillment, delivering a more tailored service.

Some examples of fulfillment center specialization include:

  • B2B fulfillment companies: they focus on fulfilling orders that are sent to businesses only. These companies are experts in providing EDI (electronic data integration) and retail compliance with major retailers, shipping orders to specialty and boutique businesses, and delivering orders to businesses. Order sizes for B2B shipments tend to be larger, encompassing many SKUs (stock keeping units) and items per order.
  • B2C and E-commerce fulfillment companies: they focus on fulfilling orders place by online consumers made through e-commerce web stores, online marketplaces such as Amazon and eBay, and other direct to consumers channels like Kickstarter and Facebook. Individual orders placed by consumers tend to be smaller in nature. B2C e-commerce fulfillment companies may also be referred to as order fulfillment companies or pick and pack fulfillment companies.
  • Omni channel fulfillment companies:they focus on fulfilling orders for all sales channels, including both B2B and B2C channels. 
  • Fulfillment and call center companies in one:they offer both fulfillment and customer care services under one roof, helping to deliver an exceptional customer experience. 

What are the Benefits of Using a Fulfillment Center?

Some of the reasons you should consider outsourcing your logistics with a fulfillment center include:

They Eliminate Storing Inventory and Managing Fulfillment Staff

Keeping tabs on inventory and managing fulfillment and shipping staff is not easy – both for startup businesses and established ones. Fortunately, fulfillment centers are here to help you handle all the problems associated with product storage, packing, and shipping so you can spend your valuable time on other core functions of your business. 

When you use a fulfilment center to manage your inventory, you eliminate the need to pay a fixed warehouse lease cost. In fact, you only pay for the space you use, which means that your warehousing costs become variable instead of fixed. When your inventory draws down, you pay less.  

They are Experts at Storage and Fulfillment

Companies that specialize in fulfillment services are experts at everything to do with fulfillment and shipping. They know how to handle various situations that you may not have experience with. While your company may have some competencies or capabilities with inventory management and shipping, fulfillment centers have greater depth and breadth of knowledge, which will help you streamline your operations, avoid pitfalls, and deliver the greatest fulfillment experience for your customers.

They Will Lower Your Overall Logistics Costs

In addition to lowering your storage costs, fulfillment centers can lower your shipping and fulfillment expenses as well. First, because fulfillment centers ship for a multitude of customers, they can obtain extremely aggressive freight rates from the shipping carriers – discounts off published rates that will be lower than what you’re able to achieve on your own. Fulfillment centers pass on some or all these savings to you, leaving you with a net shipping spend that will be lower than if you negotiated with carriers on your own.

Second, fulfillment centers can also help you achieve lower fulfillment costs, including both the labor cost of picking and packing orders, as well as the cost of materials such as boxes and packaging fill.

What is a Warehouse?

A warehouse, unlike a fulfillment center, usually focuses on providing storage only services or cross docking of goods. Storage is usually conducted on a pallet basis, crate basis, or a square footage basis. While goods will move in and out of the facility, warehouses do not usually focus on the complexities of B2B, B2C, and omnichannel fulfillment services. The size and scope of a warehouse varies depending on its intended use. Today, three major types of warehouses are available.

  • On-demand warehouse (provides short-term warehousing on an as needed basis, and usually done in various locations)
  • Public warehouse (provides general warehousing services for a multitude of customers)
  • Private warehouse (provides warehousing services for a single company)
  • Cross dock warehouse (provides short-term warehousing services for a single location)

What are the Differences between Fulfillment Centers and Warehouses?

You can distinguish between fulfillment centers and warehouses by analyzing their operations. The main role of a warehouse is to simply store product or equipment or materials, whether for a short-term period or for a longer period. Common examples of when companies utilize straight warehousing space include:

  • Storing excess inventory
  • Storing goods during a warehouse transition
  • Cross-docking goods to meet short-term transition periods along the supply chain
  • Storing goods in a local market to meet geographic sales needs
  • Seasonal storage

Fulfillment centers, on the other hand, do more than just store products and goods at their warehouse. In addition, they help retailers to ship their products to their customers worldwide. Today, most E-commerce giants rely on fulfillment centers to provide same-day delivery services. 

It is important to note that fulfillment centers store inventory for the shortest time possible and deal directly with the customer, unlike warehouses, which can store products for extended periods without dealing with the customers directly. 

How Can OSW Best Assist You with Your Fulfillment Center Needs?

Our Serviceworks is a fulfillment company that clearly understands the difference between a fulfillment center and a warehouse. We offer best-in-class fulfillment services to our customers. We do not operate as a standalone warehouse service, as our focus is on omni-channel fulfillment services, with capabilities in both B2B and B2C fulfillment operations.

What sets us apart from the competition is that we offer customer care services for a complete, end-to-end customer experience, which ensures that your passion, tone, and voice are clearly delivered with each order shipped. With our experienced and well-trained staff, we form a critical link between your brand and your customers to keep your customer relationships thriving in this hyper-competitive landscape. 

Contact us today to get started.