Warehouses and fulfilment centres are used as interchangeable terms; however, for those in business, they refer to two quite different approaches to stocking inventory. A crucial part of a retail supply chain, both fulfilment centres and warehouses provide large spaces where businesses can store all their inventory. However, there are differences when their wider services and timeframes are considered.
As a business, it is important to assess your warehousing and inventory storage so you are able to source the most efficient and cost-effective option. Read on to find out the differences between fulfilment centres and warehouses, allowing you to decide which is best for you.
Warehousing Solutions for Businesses
When businesses offer manufactured goods and products to customers and clients, they more often than not require a place where they can store what is required and created along the way. From raw materials to Work in Progress (WIP) and finished goods, as well as Maintenance, Repair and Operating (MRO) inventory, warehousing solutions provide a location for everything to be stored securely.
Warehouses, in particular, are immense spaces designed to be able to store the inventory for a range of manufacturing businesses. Often located in the suburbs of large cities, warehouses hold inventory here so that goods can easily be shipped in via sprinter vans and haulage HGVs.
Large retailers and car manufacturing plants will have their own warehouses, allowing them to build up the stocks of their inventory; however, the majority look to lease warehouse space. Renting storage space can work out as a much more cost-effective method for small and medium-sized industries. Although, it will be necessary to shop around for the best rate.
By sharing and renting space in warehouse facilities, these spaces will be equipped with all the necessary forklifts and containers capable of holding large quantities of products. But, different types of warehouse storage are tailored toward different types of businesses. For example, some warehousing providers target wholesale fulfilment and e-commerce-focused businesses, allowing for businesses to rent the large spaces that are needed to house their huge quantities of inventory. However, other options are available.
What Is A Fulfilment Centre?
Fulfilment centres which can also be referred to as distribution centres offer a slightly different service. These buildings allow businesses the option to outsource not only their warehousing but also their shipping.
Fulfilment centres which can also be referred to as distribution centres offer a slightly different service. These buildings allow businesses the option to outsource not only their warehousing but also their shipping. What this does is it allows businesses to relieve themselves of the pressure of having all the physical space to store all their products. For companies who are still not at the capacity where they can manage their inventory in-house, fulfilment centres help take care of multiple steps of the process.
Inventory management can easily become a problem for businesses, when this aspect is not properly looked after, a company’s orders can fall into disarray. Whereas, with inventory management included within a fulfilment centre’s services, a business can pass their goods to the storage centre and then will organise the shipping to the intended customer, through an outsourced haulier company.
By improving this area and having a streamlined holding and shipping process, a business can easily improve its customer satisfaction. And, with happier customers, it is much easier to retain a high customer retention rate. In entrusting these two aspects of your business and placing them under the same roof, it is possible to streamline your logistics. The fulfilment centre, therefore, becomes your hub. They take responsibility for your order fulfilment process in its entirety, from picking an order right through to packaging and shipping.
Furthermore, outsourcing these crucial and often problematic steps, allows you to focus on other important areas of your business.
How Do Fulfilment Centres Operate?
The basis behind a fulfilment centre’s operations is to support every step from the storage of products to fulfilling online orders to help get these orders to the customers’ doors. These steps are commonly recognised as the order fulfilment process.
These distribution centres target e-commerce businesses, offering them inventory storage within a third-party logistics (3PL) fulfilment centre that allows customer orders to be actioned efficiently. The fulfilment centre is able to access the list of orders placed on your e-commerce store, therefore, allowing each order to be picked and packed ready for a timely shipment.
Whether your business works at a B2B or B2C level, fulfilment centres are designed to support both services. For example, they can alter the packaging they use to support big-box retailers or a consumer at home. A fulfilment centre’s level of service can include inventory management, including the receiving, packing and shipping of goods. This package can also include negotiations with shipping carriers and handling large-volume needs and lower fulfilment costs. To be clear, if you choose to outsource your business’s e-commerce fulfilment then the 3PL is simply carrying out these processes on your behalf.
How Do Fulfilment Centres Differ From Warehouses?
In comparison to fulfilment centres, warehousing takes a more passive approach to storing a business’s inventory. A warehouse can be a range of different sizes, covering anything from a garage or spare room, to a large, industrial outbuilding. When businesses look to rent storage space, a warehouse provides just that. You will receive access to a designated area of an often secure, storage facility.
You are then able to use your rented space to house all your inventory until you need to access them or move them on. Should you receive an influx of customer orders, you will be responsible for arranging all the necessary logistics, including the management of stock, processing the order, selecting and packaging the goods and then making the arrangements for the collection and delivery of the goods.
On the other hand, a fulfilment centre can take care of all of this for you, in addition to housing your inventory. Warehousing is simply one link in the chain for fulfilment centres. Unlike warehousing, they extend their service to include the management of the entire order fulfilment process, with some centres offering shipping services that span internationally between suppliers or a customer. With all these additional processes, a fulfilment centre tends to suit businesses with a fast turnover of inventory.
As fulfilment centres are more accommodating with their services, this flexibility also extends into their warehousing facilities. Therefore if your business experiences some fluctuations in sales, a fulfilment centre can often adapt your provisions to suit. For example, if there is a sudden increase in demand and your inventory outgrows your designated space, most centres can support an upgrade. Similarly, they are normally just as supportive with clients reducing the size of the contract too. Some of these expectations will vary depending on which particular fulfilment centre you choose; however, a good fulfilment centre should have these bases covered.
What Are The Benefits Of A Fulfilment Centre?
If your business is looking to streamline its operations, enabling you to focus on alternate areas, a fulfilment centre offers plenty of benefits. Let’s take a look at the top 5 advantages of using a fulfilment centre.
1. Reduced Cost
Firstly, these distribution centres can save e-commerce businesses money. Unlike renting space in a warehouse, your rental fee at a fulfilment centre includes the management of your goods, as well as packaging, delivery and shipping service. With all of these boxes ticked by the same rental fee, your company no longer has to staff and fund their own staff to carry out their own order fulfilment process.
2. Better Deals on Packaging
Furthermore, with these centres offering the same services to multiple businesses, they have more capital from rental fees to invest and bargain with quality packaging materials. From heavy-duty boxes, packaging and dunnage, fulfilment centres have the leverage to secure exceptional discounts on these expensive necessities.
3. Improved Customer Experience
Also, with fulfilment centres, the amount it costs to rent a space within their large warehouses will undercut the cost of a small to medium business running their own warehouse. When a business struggles to meet the demand of its customers, it is time to outsource. By doing so, customers will receive their goods promptly, reducing complaints and encouraging repeat customs through impressive service.
4. More Efficient Inventory Management
In addition, it allows a professional organisation to take care of all smaller details that often get overlooked when everything is managed in-house. With your fulfilment centre taking care of orders meeting the demand, they will keep on top of your inventory supply, reducing interruptions within the supply chain process. These inventory storage and management packages allow you to monopolise the fulfilment centre’s expertise. These facilities will be clad with the best technology in logistics, allowing your business to streamline and improve your inventory turnover, which will be reflected in your inventory turnover ratio.
5. Time For Business Growth
With a fulfilment centre taking the load off your shoulders, it enables you to focus your efforts on your business operations and strategic planning. Now you have more time, it is possible to gear your business up for growth and refine other aspects of your processes.
How Does A Fulfilment Centre Overcome Significant Inventory Management Problems?
When inventory management is taken care of in-house, there are common problems that can occur. The most prevalent issue is overselling. Many businesses struggle to accurately keep their stock levels in sync with their online website, this results in there not being enough inventory to meet the customer demand. Problems like these result in disgruntled customers and a loss of custom in your goods. However, outsourcing your inventory management can significantly reduce the chance of these costly mishaps occurring.
Fulfilment centres often have the market-leading technology and software for managing stock levels. When a company outsources their order fulfilment process, the fulfilment centre will be able to provide accurate reports on your inventory level. Moreover, this will reduce the chance of your website stocking out on popular items as supply and demand will be closely monitored, resulting in higher customer satisfaction.
Furthermore, distribution centres are experts in logistics and liaising with third-party hauliers. With their contacts on board, your business can benefit from an expertly organised shipping department. Right from the initial product selection, using a fulfilment centre can help to iron out errors of incorrectly selected items which will interfere with stock figures and availability. While their haulier connections will help to save money on expensive delivery quotes and unreliable services.
Fulfilment Centres and Inventory Coordination
With inventory coordination, e-commerce businesses have a couple of choices. They can either arrange to receive and review their inventory before it is sent to a fulfilment centre, or they can make the arrangements for their manufacturer to send it directly there. The flexibility of the arrangements helps businesses scale; for example, even if a new product was scheduled to launch, the fulfilment process will already be in place, tried and tested. Therefore, by outsourcing to a fulfilment centre, the time it takes to get a newly manufactured product to customers is significantly reduced.
In addition, fulfilment centres can promise hauliers a high volume of packages from their numerous clients, allowing them to negotiate extremely competitive prices. With such low shipping costs, fulfilment centres can also offer to manage a shipping and returns process. Both delivery services offer tracked postage, allowing a business to pass on a tracking number to the relevant customer.
With returns sent straight back to the fulfilment centre, less time and money is wasted reintroducing the goods into stock quantities. All the business needs to do is process the return payment when and as required, there is no need for them to get involved in arranging special collections.
Storage Solutions With Breakwells
At Breakwells Transport Ltd. we offered coordinated warehouse storage for your inventory with our international distribution channels that have been established for over 50 years. Our safe transportation routes connect our storage centre in Kidderminster to the Isle of Man and the Isle of White, as well as the Channel Islands and Costa Blanca region in Spain. We can help you reduce your lead times with tracked, driver-accompanied vehicles and a no transhipment policy, find out more today.
FAQ
Do fulfilment centres take care of inventory management?
Yes, fulfilment centres will not only store your inventory but they can also take care of your inventory’s next steps. By monitoring your customer’s orders, fulfilment centres can select, package and ship out all orders, offering returns if necessary. Their state-of-the-art inventory management systems allow them to keep accurate records of your stock levels, informing you if your inventory needs replenishing.
What is the main difference between a warehouse and a fulfilment centre?
The most significant difference between a warehouse and a fulfilment centre is the latter’s ability to manage the order fulfilment process. Both will offer sufficient storage space for your inventory within a secure industrial centre; however, warehouses can only provide this service. Fulfilment centres have the capacity to manage your storage and shipping of goods to and from customers, clients and manufacturers.
When a package arrives from a fulfilment centre, who is it from?
Packages sent by a fulfilment centre are done so on behalf of the business who pays for their services. They are essentially an outsourced packaging and shipping department.
Why is it called a fulfilment centre?
A fulfilment centre is able to fulfil the entire process in relation to a customer or client order. The centre can hold the stock, monitor the inventory records, and when an order is placed, select, package, label and send out the goods.