FULFILMENT CENTRE VS. DISTRIBUTION CENTRE

 What is a Fulfilment Centre?

A fulfilment centre is a type of warehouse, storing inventory from various sellers and distributing the products through an order fulfilment process. Fulfilment centres are different than warehouses, though, as they’re usually operated by third-party logistics providers. These third-party logistics providers offer a variety of services to clients like e-commerce companies and retail stores, by handling e-commerce orders and offering fulfilment solutions. Fulfilment centre are more focused on business-to-consumer operations.

Amazon is a good example of what fulfilment centres look like. A small business might choose to work with a fulflment centre rather than operate their own warehouses, performing their own order fulfilment services and handling of customer orders. Fulfilment centre often negotiates discounted shipping rates, so shipping costs could be lower than the e-commerce business would get on its own. They may not have a choice, however, in shipping carriers. A fulfilment centre might also handle reverse logistics, as suggested by one of the best Shipping freight forwarding companies in India.

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Factors To Consider When Looking To Use A Fulfillment Center

While using fulfillment centers seems like a no-brainer in certain circumstances, there are a few factors that should be considered before signing any contracts. 

• Importance of value-added services: Are services like packaging, labeling customer orders, and faster shipping to customers necessary for your company’s current goals.
• Cost of service: Can your business afford to use a fulfillment center at your particular stage?
• Expected Sales: Is your business expecting a high volume of orders, or will your products need to sit for a while?
• Location of fulfillment centers: Are there fulfillment centers near where your target customers live?

Knowing who your customers are and where they are will allow you to get the most out of your experience with a fulfillment center.  

 

 

 

What is a Distribution Centre?

So distribution centre and fulfilment centre are they one and the same? Not necessarily… A distribution centre (not to be confused with “centre of a distribution” – a term used in statistics)  is more of a business-to-business storage facility than a fulfilment centre. A distribution centre is used to receive inventory, temporarily store the goods and redistribute them. It may be owned directly by the retailer or it could be leased. The distribution centre focuses on the retail store customer, receiving items from the supplier and sending them on to the various stores. Hence sometimes this is also referred to as “retail distribution centre”. Consider the distribution centre as a bridge between the supplier and the stores. Products arrive on pallets and are moved in on a forklift, but then items are removed from the pallets as order processing demands. Smaller quantities of goods are sent on to the ultimate customers, the stores. These centres are part of a distribution network of facilities located closer to retail locations, and don’t typically house inventory for an extended period of time. Distribution centres might also ship items to fulfilment centres as needed for e-commerce fulfilment. 

Types Of Distribution Centres

There are three different types of distribution centres: 

Conventional – Material movement is performed by people and mobile equipment.

Mechanized – Material movement is assisted by mechanized, conveyance and sortation systems. 

Automated – Material movement is performed in part or in full by machines or robotics.

Factors To Consider Before Using A Distribution Center

Since many e-commerce merchants are strictly B2C and don’t necessarily have a physical store, the use of a distribution center may not make sense depending on your specific circumstance. 

Distribution centers generally store and ship products in bulk. The products aren’t individually wrapped and packaged. However, the location of distribution centers allow you to hold inventory closer to your target market.

According to Shipping freight forwarding companies, understanding your offerings and your clientele will be key in deciding if distribution centers are right for your business.

What Are Warehouses?

Quite simply, warehouses are used to store goods for an extended period of time. They are also used to organize and manage inventory. While it may sound simple, modern warehouses are sophisticated in their processes and use warehouse management systems (WMS) to ensure a smooth operation.

This allows them to track how many products you currently have, where they are, where they are going, who’s handling them, etc. 

E-commerce merchants can rent space within a warehouse via short-term and long-term leases depending on their specific needs. 

Factors to Consider Before Using A Warehouse For Your Online Store

Before you decide to use a warehouse for your e-commerce business, there are several factors you’ll need to weigh:

• Seasonality of your business: Will you need the storage space after your company’s peak season?
• Location location location: Will the location of the warehouse need to be close to your customer base or can it be located further away?
• Cost of storage: How many SKUs do you have and what will the cost of storing them be?
• How long will inventory sit: Will these products need to be shipped soon or will they need to be housed for a while?

Again, warehouses aren’t typically made for quick turnaround. Rather they’re a way to make sure your products are stored safely, organized efficiently, and are overseen in a way to make sure you never run out of inventory. 

The Verdict

When looking at all three options you’ll see there really isn’t a one-size-fits-all answer. As your e-commerce business grows, your needs regarding inventory management and fulfillment will change.

Your inventory management and fulfillment decisions should depend on factors such as the size of your business, your forecasted sales, budget and goals, where your target consumers live, and more. 

If your primary need is to get your products packaged and shipped quicker, a fulfillment center may be best for you.

If your primary need is to store your products safely and have your inventory managed more effectively, then a warehouse may be the better option.

And if your e-commerce business is trying to optimize inventory levels at a physical store, then a distribution center may be your best option.

How AFM Fits Into the Equation

One common theme of all these storage options is that ​​any e-commerce storage method will require shipping at some point, whether that be warehouses shipping to fulfillment centers, or fulfillment centers shipping out to customers. 

AFM is there every step of the way as it not only integrates directly with your e-commerce platform, but has also partnered with both third-party logistics companies (3PLs and fulfillment companies) and with warehouse management system companies to help manage end-to-end fulfillment operations.  

Creating shipping labels with Shipping freight forwarding companies also allows you to track your packages throughout their journey so that you know if they’re inside of a fulfillment center, distribution center, or if they’re on their way to your customer.