Here we come to another two terms in eCommerce that might seem similar for newbies in the field. Many consider warehousing and fulfillment services the same, but is it really the case? Are those two terms just synonyms for the same activities in online retail?
If those questions have been rotating in your head as well, let’s figure out the answers below. We’re going to discuss the concepts of warehouses and fulfillment centers separately. Further, we have some excellent advice for you on the best way to manage both.
What is a warehouse?
A warehouse is a place to store products.
Warehouses can be different in their shapes and sizes, but they all have the same primary function – to provide storage space for goods. A warehouse can belong to manufacturers, retailers, or third parties. It depends on whether a manufacturer or retailer has an appropriate facility to organize the storage of products. If a company has a dedicated space, they operate private warehouses. Otherwise, they can refer to public ones.
Public and private warehouses
Third parties own public warehouses to store goods for shippers who do not have their own warehousing space. Such warehouses may often specialize in one particular type of product; food products, racking, shelving equipment, etc.
The private warehouse belongs to the company that uses it to store its products. A private warehouse can be a small off-site storage unit or a large distribution center. The advantage of having your own private warehouse is that you have more control over your products’ storage. This gives you an edge in efficiency and speed when fulfilling orders.
A bonded warehouse is a public warehouse where goods are stored under customs control. The primary purpose of bonded warehouses is to provide storage for goods that will be released later. The essential advantage of this type of warehouse is to free exporting companies from customs duties unless the products are not sold in the country.
(More on bonded warehouses on our in-depth guide)
What is a fulfillment center?
A fulfillment center is a type of warehouse where companies also fulfill the orders besides storing the products.
Fulfillment centers are run by third-party logistics 3PL (known as “fulfillment providers”) specializing in the order fulfillment process. This means we can define fulfillment service as the unit that provides warehousing services and goes a step further in delivering products to end-users. Similar to warehouses, micro-fulfillment centers come in various shapes and forms.
Micro fulfillment centers
Micro-fulfillment centers are small and specialized warehouses that offer order fulfillment services to eCommerce businesses. They are often used by smaller companies that do not have the resources or space to run their own fulfillment operation. Because they are smaller, micro-fulfillment centers can offer more personalized service and quick turnaround times than larger fulfillment centers.
(More on micro fulfillment centers in our in-depth guide)
Dark stores are fulfillment centers that usually do not sell goods directly to customers. They store and process online orders for other retailers who need extra storage space or want better control over the shipment process. To put it more precisely, a dark store is a unit of storing goods, usually located near the urban areas, and allows companies to ship orders quicker than they would do it from their production spots. Customers might either order products from dark stores or take their orders themselves at a particular dark store terminal without entering it.
(More on dark stores in our in-depth guide)
Warehousing and fulfillment centers | Differences overview
Well, what’s the main difference between those two? The critical point is that a warehouse does not fulfill orders, whereas a fulfillment center does. Warehouses store products, while fulfillment centers store products and also fulfill orders. Further, warehouses are usually run by the manufacturer or retailer who owns them, while third-party logistics companies often run fulfillment centers.
Finally, there is a difference in size between facilities that offer warehousing and fulfillment services. Warehouses are often much larger than fulfillment centers, as they need to have enough space to store a large bunch of products. Fulfillment centers can be smaller as they only need to have a limited quantity of goods, which are enough to process orders.
Can warehousing and fulfillment services be combined in one spot?
Warehousing and fulfillment services can be provided by different companies or by one service provider that offers both options simultaneously. On average, warehouses charge less per unit than fulfillment centers because they don’t have to invest in labor, equipment, and systems needed to handle the fulfillment process. However, fulfillment centers can offer a quicker turnaround time because they are specialized in order fulfillment.
Some companies choose to combine warehousing and fulfillment services in one spot to take advantage of the lower prices offered by warehouses and the faster turnaround times provided by fulfillment centers.
How to effectively manage warehouses?
Warehouses have to be planned and organized effectively so that each product would have enough space for storage, retrieval, and packing. The use of technology can help optimize this process and save you time and money. Modern automated software can help you keep all your warehouse product flows under tight control.
For example, the warehouse management feature of eSwap helps you manage multi-location warehouses from one place. You can add and remove new warehouse locations with one click and track everything from one dashboard. On top of that, you can have Real-time location reports from any of your warehouses in a matter of seconds!
Interested in more details? Request a demo call with specialists to help you automate and accelerate all your manual tracking processes in no time.