What is a fulfillment center?
A fulfillment center is a third-party service provider that processes and ships products that your customers have purchased. eCommerce fulfillment handles the logistics required to get an online order to a customer’s doorstep, eliminating the need for you to package, address, and ship each order yourself.
To use a fulfillment center, you must first store your product inventory with the fulfillment provider. Then, when you receive an order through your website, you notify the center, which in turn locates the item ordered, prepares it for shipping, and works with a shipping provider to have it delivered to your customer. From the customer’s perspective, the sole point of contact remains your ecommerce site.
A variety of companies offer these kinds of order fulfillment services. Some, like Fulfillment by Amazon services, are available only to sellers who manage their online stores through certain platforms. Others, like FedEx Fulfillment, are integrated with other logistics services, while Floship or James and James Fulfillment are offered by companies specializing in fulfillment operations for third-party ecommerce vendors.
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Fulfillment centers: advantages and disadvantages
For ecommerce merchants, fulfillment centers offer a range of advantages:
No physical infrastructure
They eliminate the need to maintain a physical location for housing and processing your orders. This will help your business cut considerable costs like rent, bills, staff, packaging materials and shipment fees.
Faster order processing
Fulfillment centers can ship orders faster than most ecommerce sellers can on their own. They usually provide excellent logistics services that are more efficient and accurate.
Lower staffing costs
You do not need to hire and manage your own staff to handle orders, which in turn reduces concerns about paychecks and other payroll taxes.
Larger product selection
Fulfillment centers make it more feasible for sellers to offer a larger selection of products than they could manage if they had to maintain inventories themselves.
They are usually capable of processing dozens, hundreds or even thousands of orders per day, helping sellers keep shipping flowing consistently.
More time for other work
By freeing brands from the work of handling orders, centers give companies more time to focus on strategic tasks. Without worrying about order processing, the main priorities will be around planning business growth, such as brand awareness and marketing strategy implementation.
However, fulfillment centers do come with some drawbacks:
Sellers have to pay providers for their services, such as a flat fee to integrate your store with the fulfillment center, along with fees for each order processed.
Lack of control
Brands have little control over how quickly a center processes orders and cannot intervene in fulfillment operations when something goes wrong. This could cause customer relations issues, which sometimes leads to negative feedback and non-returning customers.
Although the fulfilment company may be able to process orders faster, the time it takes to ship an item from a center to the customer depends in large part on where the center is located, potentially extending shipping timeframes. These factors need to be considered when picking a partner. .
Lack of customization
Centers typically do not allow sellers to customize orders or add special touches, like inserting a personalized thank-you note for each buyer.
Inventory replenishment delays
Most centers require the seller to keep track of inventory and replenish it as needed. This means orders could be delayed in the event a seller is unable to replace an out-of-stock product quickly.
How a fulfillment center works
The first step in using a center is to find the right fulfillment provider. Look for one with locations close to your customers, and whose prices align with your budget.
You will then situate inventory in the fulfillment provider’s facilities, and integrate your online stores with their systems, so the provider receives the necessary information from the seller when an order is placed. This process should be automatic – as it’s not ideal to trigger fulfillment requests manually each time a new order is completed on your website.
Other order processing activities remain the responsibility of the seller. For example, if customers receive the wrong order, the seller will need to contact the customer to address the issue. Payment must also be handled separately since payment processing is not a service most fulfillment providers offer.
Fulfillment centers vs. fulfillment warehouses
The term “warehouse fulfillment” is sometimes used interchangeably with “fulfillment center.” This can lead to some confusion, because fulfillment centers differ from traditional warehouses.
- A traditional warehouse is a location where inventory can be stored for the long term and may not always be immediately accessible.
- Warehouses also offer only a storage solution, without providing the picking, labeling, packaging, or shipping services that fulfillment centers offer.
- Warehouses are useful if you have excess inventory that requires storage until you are prepared to sell, or seasonal products that sell only during certain times of the year.
In contrast to warehouses, fulfillment centers focus on storing inventory for relatively short periods of time, then packing and shipping to customers when orders are placed, a process known as dropshipping.
Unlock the secret to better fulfillment experiences
To get the most out of this process, ecommerce providers need flexibility and choice. The ecommerce platform they use must be able to integrate with any provider they choose to work with, without requiring manual effort on the part of the seller each time an item is sold on their website.
The best ecommerce platforms also make it easy to offer customers multiple fulfillment options, like shipping from a local store, facilitating in-store pickup, or shifting fulfillment to a different location if the first option is unavailable. This flexibility is critical to ensure customers receive orders as quickly as possible, every time.
Fortunately, Adobe Commerce supports all these fulfillment options, integrates with the most popular fulfillment providers, and provides essential tools for order and inventory management.
Learn more by scheduling a demo today.
Now that you have gained extensive knowledge about fulfillment centers, you’ll need to decide whether using such a service will benefit your business. For example, if you have limited storage space or staff but many orders to process, sending stock to a facility like this can definitely save you a few worries.
If your business provides customized products or is reliant on personal touches sent with every order, fulfilment services may however not be an option for you.
For further help, check out our guide on how to grow your ecommerce business.
What are the types of fulfillments?
There are 4 types of order fulfillment:
- In-house fulfillment – the company’s employees process the customer orders.
- Outsourced fulfillment – the fulfillment center handles storing, packing and shipping.
- Hybrid fulfillment – a mixture of the above fulfillment options is used.
- Dropshipping – similar to outsourcing, without the need to manage stock.
What is a fulfillment fee?
The fulfillment fee is the cost related to inventory receiving and storage, alongside processing customers’ orders, from picking, packing, to delivery and returns. The amount varies, depending on the kind of products a business sells and its fulfillment method.
What is the best fulfillment service?
There are many fulfillment centers available on the market, each with their own features. Some of the best fulfillment providers out there include ShipBoB, Rakuten Super Logistics, FreightPros, and Fulfillment by Amazon. Make sure the company you choose to fulfil your orders aligns with your business requirements.