The terms "fulfillment center" and "warehouse" are often used interchangeably. Both are large facilities that store inventory for businesses that sell products. But, a warehouse and a fulfillment center have differing operational goals. So if you are trying to decide which option is best for your business, check out our full guide below. Let's get started.
What is a Fulfillment Center?
A fulfillment center (a.k.a distribution center) allows for goods to be moved or transported from the warehouse to a consumer, retailer, or wholesaler.
Oftentimes these facilities are air-conditioned or refrigerated. Fulfillment centers range in size from 100,000 SF to 1,000,000+ SF.
Fulfillment Center Services
Fulfillment centers often provide services like
- Inventory storage
- Generating pick lists
- Assembling items
- Order fulfillment
- Managing returns
- Freight transportation
- Customer service.
The majority of fulfillment centers are managed by third-party logistics providers, also known as a 3PL.
Benefits of a fulfillment center
Here is a list of some of the benefits of using a fulfillment center:
- Flexibility to outsource warehousing and shipping
- Eliminate the need to buy your own space to house your product
- Decreasing the capacity businesses need to fulfill their online orders.
What is a Warehouse?
A warehouse is a facility that is used for the storage and/or distribution of merchandise, goods, or materials.
Typical clients of a warehouse include importers, exporters, manufacturers, wholesalers, and transport businesses.
Warehouses can be any size, ranging from 10,000 SF to 100,000 SF, but the average size of a U.S warehouse is 16,400 SF.
The 7 different types of Warehouses
A warehouse that is privately owned by distributors, wholesalers, manufacturers, large retailers, or online marketplaces.
A warehouse that uses robotics, technology, and artificial intelligence to automate processes and reduce the number of full-time employees in the warehouse.
A warehouse that is designed to keep refrigerated, temperature-sensitive, or frozen products.
A warehouse that provides short-term storage, inventory management, or transportation on a month-to-month basis.
A warehouse space that is for businesses that need extra inventory space.
A distribution center, also known as a fulfillment center, serves as a type of warehouse that offers more than storage.
A warehouse that stores imported goods before customs duties are paid on them.
A warehouse that takes in small shipments from various suppliers and groups them together into larger shipments prior to distributing them to buyers.
A warehouse that is owned and operated by cooperative organizations. Both co-op members and non-co-op members can store their goods at the warehouse, but co-op members benefit from the reduced rates.
Some benefits of warehousing include the safety and preservation of your goods and trouble-free handling due to the location of industrial parks and loading docks.
Key differences: fulfillment center vs warehouse
It is important to understand the key differences between a warehouse and fulfillment center so that your company can make an informed decision on which route is best for your company.
How it works
A fulfillment center doesn’t intend to store goods for extended periods of time. They focus on housing enough product to fulfill orders and ship them directly to customers. The inventory will arrive on pallets but leave as a parcel sized shipment.
A fulfillment center’s role is to better the customer experience by an order processing and delivery times.
Warehouses store goods for longer periods of time. This could be due to demand shifts throughout the year, companies needing to store their goods outside of their production facility until it’s time to move them for sale, or to house goods until they need to be distributed. The role of the warehouse is to store inventory.
A warehouse receives and sends out the product on shipping pallets.
Customers of warehouses usually have a Business-to-Business (B2B) model.
Customers of fulfillment centers usually have a Business-to-Customer (B2C) model.
The goal of a warehouse is to store goods for a longer period of time. Typically this time period is several months to a year.
The goal of a fulfillment center is to not store inventory, but rather process orders in as little time as possible. Most goods don’t stay in a fulfillment center for longer than a few months.
Want to learn more about warehousing? Read our latest blog on dynamic warehouse networks.