Fulfilling online orders and ensuring they get to their intended destination quickly and efficiently is a complicated process—likely even more so than the average consumer realizes. In fact, the average package purchased via an eCommerce retailer is handled 20 times before it arrives at a customer’s doorstep. Packages sold in retail stores are only handed an average of five times, or 25 percent as much as eCommerce packages. eCommerce is tricky. And it can be costly. The average cost to fulfill an online order ends up being 70 percent of the average order value once you figure in the costs of labor, overhead, order splits, returns, and other expenses. That doesn’t leave much revenue for the retailer. One way that many online retailers are streamlining their fulfillment process and making their operations more profitable is by working with a fulfillment center. But to an outsider, the exact duties and responsibilities of a fulfillment center may seem a little bit mysterious, or they may not realize the intense work that fulfillment centers take on, functioning as an integral part of an online retailer’s operation throughout the entire supply chain. So, what happens at a fulfillment center? Here’s what you need to know.
About Fulfillment CentersWhat does a fulfillment center do? Fulfillment refers to when a third-party logistics (3PL) provider fulfills orders for an eCommerce brand or online retailer. This includes every stage of fulfillment including:
- Inventory management
- And more
- Receiving inventory
- Assembling items and kits
- Generating pick lists
- Alerting the retailer when to re-order product
The Difference Between Fulfillment Centers and Distribution CentersThe terms distribution center and fulfillment center are often used interchangeably, but their services couldn’t be more different from one another. Here’s how to recognize the differences between the two: Fulfillment Centers Fulfillment centers are often part of a 3PL operation, and handle the storing, packaging, and shipping of a company’s product, usually that’s sent directly to the consumer or to a business using a business-to-business (B2B) sales model, or a combination of the two. A fulfillment center warehouse stores all the products from a website that should be individually picked and packaged and sent to the consumer. Fulfillment centers are an essential part of a company’s supply chain, working to ensure that a consumer receives their order in the fastest, most efficient way possible. Distribution Centers Distribution centers are facilities that receive, store, and ship products based on orders. They ship goods directly to retailers or wholesalers, or sometimes to consumers directly. Typically, these products are shipped in bulk, sometimes on pallets. The main role of a distribution center is to store and ship products in bulk. The main difference? Fulfillment centers’ main duties are to pick, pack, and ship products directly to consumers. They are typically outfitted with a sophisticated internal infrastructure and state-of-the-art equipment to sort and pick products, assemble boxes, and more. In a distribution center, they may only have the equipment to stack pallets, but not much else.
The Benefits of Working with a Fulfillment CenterWhy are retailers passing off fulfillment duties to 3PLs? There are quite a few perks to letting professional fulfillment experts take on the task of managing orders. Here are a few reasons eCommerce brands are choosing 3PL fulfillment centers:
- It’s far easier to scale operations up and down with demand without a disruption in operations or delay in shipping.
- Online retailers save money by only paying for the warehouse space they need, no more or less.
- eCommerce brands can use their industry connections to ship smarter, faster, and more affordably.
- Establishing and automating inventory reorder points
- Data visualization and dashboards
- Customer care reporting
- Order channel attribution
- Customer journey insights
- Generating picking lists
- Managing returns