A Fulfillment center, also referred to as a distribution center, is a large constructed area used to store inventory. This stock is later sold to customers through an online store or a regular retail shop. The process initiates when a customer places an order, but it does not end when they receive it. Fulfillment centers enable e-commerce merchants to outsource warehousing and shipping.
Did you know? Fulfillment centers handle the logistics required to get an order to a customer's doorstep.
What is a Fulfillment Center?
A fulfillment center is in an area that the seller or company hires or owns to sell their products/ fulfilments. (third-party logistics). In the case of business-to-retail fulfillment, the seller fulfills wholesale orders to big retailers. Thus, a fulfilment centre manages and stores a seller’s inventory. It also shifts orders to customers/ retailers.
How Does Fulfillment Center Function?
Warehouse management is a challenging task. The smallest details need to be kept in mind otherwise, they can result in undesired problems, loss of time, delay in production, and an increase in the production cost. A fulfillment centre is a nucleus where the entire order fulfillment process occurs. Here the inventory is stored, ready to be supplied to the customers.
After the purchase, the product is taken from the inventory, packed, and made ready for shipment. These B2C orders are shipped directly to the customers. Fulfillment centres also provide B2B orders shipped to big retailers in large quantities. After a seller gives the fulfilment responsibility to a 3PL (Third Party Logistics), the 3PL has to run the process. This includes receiving, storage, orders, packing, and dispatch. The 3PL also works on negotiating lower shipping costs in competition with other order fulfillment services.
Advantages of Using a Fulfillment Center
Fulfillment centers enable ecommerce merchants to outsource warehousing and shipping. It relieves online business for necessary physical space to store all products, which is beneficial for merchants.
List of benefits of using a Fulfillment Centre:
- A seller can benefit by outsourcing their fulfillment to a 3PL. They get the benefit of the fulfillment centre’s experience in the field. By outsourcing their process of storing, packing, and shipping to an experienced fulfillment service, the process will become seamless as the service provider is adept in their field of work.
- Partnering with the fulfillment centre helps you clear your storage space. Many news start-ups work from garages, basements, and other cramped spaces. They are passed on to the service provider, and you can pay attention to other important aspects of the business.
- Poor customer service and dissatisfied customers can cost the company dearly. With the market rife with competition, good customer service is often the answer to thriving businesses. The fulfillment services provide continuous support to the customers through phone or email. Their policy is for easy exchanges, returns, and refunds to appease the customers. Their experience and fleet of workers can provide same-day dispatch and delivery options. As a result, the customer is satisfied, which is good for the business.
- Outsourcing through fulfillment centres is also beneficial as it helps you focus on your business.
- As the business expands, managing all the processors simultaneously becomes overwhelming. By outsourcing fulfillment you can let the service provider shoulder the responsibility of managing the influx of orders and other associated works.
- Several fulfillment centres possessing global and national facilities are in a position to provide discounts on bulk deliveries. They also base shipping rates by zone. We must realize that free shipping is an important aspect that influences the online shopping decisions of customers.
- A smart fulfillment centre provides customized packaging options. It not only attracts customers but also becomes your brand supporter.
- Many businesses maintain quality control, store inventory, take orders, pack, and dispatch.
- E-commerce requires facilities like monitoring inventory, tracking shipments, payment processing, customer data security, and others. Acquiring this system requires finances. Many e-commerce retailers, by outsourcing fulfillment to such service providers, can avail of this for minimum cost.
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Disadvantages of Fulfillment Center
A fulfillment centre provides the ability to scale your business in the future. Launching new product lines in the future fulfillment will not require as much additional attention.
The disadvantages of the fulfillment centre are given below:
Loss of Control
When an e-commerce retailer outsources fulfillment to a service provider. The control of their fulfillment operation passes onto the 3 PL.
Lack of Customization
Some businesses provide some kind of customization to the fulfillment process. While outsourcing, you may have to do away with such customization. Sometimes it proves beneficial as the costs are reduced so the money can be utilized on other fronts.
Many sellers managed to lower their costs by outsourcing. Sometimes owing to the volume and requirements of the seller, the costs ride. Some retailers take it as a disadvantage, but it can be to their advantage since they are in a position to focus on their business, improving their services and scalability.
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A fulfillment center provides an excellent opportunity for e-commerce retailers and regular businesses. By outsourcing their fulfillment to the service providers, business owners can focus on expanding their businesses. It provides store owners more flexibility and ensures there are fewer issues with processing.
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