Finding an adequate place to store goods and products, or scale a shipping and fulfillment process, can be challenging for growing businesses. That’s why many companies outsource to warehouses or fulfillment centers. What does each facility do and which is best for your business?
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What Is the Difference Between Warehouses and Fulfillment Centers?
By using a warehouse or a fulfillment center, companies are able to continue production throughout the year and make timely deliveries of goods to customers. Both are considered a convenient, cost-effective way to organize inventory, mitigate risk, and even reduce employee theft.
However, the differences between a “warehouse” versus a “fulfillment center” is commonly misunderstood. The terms are often used interchangeably, as their service and purposes seem similar or even overlap. Yet, understanding these differences can help a business achieve its long-term goals.
What Are Warehouses?
A warehouse is a building that stores goods or products for an extended period of time until they are needed. Businesses may use a warehouse to store seasonal merchandise or products that are often sold in bulk, such as non-perishable food. A warehouse can also be used to store items or goods that require specific environments or procedures to maintain, such as refrigeration or a certain air pressure.
Warehouses are typically large buildings found in industrial parks on the outskirts of cities. There are various available types, such as private, public, automated operated, and climate-controlled warehouses. Additionally, a warehouse could be owned by one organization or leased to multiple organizations. A warehouse is a popular choice for smaller or mid-sized companies that may not have enough space in their building to store all their inventory. It may be an ideal solution in business to business (B2B) sales, too.
In summary, a warehouse is defined by the following characteristics:
- Offers long-term storage
- Handles fewer buyers (mostly B2B sales)
- Owned by one or leased to multiple organizations
Related: Help! I’m Outgrowing My Warehouse
What Are Fulfillment Centers?
A fulfillment center is also a building that stores goods or products in bulk. They can look similar to warehouses and be positioned on the outskirts of town like a warehouse as well.
However, fulfillment centers are more commonly known for being third-party logistics (3PL) providers. A 3PL provider means that the center functions like a “middle man” between provider and buyer. A buyer may include retailers, e-commerce, and corporations. It could entail orders between B2B or a business to company (B2C). Its ultimate purpose, though, is to locate and ship out an order as soon as it’s filled.
In short, a fulfillment center:
- Offers short storage time (about a month)
- Can have multiple buyers (B2B, B2C, etc.)
- Owned by one company, rather than multiple businesses
Related: How Much Does Order Fulfillment Cost?
How Do They Differ?
The major difference between a warehouse and fulfillment center is the amount of time that each holds onto a product or item. A warehouse is used for long-term storage. It will typically hold onto bulk items anywhere from a few months to years. Its typically utilizes forklifts and large containers to transport and stack items.
Meanwhile, a fulfillment center is used for short-term storage—about a month at most. It may hold a large quantity of products or goods, but the center’s ultimate purpose is to complete an order as soon as it’s made. This may mean shipping out bulk items, or small orders, such as online orders done in clothing stores or digital food markets. As a result, these centers are less concerned with maintaining specific temperatures or environments to store products, as many of its items aren’t meant for long-term storage.
A warehouse may provide a fulfillment center with a product or item to complete and send out an order. But, a fulfillment center couldn’t do the same with a warehouse; a fulfillment center is usually that “middleman” between the warehouse and customer. For this reason, a fulfillment center may have a variety of different external customers and a warehouse may have fewer or merely one.
Related: What Is Order Fulfillment? The 2020 Guide
Warehouse vs. Fulfillment Center: Which Is Right for Me?
Deciding what is best for your company primarily depends on your products or items, their storage requirements, and the size of your company. A small or medium-sized business may have a quick turnaround and spend much of their day packaging and shipping orders. Using a fulfillment center could minimize or outsource that work, allowing companies to invest more time on building new ideas or connections.
As online shopping and small businesses become more ubiquitous, fulfillment centers are gaining popularity. Still, a warehouse may be a more feasible solution for larger companies or businesses that simply need more space. Whichever you choose can help to streamline the relationship between business and customer or business to business. It can ultimately serve as a successful method for managing your products and securing your business’s future.
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