What Is The Difference Between a Distribution Center And a Fulfillment Center

What Is The Difference Between a Distribution Center And a Fulfillment Center?

The terminology in eCommerce can be confusing. Some facilities appear to carry out the same function but are called different things. Two locations, in particular, are easily confused; the distribution center and the fulfillment center. Both are essentially warehouses but fulfill different roles in the supply chain. Here we examine the important differences between these two vital elements of modern logistics.

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Features of a fulfillment center

The volume of fulfillment centers has grown in direct proportion with the E-commerce market value and is projected to reach 6.5 billion square feet by 2025, of which the fulfillment center USA market will make up a significant proportion.

The distinctive feature of a fulfillment center is that it is a third-party logistics (3PL) warehouse for E-commerce retailers. Third-party logistics companies provide both warehousing and transport that are flexible to meet customers’ needs and changing market conditions. Goods can be received directly from a manufacturer or may be reviewed first.

The overall function is to make sure that goods reach customers at the time that they expect. Products are arranged so that orders can be picked and dispatched quickly directly to customers’ doorsteps and this is achieved through excellent communication between warehouse operatives and truck drivers and through optimization and planning. A customer could be a private individual (B2C) or another business (B2B) and high volumes can be processed. Typical examples are Amazon Fulfillment Center and FedEx Fulfillment.

Advantages of a fulfillment center

If you are setting up an ecommerce business, it is important that you understand what a fulfillment center can and cannot do. It would be the right choice for you if you want to do the following:

  •     Free up warehouse space so that you can use it for other things
  •     Have a depot that is geographically close to your customer base so that you can speed up shipping
  •     Deliver your products directly to your customers
  • ecommerce business    Have time to focus on other aspects of the business while someone else handles the fulfillment tasks
  •     A third party to pick and pack goods for your business
  •     The option of outsourcing packaging but retaining custom packaging and labelling
  •     Manage your returns and take over your reverse logistics
  •     The option of kitting services (putting separate pieces into a single grouping)
  •     Have trained workers handling your orders and receiving your inventory
  •     Have an automated system for your fulfillment that is transparent at every stage
  •     Use a customer service division if you do not have one of your own

Disadvantages of a fulfillment center

Conversely, a fulfillment center is not for you if you need any of the following:

  •     Unlimited storage space. There is always limited storage capacity in a fulfillment center
  •     Long term storage. These facilities will offer short-term storage only
  •     Bulk shipping of large quantities of products
  •     Cheap storage of unsold products. Storage of unsold inventory in a fulfillment center will be prohibitively expensive
  •     The cheapest storage and distribution option. Fulfillment centers tend to be more expensive because of their convenient location and the other services that they provide.

Distribution vs Fulfillment

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Features of a distribution center

The key feature of a distribution center is that it provides ‘temporary’ storage. It also receives and distributes goods in the same way as a fulfillment center and is a connection between suppliers and customers. The flow velocity is high and goods move in and out quickly.

It is typical for a supplier to ship a product to a distribution center that serves one geographical location. They serve retail stores and are a pivotal part of the order process. Distribution centers usually store lots of different types of products so managing them can be complicated. To help with this, most rely on automated IT systems such as a warehouse management system (WMS).

A distribution center is often confused with a warehouse and it is easy to see why but there are subtle differences. A warehouse stores things – and nothing else. A distribution center, on the other hand, does a lot more. It can mix products and provide cross-docking (where goods are received from the supplier, sorted and immediately dispatched without actually being stored at all).

Advantages of a distribution center

distribution center

A distribution center is the best choice for goods that do not need any further input such as additional packaging. If you have decided to use a distribution center for your business, here are the benefits that you will be able to take advantage of:

  •     Size and scale. They can store and ship large quantities of goods and products in large warehouses
  •     Deliver to businesses. Your goods will be delivered in bulk to business premises
  •     Long-term storage. There is no rush in a distribution center. Goods can remain there for some time.
  •     Competitive cost. It is not prohibitively expensive to store goods even if they are there for longer
  •     Location. You will be able to store your inventory near to where your target market is located

Disadvantages of a distribution center

You also have to bear in mind that there are some drawbacks that you will face when using a distribution center. Here are the main disadvantages:

  •     You will not be able to ship orders very frequently and in small quantities. They are designed to handle infrequent, bulk orders.
  •     You will have to pack your products yourself as goods in distribution centers are transported on pallets and are not taken off the pallets to pack
  •     Delivery times will be slower. This is due to the time taken to transport goods to their final destination – the center may not be close to your target market
  •     There will not be opportunities for you to communicate directly with your customers
  •     You won’t be offered the additional services that a fulfillment center would offer

Both facilities are designed to meet the specific requirements of businesses – depending on the scale and nature of the enterprise.

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