Fulfillment Center vs. Warehouse: What Are The Differences?

Flowspace
6 min read October 12, 2018 Modified: March 14, 2022

The use of “warehouse” and “fulfillment center” is often used interchangeably. Both essential to order fulfillment, the buildings share similar functions, and the physical differences between the two are slight. However, when it comes to comparing fulfillment center vs. warehousing benefits, it’s important to remember they are not the same. 

Each facility differs drastically concerning utilization and the goals of its operations and fulfillment services. Reviewing the definitions of each and comparing the capabilities and benefits side-by-side will better clarify just how different these two terms really are.

What is a Warehouse?

A warehouse is a large, spacious building where finished goods are stored until redistribution to the consignee (retailers, wholesalers, distribution centers). A warehouse space typically ranges from 10,000 square feet to 100,000 square feet, and are an integral part of supply chain management. 

The shape, size, and function of a warehouse are, in part, determined by the type of inventory that it is meant to house. (products from retail stores, CBG’s, etc.) In general, there are six different types of warehouses.

Private Warehouse- A warehouse, or network of warehouses owned by one organization and used in support of that organization’s supply chain.

Public Warehouse- Public warehouses are typically sub-leased to retailers in need of extra inventory space.

Automated Warehouse- An automated warehouse utilizes technology, robotics, and even some forms of AI (artificial intelligence) to automate their processes and minimize the number of full-time employees required to conduct operations.

Climate-Controlled Warehouse- A climate-controlled warehouse is designed to house refrigerated, frozen and temperature sensitive inventory.

On-demand Warehouse- The function of on-demand warehousing is to provide short-term storage, transportation, and inventory management for retailers on a month-to-month basis.

Distribution Center- In terms of fulfillment center vs. distribution center, the two are interchangeable. A distribution/fulfillment center is a type of warehouse.

What is a Fulfillment Center?

Another integral component of the supply chain operations, a fulfillment center is similar to a warehouse and is often referred to as a distribution center (DC). Like a warehouse, a fulfillment center is a building in which retailers, and similar organizations, store their inventory until distribution to the customer.

Unlike a warehouse, however, a fulfillment center is typically operated by a third-party logistics provider (3PL) that provides inventory storage and a host of other operational functions, including freight transportation, handling cross-docking, customer service, and most importantly, order fulfillment. When it comes to choosing fulfillment center vs. warehouse options, a fulfillment center offers far more capabilities to help ecommerce companies succeed.

How Does a Fulfillment Center Operate?

As the logistical center for ecommerce companies, fulfillment centers best operate when locations are set up close to customers. They can be used as overflow storage for customers scheduling an in-store pickup and can also be a location to ship directly to a customer’s front door. 

Seller inventory is stored at fulfillment centers short-term and is ready to be picked, packaged, and shipped as soon as an order is placed. This automated process calls for integration with a seller’s sales system to generate a seamless experience from online orders to front-door delivery. 

Due to the increased volume of online sales, outsourcing these operational functions to third-party fulfillment centers helps sellers scale their businesses efficiently and profitably. Outsourcing fulfillment services also allows sellers to minimize shipping costs, along with costs associated with maintaining a physical space for their inventory. Outsourcing reduces time spent on order fulfillment, and allows merchandise to get to customers quicker. 

What’s the Difference? Fulfillment Center vs. Warehouse

Every fulfillment center is a warehouse, but a warehouse is not a fulfillment center. The most significant differences are the extent of the operations carried out within and the customers they are intended to serve.

Customers

Warehouse operations generally serve B2B customers. Fulfillment centers, however, are designed to service direct-to-customer, and online orders, better known as ecommerce business and B2C.

Operations

Inventory ships in and out of a warehouse on a shipping pallet container. Thus, most of the logistics operations at warehouses concern a freight carrier or even an intermodal provider. Inbound inventory shipments arrive palletized at fulfillment centers, but they ship out as parcel-sized shipments.

An online retailer can then ship products to customers across the country and around the world because they utilize a distribution network of fulfillment centers and delivery stations. This is how an ecommerce giant like Amazon can provide same-day delivery; they’ve nailed their order fulfillment process. Before, we never would have imagined that an online order could show up on our porch in less than a day’s time.

Fulfillment companies intend to store inventory for a minimal amount of time, fill ecommerce orders, and ship orders directly to the customer.

Goals

The goal of a warehouse is the safe and efficient long-term storage of inventory, typically several months to a year.

A warehouse is generally limited to housing no more than a handful of different inventories for an extended period.

The goal of a fulfillment center, on the other hand, is order processing in the least amount of time possible. Fulfillment centers are not designed to store inventory for more than a few months; they are very practical and streamlined in their fulfillment solutions

Thus, it is possible for a fulfillment center to manage the operations of countless ecommerce retailers and small businesses. When comparing fulfillment center vs. warehouse logistics, the two are very similar and can be easily confused. The best way to remember the difference is to consider geometry class. Comparing a fulfillment center to a warehouse is like comparing squares and rectangles. All squares are rectangles, but all rectangles are not squares.

Storage

Since warehouses are often used to store inventory long-term, it doesn’t always make it immediately accessible. Warehouses are often used to store an inventory surplus or products only sold seasonally, whereas fulfillment centers are used for short-term storage since the purpose is to move inventory in and out in a consistent flow. Stock stored too long accrues more cost and usually means there’s a discrepancy in the ordering and fulfillment process.

Pickups

With fulfillment center operations, there’s a regular flow of inventory that begins once orders are placed. Therefore, shipping companies must have a greater frequency of pickups to secure on-time delivery to customers.

Certain shipping companies may designate specific days and times for pickups, while others may schedule pickups daily. It all depends on what the seller needs and what kind of shipments are being delivered. The flexibility and versatility of delivery options ensure customers receive their goods in the time frame promised by the business.

Conversely, because a warehouse is mainly used for long-term storage, pickups are scheduled less frequently and offer less flexibility when it comes to shipping solutions for sellers and customers. Though it can be cost-effective when shipping multiple items to one address with the same targeted delivery date (versus multiple, smaller shipments), it often doesn’t fulfill the needs of speedy shipping to any location.

Which Solution Is Right for Your Business Needs?

As a business owner, it’s important to make the right decisions for your company. Choosing the right solution between a fulfillment center vs. a traditional warehouse boils down to an ability to reach a wider network with full operational integration to maintain customer satisfaction. Unless simply storing goods for a long period of time is the goal, the comprehensive services of a fulfillment center are more valuable. 

However, companies that decide to take fulfillment “in-house,” meaning operating their own fulfillment centers, limit their capabilities. When relying on only one or two owned fulfillment centers, they’re stuck with those locations and can’t optimize for fast shipping, which can ultimately hurt the customer experience. Instead, they need the flexibility and scalability of a distributed network like Flowspace, which uses a unique Network Optimization algorithm to determine the optimal fulfillment centers for each company. 

To meet the changing needs required for customer satisfaction today, the ability to pivot quickly and go to where the people are has become increasingly important. Customers want the convenience of speedy shipments without any extra cost to them. A warehouse simply doesn’t have the capabilities to deliver fast, flexible fulfillment in a sustainable way.

Flowspace has hundreds of warehouses around the country that can handle your inventory. Get started today!

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