How Do Fulfillment Centers Work?

E-commerce is a multi-faceted industry that requires a place to store, package, and ship inventory. A business owner that is first starting in the e-commerce space may use their own home office or garage as a makeshift setup to fulfill online orders on their own. However, as they begin to outgrow their space, the need for outsourcing to a third-party logistics partner is often necessary. Enter: the fulfillment center.

A fulfillment center is a physical space where operations are set up to consistently receive inventory and package and deliver online orders, on-time and intact. Sometimes the question is: how do fulfillment centers work compared to warehouses? Related: Fulfillment center vs Warehouses. Who is in charge of ensuring everything is on track for a seamless fulfillment process? First, let’s answer the question of: how do fulfillment centers work?

Generally speaking, fulfillment centers serve B2C brands. Their products are stored, picked, packed and shipped directly from a fulfillment center and sent straight to a customer’s front door. The tasks and time involved to pick, pack and ship complete orders, as well as manage accounting, sales, and other operational functions, can quickly take up more hours than there are in a day.

At this point, B2C brands often enlist the help of a fulfillment center as they scale their e-commerce business. A fulfillment provider handles all fulfillment activities in one place so brands can focus on managing sales, customer service and company growth. Fulfillment center services include:

• Real-time inventory management
• Picking, kitting, and packing
• Order processing and fulfillment
• Transportation coordination

Real-Time Inventory Management

When a brand places orders from their manufacturers, that inventory is sent to the brand’s order fulfillment center to sort and store. The goal is to maintain a steady cycle of sales and inventory replenishment to prevent stock from going stale on the storage shelves. This is achieved through real-time inventory management and tracking, as well as predictive analysis during the ebbs and flows of a sales season. This type of data provides insights for retailers to make operational decisions that will optimize their supply chain costs and efforts.

Picking, Kitting, and Packing

Once a retailer receives an order from a customer, those working in a fulfillment center will pick and package the items within the order. To build efficiency throughout the order fulfillment process, many providers will offer kitting as an additional service. Kitting is the process of grouping and packaging multiple products as one single unit. By taking the individual items and bundling them as a kit, businesses can boost efficiencies, while also trimming the overall cost of shipping. A good example of kitting is beauty subscription boxes that bundle related products from different manufacturers into a single package to sell on a monthly, quarterly, or annual basis.

Order Fulfillment

The role of a fulfillment center is to do just that — fulfill orders as quickly as possible to then ship out to the end customer. Fulfillment centers are typically fast-paced environments with people processing, packaging, and shipping orders directly to consumers.

To manage the constant inbound and outbound shipment of products, fulfillment centers usually integrate advanced technology to manage and improve workflows, from receiving and processing orders to inventory management and carrier pickup. Flowspace offers e-commerce fulfillment services and software that seamlessly integrate with retailers’ online stores and sales channels. The Flowspace software provides visibility into orders, inventory, and customer insights all in one place. It allows businesses to strategically plan for inventory replenishments, predict sales trends, and keep the fulfillment process running as smoothly as possible.

Transportation Coordination

After picking and packing an order, fulfillment centers then ship the product(s) directly to the customer or end-user. From the moment the package leaves the fulfillment center, order tracking is enabled to ensure full visibility for both the customer expecting the package and the e-commerce business selling the product.

How Is a Fulfillment Center Different Than a Warehouse?

The structure and purpose of a fulfillment center seems similar to that of a warehouse, however the two are in fact different. So, how does a fulfillment center work compared to sa warehouse operation? While aesthetically, they may look the same, there are several differences between how they operate and what they’re used for.

A warehouse is typically used as a large industrial storage center for businesses that need to house large quantities of inventory. Merchants can best utilize warehousing solutions to store inventory in bulk for an extended period of time. Whereas some businesses may have their own private warehouse operation, many industrial warehouse spaces are designed to be rented out and occupied by many different merchants in need of a place to store excess inventory.

While a warehouse space is meant to accommodate inventory storage for an extended amount of time, a fulfillment center typically serves as a short-term storage solution with the goal being that sellers can turn over inventory very quickly. As opposed to letting products occupy space on warehouse shelves for months on end, fulfillment centers are characterized by frequent activity of shipments entering and leaving the facilities every day to be ultimately delivered to the hands of the consumer, the final destination. This is in fact the main goal of a fulfillment center -- to get customers’ orders fulfilled and shipped out in a timely manner.

Essentially, a fulfillment center is a type of warehouse, but a warehouse isn’t always a fulfillment center, given the difference in operational capabilities.

The Importance of a Fulfillment Center for E-Commerce Brands

There are several reasons why an e-commerce business needs a fulfillment provider. Primarily, a fulfillment center allows brands to delegate their supply chain operations. This frees up time and resources to focus on other areas of business growth, such as marketing, accounting, and product research and development.

Fulfillment centers and services also provide brands with flexibility to meet the demands of different sales seasons, as well as a robust network that helps them to reduce shipping costs. A fulfillment center is an important aspect of inventory management, and allows for implementation of a consistent pick, pack, and ship process, and integrated tracking systems. As a brand grows, it’s inevitable that they’ll explore fulfillment centers and specific fulfillment solutions to further optimize organization and workflow efficiency.

Maintain Reliable Inventory Management

It’s important to know how much inventory is in stock and being sold in real-time. This triggers actions, such as scheduling replenishment orders. It also prevents out-of-stock messages to customers and helps businesses maintain an accurate sales forecast. With Flowspace, orders are picked as soon as they’re placed, and the connected platform updates inventory status across e-commerce channels to ensure the most up-to-date numbers are available.

Implement a Pick, Pack, and Ship Process

An omnichannel fulfillment strategy is important when selling through multiple channels, and with Flowspace, all storefronts and marketplaces are connected within one platform. Flowspace picks, packs, and ships the customer order exactly to brand specifications. If there are special packaging or shipping requirements, that’s included in the fulfillment service.

This process is effective in all situations, whether it’s shipping individual orders to consumers, bulk orders to retailers, or kitting and bundling. Each order is checked with a packing slip before it’s taped up and scheduled for pick-up to ensure accuracy and promote on-time arrival. Working with Flowspace ensures this consistent, high level of quality is met every time.

When to Partner with a Fulfillment Center

As an e-commerce business grows, partnering with a fulfillment center makes sense both logistically and financially. When your sales volume has reached a steady growth state month-over-month, optimizing the process by working with a logistics partner can help you scale your business even further. Additionally, the expertise and built-in processes of a fulfillment center can handle trending or seasonal spikes in sales without slowing down operations.

If there never seems to be enough time in the day and quality and/or customer satisfaction starts to decline, it’s likely time to hand over the logistics part of your business to experts. Delegating fulfillment to a team that’s already well-versed in the process leaves time for you to focus on other areas as a business owner.

It's important to be selective about the fulfillment center you partner with to ensure you optimize the process effectively. The Flowspace network includes hundreds of fulfillment centers distributed across the country, and the Network Optimization algorithm will determine the best fulfillment centers to fulfill inventory closest to your customers, leading to on-time delivery and lower shipping costs.

The Flowspace platform also provides valuable customer insights and inventory planning, among other benefits, to help you scale your business effectively. Furthermore, with seamless integration with a wide range of marketplaces and retail stores, Flowspace can connect all your sales channels into one platform. It’s flexible, reliable, and easy to use for brands of all sizes.

Plan for Growth with Fulfillment Services from Flowspace

There is a lot happening within the walls of a fulfillment center. The steady buzz of activity allows brands to be agile as the business grows. For e-commerce retailers that have a large inventory of products and a growing customer base, exploring this option is important and worth discussing even in the early stages of development.

Rather than waiting until the number of orders is so large and overwhelming to contain, planning for growth strategically ensures you have a vetted source in place and ready to go when the time arises. However, if you’re in a position where you need a solution right away, Flowspace can step in and fill the gaps necessary to keep your fulfillment operation running smoothly and reach your business goals.

Whatever stage of business you’re in, Flowspace is ready to figure out fulfillment solutions with you. Looking for assistance when it comes to tips for peak holiday season holiday fulfillment? Our experts have you covered. Get in touch today!