Warehouse vs. Fulfillment Center: What’s the Difference?
Synonyms are funny. They’re meant to be two different ways to describe the same thing, but sometimes in an effort to trim the fat of daily jargon, we use words as synonyms when we shouldn’t. A painter is an artist, but an artist isn’t necessarily a painter. A breadmaker is a baker, but a baker isn’t necessarily a breadmaker. And a fulfillment center may be a type of warehouse, but a warehouse isn’t necessarily a fulfillment center.
In the eCommerce world, companies that have outgrown their mom-and-pop sized operations typically use either a warehouse or fulfillment center that has warehousing capabilities. In this blog we’re going to succinctly discuss the difference between the two and how they work to your eCommerce brand’s advantage.
A warehouse is a large storage space that holds inventory in bulk. There can be many different sections to a warehouse. In terms of eCommerce brands, how much you pay for space and where that space is located within the warehouse depends on the amount of product you are storing and how quickly it moves. Warehouses can service B2B and B2C clients. These storage centers have shelving as far as the eye can see and machinery to load in and load out products like forklifts, conveyors, and robotic assistants.
Extremely large eCommerce brands may have their own warehouse space, particularly for excess inventory. For certain businesses it can be more cost-effective to lease warehouse space rather than buy their own private storage space. Given the higher prices for warehouse storage in today’s rising eCommerce market, some smaller sellers may choose to go with a less expensive and extensive warehousing solution and will rent private storage, which may come with the burden of looking after your own inventory more personally, but allows you to retrieve on-hand product easily if you are running low.
Fulfillment Center Solutions
A fulfillment center is the heart of a 3PL (third party logistics) operation, and a modern marvel of the eCommerce world. Here your products are processed, picked, packed, and shipped out to customers. Basically, a fulfillment center handles every step to get your goods to the people who bought them, including storing your inventory. An eCommerce brand will integrate a top-tier fulfillment center solution like ShipMonk into their supply chain to streamline operations—increasing efficiency, decreasing the possibility of error, and shaving time off the shipping process so your customers get their orders as fast as possible.
As mentioned, one component of a fulfillment center is actually storing your inventory. A fulfillment center has the warehousing solution built in whereas a warehouse does not automatically come with fulfillment solutions. How it works with a fulfillment center is your inventory will arrive and be stored in its designated shelving location. This is called slotting. At ShipMonk, our method for slotting revolves around storing inventory in a place best optimized for your sales velocity, thus saving on efficiency for retrieving your items when they’re needed, and saving you money in the long run.
Basically, when an order comes in, dedicated team members or advanced AMRs (Automated Mobile Robots) like the Locus bots that ShipMonk uses, will retrieve items that have been ordered. Once items are picked they are sorted and packed by professionals who send them out via the shipping option selected by customers. A fulfillment center will also offer assorted types of shipping and carrier solutions (2-day, standard, economy, overnight shipping) so you and your customers have options.
2PL vs. 3PL
To further understand the difference between a warehousing solution and fulfillment center solution, AND understand which is right for you, let’s look at 2PLs vs. 3PLs. Basically, just as an entree at a restaurant influences what wine you order (white with fish, red with meat) the logistics path you take is determined by where you put your inventory. At a glance, warehouse solutions go with 2PLs and fulfillment center solutions pair with 3PLs.
In the case of a 2PL (second party logistics), there are three players in the online retail journey—the business, the carrier, and the customer. Once a purchase is made from the online retailer, a carrier like Fedex, UPS, USPS, DHL, and so on, is called upon to be the middleman that transports goods from the business’s storage space to the customer. Having a 2PL is certainly better than being a 1PL (one stop shop and in it alone, if you will) because this middleman is handling your freight forwarding, courier services, and all other transportation needs. If you’re doing all the fulfillment logistics yourself because you either have all the product at your business/home or utilize a warehouse, you are in the 2PL camp.
If you are an entrepreneur that wants to free up your valuable time and invest in a provider that doesn’t just hold onto your inventory, but fulfills orders, you are on Team 3PL.
In order to save time, maximize efficiency, and in general kick eCommerce butt, growing businesses go the route of 3PLs because orders do not require your hands-on involvement. 3PLs like ShipMonk have technologically-advanced, intelligently-designed fulfillment centers with warehouse space designated for holding your inventory. That way, when an order comes in, fulfillment processes can move with the precision of an exemplary train station. At ShipMonk, we have worldwide fulfillment centers dedicated to protecting and processing your inventory instantly. We handle all major areas of the supply chain for you, including but not limited to:
- Inventory Management
- Order Fulfillment
- Picking and Packing
- 321 Services
- Managing Returns
A FULFILLING Solution
To quote ShipMonk CPO Rafael Zakinov: “Warehouses store things. Fulfillment centers move things.”
Your inventory is precious. If you are a small operation, adopting the 2PL lifestyle by renting warehouse/storage space and handling the fulfillment process yourself is definitely an option. If you are a humongous brand, perhaps it makes the most sense to have your own warehouse. Your manufacturing process and supply chain will dictate some of the balance between warehousing storage use and fulfillment. In general though, for most eCommerce brands, going the fully-integrated fulfillment center i.e. 3PL route is your best bet. Why?
The bottom line is that as an eCommerce business owner you want to make sure your inventory is somewhere safe and ready to move at the drop of a hat when customers come calling. The speed with which you can answer that call to action, comes down to streamlining the process as much as possible. You’re an entrepreneur; if you intend to grow and scale your business, don’t waste your time or your customers’ time handling the fulfillment process yourself. Get all the benefits of a warehouse while delegating the multifaceted, complex logistics operations to a globally-trusted 3PL like ShipMonk. Contact us now to get started and take a 360° Guided Tour of one of our state-of-the-art fulfillment centers to see what we bring to the table!