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Fulfillment center

Fulfillment centers are a key part of the supply chain for many successful ecommerce businesses. By using these third-party hubs, retailers and entrepreneurs can outsource warehousing, shipping, and aspects of inventory control in order to focus on other aspects of their business. Learn more about fulfillment centers and how they’re defined, how they may improve customer experience, and if they're right for your company.

What is a fulfillment center?

A fulfillment center handles the entire process of order fulfillment for you and your customers. This includes everything from picking and packing your products all the way through to shipping. Particularly essential for ecommerce companies and direct-to-consumer (DTC) businesses, fulfillment centers are typically third-party locations that take care of all the logistics related to shipment and inventory control. With the help of a fulfillment center, your business doesn’t need to maintain its own warehouse space and shipping staff.

Moreover, fulfillment centers give businesses of all sizes greater flexibility and capacity to grow. This can be particularly beneficial for small- to medium-size companies that don’t have the physical space or number of employees necessary to manage fulfillment.

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How do fulfillment centers work?

Ecommerce fulfillment centers handle the process that brings online orders from your business to the customer's door—otherwise known as the order fulfillment process. 

Many DTC companies send their merchandise to their fulfillment center which is often managed by a third-party logistics (3PL) or fourth-party logistics (4PL) provider like Airhouse. The center enables an ecommerce business to streamline operations and improve efficiency, getting orders to customers quickly and potentially taking advantage of multiple locations to reduce shipping time and costs.

A 3PL provider stores your company's products and inventory in a center or multiple centers, where they're ready to be shipped when a customer makes an order. Your order system is fully integrated with the fulfillment center so that each order is quickly packaged and shipped after being placed online.

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Of course, not all software is created equal. While just about every 3PL and 4PL in operation today will promise access to robust technology, few can deliver. That makes evaluating a fulfillment center's technology and integrations a critical part of choosing which one is best for your business.

Benefits of a fulfillment center

A fulfillment center can offer a wide range of benefits for both ecommerce businesses and their customers, adding ease, efficiency, and speed to the process. For many businesses, using a fulfillment center opens an easier road to expansion. It also lets owners focus on innovation and growth rather than logistics.

Key benefits of a fulfillment center include:

  • No physical infrastructure needed: With an outsourced logistics provider, you don’t need to maintain your own warehouse, storage space, and mailing room to store, pick, and pack your goods. This allows you to operate from a smaller space while growing your inventory.
  • Faster processing of customer orders: Staffed fulfillment centers are ready to go when a customer order is placed. This helps your ecommerce business to save time and get orders out the door faster.
  • Reduced staffing costs and complexity: When you outsource fulfillment, your logistics provider takes care of hiring and managing staff for shipping, picking, and packing. The fulfillment center costs are then passed on to you.
  • Increased product selection: With more space to store and ship, your DTC company can offer more products and bring more goods to market.
  • Scalable expansion: As your company grows, your contract with a fulfillment center can also grow. Order fulfillment centers can process anywhere from a few orders a day to thousands at a time, which is important for expansion.
  • More focus on strategic tasks: When you don't have to focus on getting your products packaged and shipped, you can put more time and energy into developing new products and campaigns.
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Disadvantages of a fulfillment center

Fulfillment centers also come with some challenges for ecommerce businesses that could be less advantageous for some. These issues can be mitigated by choosing a product fulfillment center that's a good fit for your company's vision.

The most common concerns include:

  • Lack of control: One of the biggest advantages of outsourcing can also be a challenge. While you can always communicate with your fulfillment center, outsourcing is a hands-off process. This means that you may not have as much control over exactly how a fulfillment center prioritizes orders or addresses immediate concerns.
  • Cost: When you begin working with a fulfillment center, you'll pay flat fees and contract fees to integrate your company with the fulfillment center. This includes shipping costs, the costs of running the center, and other elements. Most fulfillment centers offer multiple plans with different pricing levels.
  • Location and shipping: In most cases, using an order fulfillment center reduces shipping time. However, the distance between the center and the customer's home can vary, leading to increased shipping times for customers who are farther away. To address this, fulfillment professionals like Airhouse offer multiple centers for distributed shipping.
  • Reduced personalization: New, small businesses may include personal notes from the seller or handwritten thank-yous. With order fulfillment centers, there are fewer opportunities for a personal touch unless you learn up front what the fulfillment center can handle on your behalf.
  • Inventory replenishment: Your business will still need to work with your ecommerce fulfillment provider to ensure the centers are stocked with enough inventory. While inventory management is easier when you’re working with a fulfillment center, there could still be delays if you are out of stock.
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For the first few hundred customers, it was an awesome learning experience, but by no means is it worth our time to continue managing fulfillment.
David Bronkie
Co-founder, Siblings

How fast is shipping from a fulfillment center?

Fulfillment centers offer a range of expedited shipping options, including same-day, two-day, and regular shipping speeds and costs. The options available depend on the location of the center, the operations in place, and the shipping services used.

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Warehouse vs. fulfillment center: How do they differ?

A warehouse and a fulfillment center serve different purposes—to some. In fact, often these phrases are interchangeable, but if we were to make a distinction, it would be this: at a warehouse, you store inventory for later access. An order fulfillment center is designed for short-term storage and instant fulfillment of orders and shipping to customers. In essence, a warehouse is storage space, while a product fulfillment center is an outsourced solution for shipping and inventory tracking.

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A fulfillment center can provide new efficiency and growth for your ecommerce business, simplifying your work and providing a better customer experience. Contact Airhouse to connect with a fulfillment expert and learn more about how an order fulfillment center can work for you.

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