Running a successful ecommerce business means choosing the right storage and shipping solution that meets your needs. “Warehouse services” and “fulfilment centres” are terms that you often hear being used interchangeably, but they each serve different purposes in the supply chain.
This article will help you understand what fulfilment centres and warehouse services are, how they differ from each other, and why one or the other is the right choice for your business.
Understanding the difference between the two helps you avoid incorrect service selection that ultimately leads to increased costs, inefficient order processing, delayed shipments, and dissatisfied customers.
What are Warehouse Services?
When we say, “warehouse service,” we mean specific functions and services provided within a warehouse. Warehouses store inventory for extended periods of time. Businesses use them to keep products safe until they’re needed. Inside a warehouse, you’ll find bulk storage with high shelves, forklifts, and other heavy machinery.
For businesses that do wholesale or B2B transactions, warehouses are ideal as they accommodate large quantities of stock. Plenty of companies lease warehouse space to reduce costs, but smaller sellers might choose local storage solutions like lockers or storage units for convenience.
Beyond simple storage, warehouse services include:
- Holding inventory for extended periods for seasonal fluctuations, excess stock, or future demand.
- Accurate tracking of inventory levels, location, and movement to manage stock levels. This is to prevent stockouts or overstocking.
- Basic order picking and packing services.
Some warehouses are owned by third-party logistics providers, offering storage and related services to multiple clients. They are often used by businesses with fluctuating inventory needs or those without their own warehouse space.
What is A Fulfilment Centre and What Does It Do?
Fulfilment centres are a centralised hub that handles ecommerce orders. They’re often part of a third-party logistics (3PL) provider. This is where products go from storage to being picked, packed, and shipped directly to customers.
While warehouses focus on long-term storage, fulfilment companies aim to quickly process and dispatch orders. The end goal of a fulfilment centre is maintaining fast delivery times to meet consumer expectations.
Think of a fulfilment company as the backbone of ecommerce. They handle the work that takes online orders to the customers’ doorstep. This is also known as the order fulfilment process.
What’s the Difference Between A Fulfilment Centre and A Warehouse Service?
Both fulfilment centres and warehouses can serve as storage and distribution points, but they are more nuanced than you think. Their primary functions, operational focus, technology adoption, and cost structures are distinct from each other.
| Functions | Warehouses | Fulfilment Centres |
| Storage duration | Long-term storage with low inventory turnover rates. | Short-term storage with inventory frequently moving in and out of the facility. |
| Operational focus | • Inventory management • Bulk storage • Order consolidation for larger shipments Focused on storage and retrieval. | • Storing inventory • Picking and packing • Shipping individual customer orders Focused on order fulfilment, and uses advanced technology and systems for efficient operations. |
| Technology and automation | Manual processes are common, especially in smaller warehouses. | Heavily relies on technology for inventory tracking, order management, picking, packing, and shipping. |
| Cost structure | Pricing models include: • Long-term lease agreements • Purchase of the facility | Pricing models include: • Fixed fees • Variable fees based on order volume. |
The costs of warehouse services or fulfilment services vary based on location, size, services offered, and economic conditions.
As a general guide, the key cost drivers that you should take note of for both warehouses and fulfilment companies are:
- Real estate: Rent or purchase costs for the facility.
- Labour: Wages for warehouse and for the staff.
- Technology: Investment in warehouse management systems, automation equipment, and other technologies.
- Equipment: Costs for racking, shelving, conveyors, and other material handling equipment.
- Utilities: Electricity, heating, cooling, and other utilities.
- Insurance: Coverage for property, inventory, and liability.
- Transportation: Shipping costs for inbound and outbound goods.
Warehouses are great for storing goods in bulk, and fulfilment centres are specialised facilities that handle the end-to-end order fulfilment process.
To operate at peak efficiency and deliver consistent customer satisfaction, centres that specialise in fulfilling customer orders require higher levels of technology, automation, and labour to meet the demands of ecommerce and direct-to-consumer (D2C) businesses.
A solid grasp of the distinctions between the two can help you choose the appropriate facility for your supply chain needs.
What are the Services Offered By Fulfilment Companies?
The services they cover are more in-depth compared to warehouse services.
Inventory Storage
Plenty of fulfilment companies come with warehousing services — meaning they store a retailer’s products until they are ordered. The basics of inventory storage seem straightforward, but order fulfilment companies often employ various methods and technologies to optimise space utilisation.
Upon arrival, products are inspected, verified against packing slips, and documented in the inventory management system (IMS) to ensure accurate inventory records.
Products are then labelled. Each product gets a unique identification code, like barcodes or QR codes, for easy tracking and location management within the warehouse.
Inventory is strategically placed in designated storage locations based on factors like product size, demand, and weight. This is done with picking efficiency.
Depending on product type and size, the fulfilment facility may choose to use varying storage methods like pallet rack systems, shelves, bin storage, and carousel systems.
And to keep track of it all, fulfilment companies implement inventory management systems (IMS) software. These programs can track product quantities in real-time, locate each item within the warehouse, reorder points and stock levels, and track expiration dates for perishable items.
Order picking
Order picking refers to the process of selecting products from storage to fulfil customer orders. Fulfilment companies in the UK and across the globe are capable of processing thousands of orders per day, with average picking accuracy rates exceeding 99%.
After receiving an order, the IMS generates a pick list for the order pickers. Different picking techniques are then employed with maximum efficiency in mind. Some examples of picking techniques are:
- Batch picking: Picking multiple orders simultaneously to minimise travel time.
- Zone picking: Assigning specific zones of the warehouse to pickers for better organisation.
- Wave picking: Grouping similar orders together for more efficient picking.
Fulfilment companies also integrate picking technology to assist pickers and improve accuracy. Notable examples of this include:
- Pick-to-light systems: Lights guide pickers to the exact location of each item.
- Voice picking: Pickers receive instructions through headsets, so they don’t need to look at pick lists.
- Warehouse Management Systems (WMS): These systems are usually integrated with IMS data to optimise picking routes and accuracy.
After each order is picked, they are double-checked for accuracy before being sent to the packing area.
Packing
Packing is where the fulfilment company prepares the customer’s product for shipment. This is an important stage in the order fulfilment process as it involves selecting appropriate packaging materials before carefully enclosing the product to ensure its safe arrival at the customer’s doorstep.
What does the packing process look like?
It starts with material selection. The fulfilment company chooses the right box, envelope, or other container based on product size, weight, and fragility.
The items are then wrapped in materials like bubble wrap, packing peanuts, or void fill to cushion the product and prevent damages during transit.
They secure the package with tape or other closures to prevent tampering and product loss, and then affix shipping labels and other necessary customs documentation.
To optimise this process further, packing systems are also automated to improve efficiency and reduce labour costs.
Shipping
Fulfilment centres are responsible for coordinating the transportation of products to customers. Shipping labels with accurate addresses, tracking numbers, and shipping service details are generated using order information and carrier specifications.
After the labels are attached, the centre coordinates with carriers to schedule daily or multiple daily pickups based on order volume. In addition, fulfilment companies also provide tracking information to the retailers’ customers, so they can monitor the progress of their orders.
It’s common practice for fulfilment centres to partner with multiple shipping carriers to meet customer needs and provide various shipping options, whether ground, air, or overnight. They also negotiate shipping rates with carriers to get discounted prices, which lead to cost savings for businesses down the road.
Returns Handling
Returns management involves processing returned products from customers. All returned items are received, inspected, and processed for restocking, repair, or disposal.
Inventory records are updated to reflect returned items, and returned items are then prepared for resale if they meet quality-assurance standards. Refunds are issued to customers based on return policies.
In addition to this, shipping and fulfilment service providers also handle returns (sometimes through the same carriers), generate return labels, and coordinate pickups.
These are the most common services offered by on order fulfilment company.
But sometimes, they also offer additional services to more closely cater to provide better order fulfilment for B2Bs.
Additional services can include:
- Kitting: Assembling product components into kits for sale.
- Bundling: Combining multiple products into a single package.
- Labelling and customisation: Applying custom labels or packaging to products.
- Customer service: Providing customer support for order inquiries and issues.
- Value-added services: This includes product inspection, quality control, and product photography.
By outsourcing these functions to an order fulfilment service provider, retailers save lots of time. A third-party logistics partner like Green Fulfilment can handle the cyclical process of shipping and returns, while the business owner focuses on growing their business.
The Benefits of Using a Fulfilment Centre
What are the main benefits for online sellers when using fulfilment services?
Increased storage capacity
Managing the physical space required to store all of your products can be a hassle if you’re doing it all by yourself — unless you’re an established brick-and-mortar retailer. If you want to save yourself the trouble of running to the post office multiple times a week to ship out your customers’ orders, using fulfilment services are the answer.
They can keep track of your increasing order volume for you. Most also have warehouses and they have standard protocols in place for organising storage and optimising placements for easy picking and packing later on.
Better cost savings
If your business is busy dealing with high order volumes, partnering with a fulfilment company does wonders for helping you reduce overhead and improve operational efficiency. By eliminating the need for long-term warehouse space, your business can avoid costs associated with rent, utilities, property taxes, and building maintenance.
In addition, specialised staff who are experts in order fulfilment tasks are also employed. You don’t need to hire, train, and manage in-house personnel to do it for you. That leads to significant labour cost savings. It’s also common for centres to negotiate volume-based discounts with carriers to offer lower shipping rates to their clientele. Fulfilment centres’ access to multiple carriers allows them to pick the most cost-effective options for each order.
And to minimise the risk of overstocking and stockouts, efficient inventory management practices are implemented. This reduces carrying costs like storage fees, insurance, and obsolescence.
Using a third-party for fulfilment is appealing because it lets you focus on growth. It helps you save money and keeps your operations simple. This way, you can expand your business while experts handle the logistics efficiently.
Improved efficiency in business operations
In general, an order fulfilment facility operates like a well-oiled machine. Their staff follows standard operating procedures that are optimised for speed and accuracy. Working with one leads to improved customer satisfaction and streamlined processes.
They employ dedicated order processing teams and advanced technology to handle high volumes of orders quickly and accurately. The goal of this is to reduce order cycle times and make sure that your customers receive their products promptly.
These centres also make use of advanced warehouse management systems (WMS) and automation technologies to optimise inventory management, picking, packing, and shipping processes. It leads to minimised labour-intensive tasks and reduces the risk of making errors.
Additionally, they are also designed to scale alongside your business. Fulfilment services continue in the midst of peak seasons or in periods of rapid growth. In turn, your business gets the flexibility to meet changing demands without compromising on the quality of services.
Faster delivery times
Fulfilment centres often operate multiple facilities that are strategically located across different regions, which reduces shipping distances and transit times. The geographic advantage means that products can reach your customers faster, no matter where they are located.
And because it’s common for these centres to maintain strong partnerships with carriers, they have access to a wider range of shipping options, including expedited services and priority handling. For you, this means the ability to offer flexible delivery options to your customers.
Advanced shipping technologies utilised by fulfilment service providers have real-time order tracking that lets both you and the customer monitor their shipments’ progress.
Leveraging these strategic advantages lets you improve delivery speed and reliability to boost customer satisfaction and loyalty.
Enhancing customer satisfaction
Because fulfilment centres focus on accurate and timely deliveries, employ robust quality control measures, and ensure efficient shipping processes, customers’ orders usually arrive at the doorstep on time.
This superb attention to detail builds trust and helps strengthen your business’ relationship with its customers. In addition, they also streamline the handling of returns by providing prepaid return labels and hassle-free exchanges, making the return process easy for customers while reducing costs for businesses.
Proactive customer communication is another key benefit, as many order fulfilment companies keep customers informed about order status, shipment updates, and any potential delays. This transparency reduces customer inquiries and enhances the overall shopping experience.
Access to advanced technology and automation
Doing order fulfilment by hand and through manual processes are possible, but they’re not as efficient or 100% reliable. Manual processes are prone to mistakes, and when you’re in the business of prioritising your customers’ experience, the margin for error is low.
To boost efficiency and precision of its operations, these centres utilise sophisticated Warehouse Management Systems (WMS). WMS are used for inventory management, order fulfilment, and warehouse operations.
Specialised order fulfilment software automates key processes, from order entry to shipping label generation. The software plays a part in reducing manual errors and increasing overall productivity. Automation technologies, like robotic process automation (RPA), automated guided vehicles (AGVs), and automated packing systems also streamline warehouse operations by reducing labour costs and increasing throughput.
And to get valuable insights into inventory levels, order trends, and customer behaviour, a fulfilment company also makes use of advanced data analytics tools. The data they gather informs decision-making and continuous process optimisation.
Seamless integration with ecommerce platforms
An important benefit that third-party fulfilment services offer, particularly if you’re selling on platforms like Amazon, Shopify, and Magento, is smooth integration with ecommerce platforms.
Integrations like this ensure that order information is transmitted accurately, minimising errors and delays and allowing you to focus entirely on growing your business. Real-time inventory synchronisation prevents stockouts and overselling, improving order fulfilment accuracy. Integration with shipping carriers makes order tracking easy and transparent as updates are provided directly on the ecommerce platform. Returns management is simplified, thanks to accessible return labels and tracking information.
The expertise and resources of a fulfilment centre is integral for ecommerce sellers and the success of their business.
How to Choose the Right Fulfilment Centre: 6 Key Factors to Consider
The right fulfilment company is a critical decision that can help or break any ecommerce business. You need a fulfilment company that aligns with your end goals and makes a positive impact on your operational efficiency, customer satisfaction, and overall business growth.
There are some key factors that you need to closely consider when selecting one to do business with:
1. Location
How close an order fulfilment facility is to your target market impacts shipping costs and delivery times. For instance, if your primary customer base is in England, then fulfilment services in the UK will serve you better than one that is located somewhere else. Partnering with a shipping and fulfilment provider that also has multiple strategic locations across different regions can also be advantageous.
Also think of costs, tax implications, and disaster recovery plans based on location, and evaluate the centre’s access to transportation infrastructure and major courier hubs, like airports, sea ports, and highways.
2. Technology and Ecommerce Integration
The technology utilised by your fulfilment partner is vital for a seamless operation that meets customers’ demands. Assess the fulfilment company’s use of warehouse management systems (WMS) and check how well it integrates with your existing e-commerce platforms or ERP systems.
An order fulfilment process that’s well-integrated with your existing ecommerce platform needs to be able to:
- Synchronise inventory levels
- Automatically transmit order information
- Provide real-time order tracking
- Facilitate returns processing
You need to have transparent visibility on real-time inventory updates, the entire order fulfilment process, and accurate tracking of products as it’s being shipped to your customers’ front doors.
Also consider the level of automation in their operations and whether it’s reliable as this affects the speed and precision with which they handle order fulfilment.
3. Cost
Cost is an important part of selecting a fulfilment partner. Ask for detailed quotes from potential fulfilment partners. These quotes need to outline all fixed fees, variable fees, or the combination of both. It must also include associated costs, like storage, picking and packing, shipping, and any additional fees. Your order fulfilment partner’s level of transparency will help you make a well-informed decision and choose a centre that offers the best value for your budget.
In addition, don’t forget to look beyond just the price tag. Consider the overall value that the fulfilment company offers. Look at their service quality, their technological capabilities, and potential cost savings from reduced shipping times or improved efficiency.
4. Experience and Reputation
One way to gauge a fulfilment service provider’s reliability and professionalism is by looking at their level of experience and their reputation within the industry.
A fulfilment company that has a long track record in the logistics industry likely has more refined processes and efficient systems in place. How do you evaluate a fulfilment company’s reliability and reputation?
- Look for the centre’s certifications on quality management or other industry-specific certifications.
- Read customer reviews and testimonials from other businesses that have availed of their fulfilment services.
- Do an onsite visit to assess the warehouse conditions, technology, and staff with your own eyes. Ask for a complete walkthrough on their operations as well.
- Request references from the centre’s current or past clients.
- Evaluate their disaster recovery plan and ask about how they handle unexpected events like natural disasters or system failures.
- If they are available, read case studies to understand how they overcame challenges and provided solutions to their clients.
- Evaluate their impact on their clients’ business growth.
A fulfilment centre’s positive reputation and proven experience will bring you peace of mind and security to your operations.
5. Sustainability
Part of running a successful business is being a responsible business owner. Choosing an order fulfilment company that shares your commitment to being responsible for the environment is important.
Do some thorough research and look for fulfilment companies who implement eco-friendly practices such as using recyclable packaging materials, optimising delivery routes to reduce carbon emissions, and adopting energy-efficient warehouse operations.
Sustainable practices benefit the environment and enhance your brand’s reputation.
6. Service Offerings
Fulfilment centres typically handle short-term inventory storage, order picking, packing, shipping, and returns management.
But to ensure that it’s really the right shipping fulfilment services for you, you have to inquire about other additional services that they offer. Do they take care of customer service for you? Do they offer kitting and bundling services?
Also evaluate their experience with the type of products that you sell. You need an order fulfilment partner that knows how to handle your products with care, whether that’s apparel, electronics, bulky items, or something lighter like stationery items.
3 Successful Companies that Have Used Fulfilment Centres
From startups to big enterprises, businesses can benefit a lot from using fulfilment services. Check out a few stories below.
1. Duolingo
Duolingo is the world’s most popular language learning app with a fantastic group of volunteers who help them spread the love of languages. And to show their appreciation for these volunteers, Duolingo sends them care packages with a bunch of fun swag.
Since Duolingo is in the US and many of their volunteers are located in the UK, the care packages took too long to arrive. Duolingo wanted to solve the issue of slow deliveries, high shipping costs, and long wait times for the volunteers.
Duolingo partnered up with Green Fulfilment to help them handle overseas fulfilment. Through this partnership, Duolingo was able to store their care packages in a facility that was closer to their UK volunteers.
In the end, packages only had to travel for a short time, Duolingo saved on costs because they resorted to using a European fulfilment centre for their UK volunteers, and the volunteers were thrilled to receive their packages.
2. Facebook
In 2016, Facebook’s London office faced logistical challenges in managing promotional items. They were bogged down by constant last-minute requests for swag from their main warehouse in Glasgow. It was overwhelming, plus shipping large quantities of materials to events across Africa complicated the matter further.
The company reached out to a fulfilment company in the UK, Green Fulfilment, for customised solutions to address this dilemma. There were 4 solutions put in place:
- Warehouse Consolidation: Facebook’s promotional stock was organised within a dedicated area of their warehouse near London. This ensured readily available inventory and faster access for the London office.
- Custom Internal Ordering System: A custom internal website was created for Facebook staff to streamline the ordering process for promotional items. This eliminated late-night scrambles and enabled easy ordering with just a few clicks.
- Pre-assembled Party Packs: These “party packs” contained popular Facebook and Instagram swag. It let the London office quickly distribute promotional items without the hassle of assembling orders.
- Rapid response for VR Headsets: 100 Samsung Galaxy VR headsets were sourced and procured on short notice for a Facebook event, demonstrating the centre’s ability to deliver under pressure.
Facebook faced logistical challenges, but a fulfilment centre helped provide tailored solutions to each problem. This resulted in faster fulfilment, simplified shipping, better control and visibility, and greater efficiency.
3. FurGrip
FurGrip, an innovative product designed to remove pet hair from clothes in the washer or dryer, faced the challenge of balancing fast shipping with costs. As a growing brand with a small, affordable item, maintaining speed in deliveries while keeping expenses low was a significant hurdle.
After partnering with a fulfilment company, Green Fulfilment helped FurGrip make minor packaging adjustments to help them achieve faster and cheaper deliveries. The company also helped FurGrip maintain tight inventory control by scheduling product reorders based on stock projections.
The results?
FurGrip has maintained an impressive 99.99% order accuracy rate and achieved “shipping utopia” with faster, cheaper deliveries. They also expanded their product line to include new pet care products.
FurGrip has transformed from a single-product company to a global shipper with thousands of satisfied customers. Their partnership with the right fulfilment centre made this growth smooth and hassle-free.
Frequently Asked Questions
Can small businesses benefit from fulfilment centres?
Yes! Small businesses can benefit from utilising an order fulfilment facility. They have become increasingly accessible and beneficial for many startups in recent years despite their reputation for being used by much bigger ecommerce brands.
Here’s how they benefit a small business:
- Reduced costs: Fulfilment warehouses eliminate the small business’ need for warehouse space, labour, and shipping management.
- Scalability: Fulfilment companies can handle fluctuations in order volume. This lets small businesses grow without worrying about their operations.
- Access to advanced order fulfilment technology: A fulfilment company uses advanced warehouse management systems and automation technology to operate efficiently.
- More time to focus on business growth: As order fulfilment service providers take care of the entire order fulfilment process, small businesses can concentrate on product development, marketing, and customer acquisition.
In a way, an order fulfilment centre levels the playing field. Small businesses can compete with larger companies in terms of order fulfilment efficiency and providing top-tier customer experience.
How do fulfilment companies handle peak seasons or high order volumes?
They can quickly scale up their workforce to meet increased order volumes during peak seasons and order surges.
In addition to using advanced warehouse management systems and automation technologies to improve efficiency and accuracy, many fulfilment warehouses also have the capacity to expand their storage and processing areas to accommodate increased inventory and order flow.
Lots of fulfilment companies also utilise data analytics to predict order volumes, so they can maintain high levels of service and proactively prepare for the busiest times of the year.
How do fulfilment companies ensure product quality and accuracy in order processing?
They implement strict quality control checks throughout the order fulfilment process, from receiving inventory to packing and shipping. All of the employees are trained in proper handling procedures to minimise product damage.
To ensure accuracy, many centres use warehouse management systems and barcode scanning technology to help track products and prevent errors.
During the shipping process, they pack all items with proper packaging materials and techniques that protect products during shipping. In addition, clear return policies and procedures are put in place to handle damaged or incorrect items.
Are fulfilment centres secure?
Security is a top priority. As a general idea, some measures they implement to protect inventory and customer data include the following:
- Physical Security: Surveillance systems are in place on top of security personnel and restricted access to the facility.
- Inventory Control: Strict inventory control measures, including barcode scanning and regular audits, help prevent theft and loss.
- Data Security: Encryption and other security measures are implemented to protect customer data and sensitive information.
- Insurance: Most fulfilment companies carry insurance coverage to protect against losses due to theft, damage, or natural disasters.
No facility is completely immune to security breaches, but a reputable fulfilment company invests in robust security measures to safeguard their clients’ assets.
What is the typical contract length with a fulfilment centre?
Contracts vary in length depending on the specific agreement between the business and the fulfilment company. There are short-term contracts, medium-term contracts, and long-term contracts.
It’s important to carefully review contract terms, including termination clauses, pricing structures, and service level agreements (SLAs) before signing.
To get more detailed information about contracts and pricing that’s tailored for your business, we recommend you speak to the Green Fulfilment team.
Final Thoughts
Packing boxes and shipping customer orders are important for meeting consumer expectations, but they are tasks that you can easily outsource.
Green Fulfilment handles the logistics operations for you. We understand the need to have every aspect of your business taken care of. So you can take the time spent on order fulfilment and use it for marketing, business development, and product management instead.
You focus on your business’ growth, and we’ll take care of the order fulfilment for you.