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Fulfillment Centers: Everything You Need to Know

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Fulfilling orders on your own can become almost impossible as your eCommerce brand grows. That’s why many eCommerce businesses outsource fulfillment to external providers. Fulfillment centers can help online retailers process orders quickly, although there are some important operating considerations to keep in mind. In this guide you’ll learn what a fulfillment center is and whether it’s a good fit for your eCommerce strategy.

What is a Fulfillment Center?

A fulfillment center is a third-party service provider which processes and ships products that your customers have purchased. Fulfillment centers handle the logistics required to get an order to a customer’s doorstep, eliminating the need for you to package, address, and ship each order yourself.

To use a fulfillment center, you must first store your product inventory with the fulfillment provider. Then, when you receive an order through your website, you notify the fulfillment center, which in turn locates the item ordered, prepares it for shipping, and works with a shipping provider to have it delivered to your customer. From the customer’s perspective, the sole point of contact remains your eCommerce site.

A variety of companies offer fulfillment center services. Some, like Fulfillment by Amazon services, are available only to sellers who manage their online stores through certain platforms. Others, like FedEx Fulfillment, are integrated with other logistics services, while Floship or James and James Fulfillment are offered by companies specializing in fulfillment operations for third-party eCommerce vendors.

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Fulfillment Centers: Advantages and Disadvantages

For eCommerce merchants, fulfillment centers offer a range of advantages:

  • No physical infrastructure
    Fulfillment centers eliminate the need to maintain a physical location for housing and processing your orders.
  • Faster order processing
    Fulfillment centers can ship orders faster than most eCommerce sellers can on their own.
  • Lower staffing costs
    With a fulfillment center, you do not need to hire and manage your own staff to handle orders.
  • Larger product selection
    Fulfillment centers make it more feasible for sellers to offer a larger selection of products than they could manage if they had to maintain inventories themselves.
  • Scalable operations
    Fulfillment centers are capable of processing dozens or even thousands of orders per day, helping sellers keep shipping flowing consistently.
  • More time for other work
    By freeing brands from the work of handling orders, fulfillment centers give companies more time to focus on strategic tasks, like planning business growth.

However, fulfillment centers come with some drawbacks:

  • Cost
    Sellers have to pay fulfillment center providers for their services, such as a flat fee to integrate your store with the fulfillment center along with fees for each order processed.
  • Lack of control
    Brands have little control over how quickly a fulfillment center processes orders and cannot intervene in fulfillment operations when something goes wrong.
  • Shipping time
    Although fulfillment centers may be able to process orders faster, the time it takes to ship an item from a center to the customer depends in large part on where the center is located, potentially extending shipping timeframes.
  • Lack of customization
    Fulfillment centers typically do not allow sellers to customize orders or add special touches, like inserting a personalized thank you note for each buyer.
  • Inventory replenishment delays
    Most fulfillment centers require the seller to keep track of inventory and replenish it as needed. This means orders could be delayed in the event a seller is unable to replace an out-of-stock product quickly.

How a Fulfillment Center Works

The first step in using a fulfillment center is to find the right fulfillment provider. Look for one with locations close to your customers and whose prices align with your budget.

You will then situate inventory in the fulfillment provider’s facilities and integrate your online stores with the fulfillment center systems so the provider receives the necessary information from the seller when an order is placed. This process should be automatic as it’s not ideal to trigger fulfillment requests manually each time a new order is completed on your website.

Other order processing activities remain the responsibility of the seller. For example, if customers receive the wrong order, the seller will need to contact the customer to address the issue. Payment must also be handled separately since payment processing is not a service most fulfillment providers offer.

Learn How to Fulfill Orders Even During Your Peak Season

Fulfillment Centers Vs. Warehousing

The term “fulfillment warehouse” is sometimes used interchangeably with “fulfillment center.” This can lead to some confusion, because fulfillment centers differ from traditional warehouses.

A traditional warehouse is a location where inventory can be stored for the long term and may not always be immediately accessible. Warehouses also offer only a storage solution without providing the picking, labeling, packaging, or shipping services offered by fulfillment centers. Warehouses are useful if you have excess inventory which requires storage until you are prepared to sell or seasonal products that sell only during certain times of year.

In contrast to warehouses, fulfillment centers focus on storing inventory for relatively short periods of time, then shipping to customers when orders are placed.

Unlock the Secret to Better Fulfillment Experiences

To get the most out of fulfillment centers, eCommerce providers need flexibility and choice. The eCommerce platform they use must be able to integrate with any fulfillment provider they choose to work with, without requiring manual effort on the part of the seller each time an order is placed. 

The best eCommerce platforms also make it easy to offer customers multiple fulfillment options, like shipping from a local store, facilitating in-store pickup, or shifting fulfillment to a different location in the event the first option is unavailable. This flexibility is critical for ensuring customers receive orders as quickly as possible, every time.

Fortunately, Magento Commerce supports all these fulfillment options, integrates with the most popular fulfillment providers, and provides essential tools for order and inventory management. Learn more by scheduling a Magento Commerce demo today.

Fulfillment Centers: Everything You Need to Know