How Do Fulfillment Centers Work?

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E-commerce and Fulfillment Centers

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?

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

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. 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. 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.

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.

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.