Smart Warehousing Feb 11, 2022 5:03:19 PM 8 min read

Fulfillment Center vs. Warehouse: Which Is the Best Option for Your Business

When it comes to fulfilling orders for your customers, you have two main choices: a fulfillment center or a warehouse. Although these two are in most cases used interchangeably due to some overlap, they have certain distinctions that set them apart. They also have their own unique benefits and drawbacks, which can make it difficult to decide which option is right for your business. In this blog post, we will compare and contrast the two options so that you can make an informed decision.

What Is a Fulfillment Center?

A fulfillment center serves as a place of high activity that includes picking products to fill orders, packaging those products, and shipping them to customers.

A fulfillment center is generally used to store products as they move in and out in order to meet consumer expectations for quicker shipping. These centers are usually staffed by the company that owns them, but there are third-party options where the facility is owned by someone else.

Fulfillment centers are often used by small and medium-sized businesses, as they do not have the resources to operate their own warehouses. Such centers offer a number of benefits, including:

  • Reduced shipping times
  • More efficient order processing
  • Reduced costs for shipping, storage, and packaging materials.

What is a Warehouse?

A warehouse is used to store products. Warehouses usually have large amounts of space available for storing goods; some even have room to transport merchandise onsite via train cars or trucks.

Warehouses are often used by large businesses that have the resources to operate their own distribution centers. But you can also rent warehouse space in conjunction with other eCommerce businesses. Warehouses offer a number of benefits, including:

  • More efficient long term storage space
  • Lower costs for storage and transportation.
  • Overflow storage capabilities

Differences Between Fulfillment Centers and Warehouse

There are many similarities between fulfillment centers and warehouses in that both are used for storage, fulfilling orders and shipping. However, there are also some key differences. For example:

Fulfillment centers tend to be smaller than warehouses; they often have limited space on-site for storing goods (usually only enough room for a few pallets at most). Warehouses typically have more storage capacity available, which means that companies can ship a larger volume of products.

Fulfillment centers are usually used to store and ship products for online merchants, while warehouses are used to store products that are sold by the company (who owns it). Fulfillment centers process orders more quickly than warehouses, as they do not have to wait for orders to be sent from the warehouse before they can be shipped.

Fulfillment centers are used to store products for shorter periods as the goods are used to fill orders since they are usually in demand resulting in high goods turnover. Warehouses are generally used to store products for longer periods.

Fulfillment centers are used to ship products directly to the consumers while warehouses generally ship products to wholesalers, distributors, other businesses, or manufacturers- in the case of raw materials.

How Can a Business Choose Between a Fulfillment Center and a Warehouse?

It can be difficult to decide which option is right for your business, as both fulfillment centers and warehouses have their own unique benefits. Here are a few factors to consider to help you make the decision:

  • The size of your business
  • The number of products you sell
  • Your shipping needs
  • The nature of your business
  • The geographical location of your customers.

The size of your business is important, as it will determine the amount of space you need for storage. If you are a small business with only one or two employees, then it's unlikely that your storage needs will require anything more than what a fulfillment center has to offer.

The number of products you sell is also important because the more items there are in your inventory, the larger space (and budget) will be needed for storing them. If you only sell a few products, then it's not feasible to store them in a warehouse. However, if you have a large product catalog, then you'll need to use a warehouse center as such offer large storage space.

Your shipping needs are another important consideration. If you frequently send orders to customers located across the globe, then using a fulfillment center may be more expensive and time-consuming. However, if all of your customers are in one country or region, then it's possible to operate from a single warehouse location.

If you're in the business of selling directly to consumers, then a fulfillment center should be your best option. However, if you're looking for a space to store your products which you'll later sell to other businesses such as wholesalers, distributors, or manufacturers, then you should go for a warehouse. Again, if you need to store the products for a longer period, then a warehouse should be your best choice.

Geographical location is another consideration when choosing between a fulfillment center and a warehouse. If you have many international customers, then using a fulfillment facility that ships globally may be more expensive than using a warehouse. However, if your customer base is located in a certain region, then it makes more sense to use a warehouse within that area.

Bottom Line

The choice between a fulfillment center and a warehouse comes down to the size and nature of your business, the number of products you sell, and your shipping needs. If you are unsure which option is best for you, consult with a logistics specialist who can help you make the right decision.

Keep in mind, that the terms are often used interchangeably so you may need to dive in on capabilities and not just terminology as you look for the right fit.

For example, many companies do offer fulfillment services out of their warehouses like Smart Warehousing. As you begin to partner with a logistics partner, it’s best to ask what their ideal partner is. This will give insight into how they are set up and if they can serve your organization.

Many providers can only handle big retail items and others can only handle smaller e-commerce D2C orders. There are few providers that can handle both. Smart Warehousing has omnichannel solutions that serve both due to their network of large warehouses that are automated and set up for quick turnaround for online merchants.

Regardless which partner you choose to handle your products, make sure they have the experience to meet your consumers’ demands.

Smart Warehousing is an experience strategic logistics partner that can help you meet demands of an ever-growing market. Contact us today to learn more about our fulfillment services.