This comprehensive guide will help you understand fulfillment centers. This FAQ article will guide you through the intricacies of fulfillment centers, and also discuss its relationship to e-commerce.
This guide will explain what a fulfillment center is, how it works, types of fulfillment centers, their costs, and examples.
Let’s dive in to learn everything we can about fulfillment centers.
What does Fulfillment mean?
According to the Cambridge Dictionary, fulfillment refers to “the act of fulfilling a need or a promise to fulfill”.
Let’s look at fulfillment through the lens of an order you place on your online shop.
Your online store is responsible for delivering the product to the address that your customer has provided when they place an order.
Fulfillment in e-commerce refers to the process of fulfilling your promise to deliver the order to your customer.
What is a Fulfillment Center? Why is it important?
A fulfillment center is where online orders are prepared and shipped to customers’ addresses.
A fulfillment center is responsible for managing inventory, packing and shipping orders online directly to the customer’s home address.
Fulfillment centers are a necessity in today’s age of online shopping. Fulfillment centers are the best choice for online retailers, as they allow them to operate virtually and have offices with very little inventory.
What does a Fulfillment Company do?
Online orders will most likely be fulfilled by a fulfillment company with which you have a contract.
Some e-commerce sites offer fulfillment services themselves, while others contract with third-party logistics and fulfillment service providers to store goods and fulfill orders.
You can therefore say that fulfillment companies have a warehouse to stock an inventory online stores, and also have staff to prepare and ship online orders for the online shops.
Fun Fact: Did you know that customers can order 2 or more products from one online store and still receive them individually on separate dates?
Because each item in an online order is handled at a different fulfillment center, or the same place as the other, it can be confusing.
What is a Fulfillment Centre?
The fulfillment center operates in a systematic manner. An online store receives an order. The order details are then sent to the fulfillment center. You have many options to notify the fulfillment center of the order.
These are the most popular practices in online commerce to inform fulfillment centers about an order:
- Telefon
- Spreadsheet (Excel or CSV file, Google Sheet, or Google Sheet)
The fulfillment center begins its fulfillment process after receiving the intimation regarding the order. These are the typical details that fulfillment centers receive from online stores:
- Item details including its unique SKU number.
- Details of the customer, including name, address and telephone number.
Do Fulfillment Centers Handle Inventory Management?
Yes. Yes. Fulfillment centers are actually the warehouses for online shops. It houses the inventory and management of online shops.
Many fulfillment companies are available to work with many online shops. Inventory management is crucial in fulfillment centers.
They must organize the products using proper coding and numbering so that they are easy to store, protect and locate when needed.
Fun Fact: Online stores often use the services of fulfillment centers located in different locations to ship their products from the closest zone. This allows them to cut shipping costs.
Can Fulfillment Centres Do One- and Two-Day Delivery?
Yes. Yes. Fulfillment centers can do one-day or two-day deliveries. In e-commerce, one-day delivery is sometimes called next-day delivery.
Amazon and eBay, two of the largest e-commerce sites, offer same-day shipping. However, shipping costs for one-day and two-day delivery may be more expensive than regular shipping rates.
What is an E-commerce Fulfillment Centre?
It is important that you have realized that fulfillment centers and e-commerce businesses have a direct relationship.
An e-commerce fulfillment centre is simply a place where online orders are picked up, packed and shipped.
Recall that an e-commerce fulfillment centre is where online store inventory is stored and shipped to customers.
What is the Fulfillment Process?
The fulfillment process begins when a fulfillment company is provided with information about the order. These are the steps that will be followed to fulfill an order.
- Finding the item.
- Picking up the item.
- Inspect the item and make sure it is free from any damage.
- Packaging the item.
- Label the item according the store’s guidelines.
- Preparing the item for shipment to the customer.
- Shipment from the fulfillment center
Is Fulfillment a Part of the Supply Chain?
Yes. Fulfillment is a key part of the supply chain for e-commerce. Fulfillment centers are the strongest link between you and customers.
Fulfillment centers are designed to improve the efficiency and speed of the supply chain in the e-commerce sector.
What is Order Fulfillment in Supply Chain Management and How Does It Work?
The most critical step in supply chain management is order fulfillment, especially for e-commerce.
Customers are the ones who should be involved in the supply chain. The entire supply chain is meaningless if there is no order fulfillment.
The fulfillment of orders is one of the most important steps in supply chain management. These are:
- Handling and storage of product.
- Preparation and arrangement of products.
- Shipping or delivery of the product.
- Handling returns.
What is Fulfillment Time?
It is hard to predict the fulfillment time precisely because the fulfillment process begins with the product being located and delivered to the address. Two factors are key to determining the fulfillment time.
- Distance between the fulfillment center’s address and the customer’s.
- The shipping medium used.
Fun Fact: Online stores often work with multiple fulfillment centers, and customers all over the globe are notified about a tentative delivery date. This is usually in weeks.
What are Fulfillment Expenses and How Do They Work?
Fulfillment involves picking up the item from storage and delivering it to the customer.
There are many costs associated with fulfillment. The following are some of the most significant expenses:
- The storage of the items.
- Maintaining inventory
- Packaging and labeling costs
- Payments to fulfillment staff, etc.
How do Fulfillment Centers make money?
Fulfillment centers often have contracts with multiple stores. Fulfillment centers charge other online shops for the service of handling inventory and delivery.
Fun fact: Many fulfillment companies offer return procedures. Fulfillment centers can process returns from customers who return products for any reason.
What is a good price for fulfillment solutions?
Fulfillment companies offer two types to online shops for managing inventory and orders.
- Price per unit (Product).
- Price per month. Based on the number of units that are sold per month.
It is a good idea to start with the price per unit if you are just starting out. Prices per unit can range from less than $1 to more than $1.
You can change your contract to a monthly rate when you become a professional.
Fulfillment companies offer different rates for different services. These include:
- Receive your items at an hourly rate
- Storage fees (monthly rate).
- Pack a few items.
- Shipping costs (as per product and destination)
Is Fulfillment Center Pricing Worth It?
It all depends on the growth of your business. The fulfillment center is essential for any online store that is growing rapidly and has high sales volumes.
Your online shop may not be making regular sales. The full price of fulfillment centers can hurt your business viability until your online store makes profits.
What is Outsourced Fulfillment?
Outsourced fulfillment simply means that you allow another company to fulfil your orders for your online store.
Outsourcing fulfillment is also known as 3PL Fulfillment in e-commerce. Shipping carriers are increasingly inclined to online fulfillment due to the changing nature of online shopping.
Does Fulfillment Include Shipping?
Yes. A fulfillment company has one of its most important obligations: to ship or deliver the products to customers.
Fulfillment services are designed to enable online shops with order delivery.
Fulfillment services focus on shipping the product to customers, while you are focused on bringing in orders.
How is shipping cost calculated?
Shipping costs depend on many factors. Shipping costs are affected by the type and nature the product.
Shipping costs are determined by the following factors:
- Product weight
- Product volume.
Shipping costs will be lower for products that are small and light in weight.
Shipping cost can also be affected by the shipping medium used. Shipping by:
- Air
- Road
- Sea
The most expensive shipping method is by air, while those by road are the least expensive.
Sea shipping is the most cost-effective and commonly used mode of shipping. Shipping is the name of the most economical and commonly used medium for shipping.
Fun Fact: Did you know that some online stores offer free shipping? It’s not free.
Shipping costs are not included in the product price.
What is the difference between a fulfillment center and a warehouse?
A fulfillment center can be thought of as a warehouse, but it is designed to fulfill online orders.
A fulfillment center, however, is very different from a traditional warehouse in many aspects.
A warehouse is usually used to ship bulk material to physical stores.
The material is further reduced into smaller packages in physical stores for sale to the consumers. The warehouse has a limited staff that can handle inventory.
The packages are sent to one destination only at a fulfillment center.
Instead, they are broken down and sent directly to customers. Fulfillment centers have more employees who are responsible for specific jobs.
What is the difference between a Fulfillment Center or a Distribution Center?
Distribution centers are responsible for distributing products to various locations. Distribution centers can be thought of as warehouses that have distribution facilities.
A fulfillment center is different from a warehouse because it is primarily used for e-commerce. It handles orders for various online stores.
A single company manages a distribution center to handle its inventory and deliver to its retail outlets.
What are the advantages of having a warehouse, distribution center, and fulfillment center?
One company might have a warehouse for its large inventory, a distribution centre to feed its retail centers and a fulfillment center that manages and delivers its online orders.
A company could have one or two of these people to manage its supply chain. Depending on the company’s size and work area, it may have three or more.
Is Amazon a Fulfillment Centre?
Yes. Amazon has many fulfillment centres. Amazon fulfillment centers can be found in many parts of the globe.
Amazon is very careful about fulfilling orders. Amazon also promotes FBA ( Fulfillment by Amazon).
What is Amazon Fulfillment Center?
Amazon fulfillment centers operate in the same or more structured way as other fulfillment centers. Amazon stores and manages all products from Amazon’s suppliers.
Amazon then handles all the delivery once the orders have been received. It stores an inventory of sellers, and charges the suppliers for that inventory whether it is sold or not.
Fun fact: Amazon offers self-pick up services in addition to fulfillment centers. Amazon can be reached to pick up your items.
What is Shopify Fulfillment?
Shopify Fulfillment is an online order fulfillment service that Shopify, one of the most popular e-commerce platforms worldwide, offers.
How does Shopify Fulfillment work?
Shopify fulfillment is a simple but effective process. Below is the typical Shopify fulfillment process:
- Send your products to Shopify
- Shopify sells your products through its own fulfillment center.
- Shopify will inform you about any orders that have been placed.
- Shopify will take your details and ship your products to you.
What is the Shopify Fulfillment Price?
Shopify offers rates that are tailored to the needs of online shops. Shopify will ask you questions about your fulfillment requirements and send you a quote with rates.
Shopify fulfillment costs include:
- Storage costs are determined by the amount of space that your products take up.
- Calculated per-order pickling and packaging costs
- Shopify offers shipping rates that are optimized to reduce shipping costs.
Fun fact: You can integrate other fulfillment centres with Shopify, even if Shopify Fulfillment is not your choice.
Which Fulfillment Centers Are the Best?
Fulfillment centers that offer exceptional order fulfillment services are the best. A fulfillment center should not only fulfill orders but also provide exceptional services such as tracking and returns handling.
The following fulfillment centers are leading the pack in 2020 based on the essential factors needed for order fulfillment:
- ShipBob
- Rakuten Super Logistics
- ShipMonk
- Fulfillment By Amazon
- FedEx Fulfillment
Fun fact: Fulfillment by Amazon can be used to manage your orders even if your online store is not an independent one. FBA can be used by sellers on eBay as well.
What are the benefits of Fulfillment Centres?
E-commerce is synonymous with fulfillment centers. This is why fulfillment centers are in increasing demand. Fulfillment centers are great for online shops.
- Improved inventory and order management
- Space and time-saving
- Your online store deserves more attention
- It is possible to employ less staff.
- Customer service that is more efficient
Do I need a fulfillment company?
Since its inception, e-commerce has faced many challenges. To reduce your stress if you sell items online, look into what fulfillment companies can offer.
You will be able to concentrate on getting online orders and not inventory management or delivery management by using fulfillment companies.
How do I choose a fulfillment center?
It is not difficult to choose a fulfillment centre. It is necessary to conduct a quick fact-check on your online business. You must define:
- Your future expectations and the size of your orders.
- The coverage area for your store.
- Nature of products
- The delivery and return policies of your store, etc.
Once you have defined the parameters, you can compare the rates offered by fulfillment centers. You should choose the one that’s most cost-effective and meets your business’s needs.
How do you choose a fulfillment center?
A fulfillment center is an important decision that will impact the reputation and growth of your online store. Customers are often unaware that orders are fulfilled by third-party fulfillment centers.
Online stores are the only ones customers will remember. Your store’s reputation can be damaged if you provide poor service at the fulfillment center. You may lose customers.
It is important to select a fulfillment center carefully. When choosing a fulfillment centre, you should consider the following.
In order of priority, the following list contains important factors.
- Outstanding customer service
- Their fulfillment centers are easily accessible and located.
- Pricing is value for money.
- Faster shipping methods.
Dropshipping is not a great business model
Margins of low profit
One quick truth you should be able to focus on is that dropshipping doesn’t allow you to set a retail price that is too high compared to the suggested amount by your supplier.
Dropshipping has this disadvantage. If goods are purchased in bulk, a wholesale price will almost always suffice. However, this is not the case for a dropshipper who runs an online store.
Your average profit margin will be reduced if your customer regularly orders one unit. This is why you have to sell your products at a higher price.
Fierce competition
Dropshipping is now more competitive than ever. We cannot ignore the fact is a low barrier to dropshipping.
Every day, there are so many ads. This is not the only way to market your business. To beat your competitors, your store must rank higher on the search engine.
You must not only invest in expensive SEO strategies but also time and money to create a customer-like experience.
Quality of the products is not controlled by us.
Dropshipping can lead to frustrations that could cost you a lot of money.
Your supplier could ship the wrong product or damaged product to you. The buyer can return the product or pay the chargeback. This is a dropshipper’s nightmare.
Sometimes, the supplier may ship the wrong quantity. These are some of the problems you will face in this business model.
Last words
We hope this article has helped you to see the possibilities of a fulfillment center, and other related questions. We welcome your feedback and suggestions about this article.
We are happy to answer any questions you may have about the topic.
