Fulfillment Center Vs. Warehouse: What are the differences?

The terms “warehouse” and “fulfillment center” are often used interchangeably. The buildings share similar functions, and physical differences between the two are slight.

However; they are not the same. The buildings differ drastically concerning utilization and the goals of their operations.

What is a Warehouse?

A warehouse is a large, spacious building where finished goods are stored until redistribution to the consignee. (retailers, wholesalers, distribution centers)

The shape, size, and function of a warehouse are, in part, determined by the type of inventory that it is meant to house. (retail product, CBG’s, etc.) In general, there are six different types of warehouses.

Private Warehouse: A warehouse, or network of warehouses owned by one organization and used in support of that organization’s supply chain.

Public Warehouse: Public warehouses are typically sub-leased to retailers in need of extra inventory space.

Automated Warehouse: An automated warehouse utilizes technology, robotics, and even some forms of AI (artificial intelligence) to automate their processes and minimize the number of employees required to conduct operations.

Climate-Controlled Warehouse: A climate-controlled warehouse is designed to house refrigerated, frozen and temperature sensitive inventory.

On-demand Warehouse: The function of an on-demand warehouse is to provide short-term storage, transportation, and service of inventory for retailers on a month-to-month basis.

Distribution Center: The terms “distribution center” and “fulfillment center” are interchangeable. A distribution/fulfillment center is a type of warehouse, but a warehouse is not a fulfillment center.

What is a Fulfillment Center?

A fulfillment center is similar to a warehouse, and often referred to as a distribution center (DC). Like a warehouse, a fulfillment center is a building in which retailers, and similar organizations, store their inventory until distribution to the customer.

Unlike a warehouse, however, a fulfillment center is typically operated by a third-party logistics provider (3PL) who provides inventory storage and host of other operational functions, including freight transportation, handling cross-docking and, most importantly order fulfillment.

What’s the Difference? Fulfillment Center vs. Warehouse

The most significant differences between a fulfillment center and a warehouse are the extent of the operations carried out within and the customers they are intended to serve.

Customers: Warehouse operations generally serve B2B customers.

Fulfillment centers, however, are designed to service direct-to-customer, and online orders, better known as e-commerce and B2C.

Operations: Inventory ships in and out of a warehouse on a shipping pallet. Thus, the majority of the logistics operations that take place at warehouse concern a freight carrier, or even an intermodal provider.

Inbound inventory shipments arrive at fulfillment centers palletized, but they ship out as a parcel sized shipment.

E-commerce retailers manage to ship products to customers across the country, and the world because they utilize a network of fulfillment centers.

A fulfillment center is intended to store inventory for a minimal amount of time, fill e-commerce orders and ship orders directly to the customer.

Goals: The goal of a warehouse is to safely and efficiently store inventory for an extended amount of time, typically several months to a year.

A warehouse is generally limited to housing no more than a handful of different inventories, for an extended period.

The goal of a fulfillment center, on the other hand, is to fill and ship orders in the least amount of time possible.

Fulfillment centers are not designed to store inventory for more than a few months; they are very expedient and streamlined in their operations.

Thus, it is possible for a fulfillment center to manage the operations for countless e-commerce retailers.

Fulfillment centers and warehouses are very similar, and it’s easy to confuse the two. The best way to remember their differences is to consider geometry class.

Comparing a fulfillment center to a warehouse is like comparing squares and rectangles. All squares are rectangles, but all rectangles are not squares.

Every fulfillment center is a warehouse, but a warehouse is not a fulfillment center.

At iLogistics USA we are your Fulfillment Center, with a staff trained in logistics. See what we can do for you by calling 1-305-909-0400 and as always, a team member will be happy to assist you.