What Is the Difference Between a Distribution Center and a Fulfilment Center?

order fulfillment

What is a distribution center?

A distribution center is where a company’s products are stored for shipping. It is the main center of the distribution chain where the company’s products are stored, checked, and packed before shipping to different retailers and wholesalers. The distribution center is an essential part of the distribution chain, making large-scale orders and shipping easy.

The distribution center plays a vital role in affordable shipment to retailers or wholesalers, reducing the cost of shipping as it facilitates bulk shipping to the wholesalers or retailers. It is also beneficial as it reduces the cost of shipping and eliminates taxes, VAT, or tariff charges that you have to pay internationally. 

Distribution centers are mainly comprised of storage, receiving, and shipping areas. It may have a separate building and staff or be used in a shared space of the manufacturing site or shared team. It uses different equipment to make secure shipping, such as boxes, cartons, pallets, containers, pallet jackets, forklifts, etc. they manage their goods in different ways depending upon the type of goods.

Distribution centers work and ship from company to company or fulfillment centers, so your ability to ship directly to customers will be limited. They depend on particular amounts being transported all at once rather than individual orders, thus providing fewer frequent shipment periods. Additionally, they are frequently situated far from important markets, which might lengthen shipment time. However, a distribution center can be the best option company’s priority is shipping massive products to the market. 

What Distinguishes a Warehouse from a Distribution Center?

Distribution centers and warehouses are usually used interchangeably and are considered the same. But they are different in terms of their work.

  • The warehouse only stores the company’s goods; however, the distribution center stores the company’s interests, order fulfillment, packing, and shipping. 
  • The flow velocity is more significant in the distribution center than in the warehouse. Distribution centers store goods for a limited period as compared to the warehouse.
  • The distribution center’s role effectively meets the customer’s requirements, while the warehouse only stores the company’s goods.
  • The distribution center deals with external customers, such as retailers or wholesalers, while the warehouse does not.
  • The distribution center is more complex than a warehouse.
  • Distribution center uses advanced technology for management, transportation, and order processing.

What Does a Fulfilment Center Do?

Fulfillment is a center that provides third-party services. Order fulfillment centers or 3PLs are other names for fulfillment centers. It simply includes order processing and shipment to the customers. Fulfillment centers eliminate the need to package, address, and ship each item individually. The fulfillment center locates your order and prepares it for shipping with the help of the shipping provider. You have to store your goods in inventory, ranking on the website then the fulfillment center proceeds with your order. The customer needs to remain in contact through the website.

An order fulfillment center’s purpose is to transport goods faster. Pick and pack services and shipping services are a fulfillment center’s main components. Some large-scale companies have specific fulfillment facilities; however, the majority of eCommerce businesses rely on the fulfillment facilities of a third-party logistics provider.

Fulfillment centers provide vast services. Some fulfillment facilities deal with particular products, such as food items that need refrigerated, apparel, hazardous chemicals, or oversized items.

Some of the significant services an order fulfillment center provides are discussed here.

1. Pick and pack services:

Pick and consolidate service is the best option in the fulfillment center. A customer can place a direct order on a website, and then a pickup list will be produced. A picker then picks items from the company. A selector can select more than one order at one time. Then items pack in the center in a box securely. Then the packed order sends to the shipping area for shipment. Most fulfillment centers use the primary carrier, e.g., UPS or FedEx. Couriers effectively deliver the parcel to the customers. 

2. Freight shipping:

Freight delivery can help you save money when using bulky items. LTL freight is an excellent option for shipping a sizable business-to-business or wholesale order. LTL freight services help send big goods like appliances. 

3. Kitting and assembly:

Kitting and assembling are excellent services for customization as it collects customers’ items in one place. It is beneficial as it packs all the stuff of a single customer n a single box.

4.Inventory management:

Inventory management is another essential role of the fulfillment center as it keeps updating your inventory. It helps your money flow and holds items in stock, so inventory management is a good replenishment plan for a business. 

Fulfilment Center vs. Distribution Center: Which Is Better?

A fulfillment center is a third-party service that provides storage, packing, and transportation of a company’s goods to its customers. It is a type of warehouse that collects goods from the company website and then delivers them to its customers. Distribution centers ship the company’s goods directly to the customer, retailer, or wholesaler in bulk. At the same time, distribution centers receive the goods from a particular company and then ship them to their customers.

The primary role of the fulfillment center is to order processing, packing, and shipping directly to the customers. In contrast, the distribution center only stores goods in bulk and distributes them to the retailer or wholesaler. A good supply chain has both a distribution and fulfillment center. Some companies prefer fulfillment centers over distribution centers as they are more reliable, quick, efficient, and effective. The fulfillment center and distribution center are two quite distinct sets of services. 

Each one plays a vital part in the current e-commerce scene, but it depends upon the company’s needs. If your business is new and trim and you don’t have customer service, you can use a fulfillment center, as they will provide order processing, packing, and shipment. If your business is significant, you need to get distribution center services to deal with bulk orders and deliver them to retailers or wholesalers. Whatever you choose, it’s critical to pick a logistics partner you can rely on to return your items on time, expand with your company, and keep your customers happy.

Pros and cons of fulfillment center:

Pros:

The fulfillment center provides a lot of advantages to its customers, as follows;

  • it eliminates the need for physical infrastructure to process orders.
  • It provides a faster order shipment service than other eCommerce websites.
  • Minimal staff hiring to manage orders.
  • It manages orders in bulk, as it can handle a thousand orders daily.
  • Fulfillment centers provide brands more time to concentrate on strategic objectives, including planning business expansion, by relieving them of the burden of managing orders.

Cons:

These centers also come with some drawbacks, as follows;

  • Sellers are responsible for paying the fulfillment center providers fee, including a one-time setup cost to link your business to the fulfillment center and ongoing charges for each order handling.
  • Brands need to have direct control over fulfillment center order processing.
  • Shipping time largely depends on the customer’s location, which may vary.
  • The fulfillment center needs more customization.
  • Most fulfillment facilities demand that the seller monitor inventory levels and refill them as necessary. 

Pros and cons of distribution center:

 Pros:

The distribution center also provides advantages such as;

  • Distribution centers deal with bulk orders from companies to retailers or wholesalers.
  • It can store the company’s goods in bulk and distribute them when needed.
  • It is good if packing and handling are not required.
  • It is cheaper than a fulfillment center.
  • It helps access the inventory to the market.
  • It helps to store inventory long-term.

Cons:

Along with advantages distribution center also has some disadvantages, as follows;

  • It does not provide packaging service, so it delivers in pallets.
  • Shipping time may be prolonged as products are offered in bulk, so they need time to fill again.
  • The distribution center is farther from the primary market so shipping may be delayed.
  • Services are limited compared to the fulfillment center as they do not provide packaging services.
  • Customers need to communicate directly with the center.

Conclusion:

Distribution and fulfillment centers are both beneficial services in the supply chain business. However, they are a little bit different in terms of their services. A distribution center only picks and distribute order in bulk to retailers or wholesalers, while an order fulfillment center picks, packs, and distributes your order to the customer directly. If your business is large, you can use a distribution center as it is cheaper than fulfillment center services. But suppose your business is small and you need customer service. In that case, you can use fulfillment services as they can give you many beneficial services such as packing, assembling, customization, shipment, etc.