Despite the terms being used interchangeably, the truth is warehouses and fulfilment centres are substantially different.
Warehouses, defined as commercial buildings, were traditionally used to stockpile goods until they were required to be shipped out. Goods in the warehouse are stored at maximum capacity for an extended period of time.
However, due to the evolution of the supply chain, information became more readily available for businesses to predict demands and supplies. As conventional warehouses were not fully equipped to handle fluctuating demands and supplies with timely product dispatches, fulfilment centres were born.
Fulfilment centres, sometimes also known as distribution centres, are defined as specialised buildings designed to store products temporarily for retailers and wholesalers which are then shipped out to another location or directly to customers. Other than providing storage, fulfilment centres provide value-added services such as packing, cross-docking, order fulfilment etc. As such, fulfilment centres are better suited to cater to the needs of end-consumers.
The two have a notably different emphasis in their business models as well. Warehouses prioritize delivering cost-effective solutions for storing goods which are geared towards serving manufacturers, importers, exporters, wholesalers and transport businesses. While fulfilment centres value business relationships and focus on serving customers, the facility also caters to retailers, wholesalers and end-users.
In terms of equipment and capabilities, they each have their own strengths. Warehouses have power pallet trucks, pallet pickers, order pickers, including technology to track and store large amounts of goods. Fulfilment centres are equipped with advanced technological capabilities to process orders, manage transportation and warehousing. This enables fulfilment centres to handle more complex operations than in the warehouse.
The infographic shown above provides an overall analysis of the differences between a warehouse and fulfilment centre. A warehouse ships to hundreds of stores in huge batches, while a fulfilment centre ships out to millions of end consumers in small packages. Fulfilment centres offer specialised packaging that delivers personalised and delicately wrapped parcels to customers. Warehouses, on the other hand, do not offer specific labelling or packaging as it is delivered in pallets to major retail stores, which will further sort the goods before being sold.
Now, let us dive into the evolution of consumer expectations and explore the importance of fulfilment centers.
As online shopping becomes more convenient and integrated, consumers’ list of expectations only lengthens. Excellent customer service and speedy delivery are no longer considered extra benefits, rather a necessity. Delayed order fulfilment or unpleasant delivery experiences are intolerable.
A research conducted by Voxware pointed out that 69 in 100 consumers will most likely not re-purchase from a business if their order is not delivered within 2 days of the promised date. This further emphasizes the importance for businesses to deliver their package within the stipulated time.
On the other hand, B2B eCommerce sales are expected to rocket to $17.6 trillion. However, the United States’ share of global retail eCommerce sales is predicted to drop by 5.3% across 5 years.
This could potentially mean the bulk of eCommerce sales could occur in Asia. In Southeast Asia (SEA) alone, there are more than 640 million people, and according to research by Forrester Analytics, SEA sales are expected to rise by an average of 23% annually. Indonesia, Philippines, Vietnam, Thailand, Thailand, Malaysia and Singapore are the key forces driving the SEA economy and will have over 480,000,000 users in 1 year’s time. As the population continues to rise, growing middle-class affluence and increasing internet usage has led to a massive change in consumer behaviour. More and more people are shopping online instead of at physical retail stores. According to the Corporate Fair Trade Community, Southeast Asia has an incredibly positive outlook with over 620 million potential online consumers, increasing disposable income, and the proliferation of smartphones including internet access.
In order to get a share of the pie, business owners have to step up their game to remain relevant. The best way to deliver returns is through a satisfied customer. Happy customers will return and convert to loyal customers, which will, in turn, become free advocates for your business. Therefore, generating more sales by sharing your good service with their friends and families.
Outsourcing the job to fulfilment centres would rid businesses the hassle of storing inventory and rushing orders. Using advanced technology, orders are automatically pushed for delivery and inventory levels are systematically updated. Businesses would have more time to focus on expansion efforts or product development. The facility can process large amounts of orders and ship parcels directly to the end consumers. It helps businesses eliminate inventory storage and parcel delivery while integrating automated warehousing and fulfilment.
Fulfilment centres have employees who pick & pack orders and handle return requests. Unlike small in-house eCommerce businesses, fulfilment centres help minimise the chances of mis pick, mis ships and damaged goods with tightened inventory control. The risks mentioned above are extremely prevalent for eCommerce businesses as they have a lot on their hands. Fulfilment centres are equipped to handle these types of inventory problems which may compromise customer satisfaction.
A study in 2018 done by Arvato showed that 83% of online consumers in the US agreed that free shipping was the most important factor when supporting a business.
Whereas, 54% of consumers abandoned their carts because of delivery costs.
Employing fulfilment centres will help lay down better delivery rates as they have more clout to negotiate with courier services. Cheaper shipping rates allow businesses to offer discounted or free shipping services to their consumers. This makes them relevant and more price-competitive in their respective industries.
With an expected hike in eCommerce sales in Asia, businesses should utilize this opportunity to outsource their order fulfilment to a third-party logistics service provider. With time earned from doing so, businesses can scale their business to the next level. Outsourcing elaborate and time-intensive processes like fulfilment can help you simplify eCommerce business operations.
If you are interested in employing fulfilment services, you would be happy to know that there are many third-party logistics (3PL) service providers out there. However, it may get tricky to navigate through the endless options. With enough research and discussion with 3PL companies, finding a company that suits your needs is simple.
UrbaxFox is an end-to-end urban logistics expert that provides reliable and economical services that help business maximize sales potentials. As a subsidiary of Keppel Logistics, UrbanFox works closely with its parent company to leverage mutual strengths.
Unlike traditional warehouses, we tap into advanced technologies to reduce stock holding costs by predicting accurate warehousing periods. Geared with smart systems, pallets or bulk orders can be broken down into single items for order fulfilment.
UrbanFox understands the time-sensitivity and competitiveness of the eCommerce landscape. With over 3 million square feet of warehousing space and 5 warehouses across the island, we are able to customise our solution to cater to your business’ needs.