For most people, fulfilment centres and warehouses are often seen as the same thing when it comes from an eCommerce fulfilment perspective. However, they play very different roles from each other.
As an eCommerce merchant, you may have heard that fulfilment centres can aid in managing the eCommerce logistics aspects of your business. But what exactly happens in a fulfilment centre and how does it differ from a warehouse?
A warehouse is a space to store goods within their journey through the supply chain. Being a catch-all term, the functions that happen within a warehouse’s space is what differentiates warehouses from each other. These functions include customs clearance, order fulfilment, sorting and dispatch, or general inventory storage.
When a shipment arrives at a fulfilment centre, workers on the ground will take note of the shipment and store it in the short-term. Fulfilment centres thus play a key role in inventory management by handling the following activities in your supply chain:
If you’re using a fulfilment centre for your B2C eCommerce business, it helps to know that items typically move faster than a storage warehouse as the products are sent directly to the consumers. The contents of the shipment would be organised with similar products and recorded down for easy access later. When an order is placed for a specific item, the goods will then be picked & packed for shipping.
For instance, a black shirt will be stored in the same rack with other products of the same category. The black shirts are further separated into shelves by its different sizes. Once a customer places an order for a medium-sized black shirt, the fulfilment centre workers can then pick the item from the correct shelf and rack based on where it is stored, and pack it into a polyurethane shipping bag to be sent off for first mile delivery.
A fulfilment centre’s operations can be paired up with a transport logistics hub to handle the sorting and dispatch of parcels quickly. Transport logistics hubs are mainly used to sort and dispatch parcels. These hubs don’t have anything to do with organising or sorting the contents of a shipment before the dispatch. Thus, their service compliments the inbound, storage, and outbound operations of a fulfilment centre. In some cases, the fulfilment centre and the transport logistics hub could be in the same building.
While these features can be brought in-house for bigger brands that can afford to have physical assets, smaller eCommerce merchants can benefit from having a third-party fulfilment centre tackle key parts of the eCommerce supply chain.
By engaging the services of a fulfilment centre, you can take the load off a few operational steps, such as:
This is particularly the case if your eCommerce storefronts have a high order volume to deal with. If you’re dealing with a spike in demand, like during 11.11, any mistakes or delays when delivering your customers’ parcels can sour their eCommerce experience.
On the other hand, timely coordination between moving parts in the logistics system can also mean a smoother delivery experience overall. This frees up space for you to focus on activities that grow your eCommerce business such as developing your products or planning marketing campaigns for the major shopping periods.
While the benefits mentioned can help you free up some bandwidth when it comes to your eCommerce operations, it still helps to know how to choose a fulfilment centre to maximise your benefits of working with them.
Your choice of fulfilment center location affects the efficiency of your shipping supply chain. This is especially so if your fulfilment centre is situated closer to key parts of the supply chain such as:
In the first instance, your logistics partner can reduce the lead time between the order being placed and when it’s loaded on the plane. In the second instance, they can optimise their route to reach your end-consumers.
If you’re serving customers throughout various countries across Southeast Asia all at once, it may make sense to engage with a regional fulfilment centre in a strategic location like Singapore. Having a centralised, regional fulfilment hub closer to multiple countries reduces the costs and time of setting up multiple fulfilment centers in different countries. This is also good in the short run as you can get your products to multiple countries sooner and gauge where in Southeast Asia the majority of your customers are for future supply chain planning.
Additionally, if the regional fulfilment centre is within a free trade zone1, you won’t incur additional customs duties and taxes for storing your inventory there. You would only need to pay for duties and taxes of the destination country you ship internationally to later on.
Since a part of your inventory management is outsourced to a third party, it helps to keep tabs on the availability of your products and its variants. Choosing a proactive fulfilment centre that can update you on your inventory can help you stay on top of your product availability and prevent overselling. For instance, if you are running low on stock, the fulfilment centre can alert you on that so that you can restock your products.
On the other hand, if you have an excessive amount of products that have been sitting in the fulfilment centre for a while, it helps to have a plan to deal with the excess stock by having a discount campaign or bundling the products with a best seller. Having a proactive third-party fulfilment centre is key so that you stay on top of your inventory.
Fulfilment centres play a vital role in managing your inventory while taking a load off the shipping process so that you can focus on other parts of your eCommerce business. This can help to streamline your operations so that you can focus on what you do best while maintaining a good relationship with your end-consumers.
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