Fulfillment Center vs Warehouse: Which is Right for Your Business?

Key Takeaways

Fulfillment Woes—The Ecommerce Headache: Delayed deliveries, overstock, and stockouts plague ecommerce, making order fulfillment a significant challenge that brands must overcome to satisfy customer expectations.

Fulfillment—The Customer Experience Backbone: Order fulfillment significantly influences how customers perceive your brand, impacting their shopping experience and loyalty.

Customers Crave Quickness and Clarity: Shoppers prioritize accurate order info, swift deliveries, and hassle-free experiences, increasing pressure on businesses to optimize fulfillment processes.

Perfect Fulfillment Equals Happy Shoppers: Refining order fulfillment processes enhances customer satisfaction, fostering positive B2C relationships and bolstering brand reputation.

Capitalize on Stellar Fulfillment: Optimized fulfillment not only pleases customers but also offers brands an opportunity to leverage strong customer relationships and improve business outcomes.

Order fulfillment struggles are a headache—delayed deliveries, overstock, stockouts, high fulfillment and shipping costs… the list goes on. It’s painstaking for any brand.

But, especially for an ecommerce brand, order fulfillment is a huge chunk of how customers experience your brand and shop from your store.

Customers are always looking for more accurate order info, quicker delivery times, and an overall easier experience.

Need expert help selecting the right tool?

With one-on-one help, we guide you to your top software options. Narrow down your software search & make a confident choice.

Get free tool advice

That means that when you perfect your order fulfillment, customers will notice. Then, by extension, you can capitalize on those positive B2C relationships and brand reputation. 

Order fulfillment helps your brand beyond the surface-level benefits of organized inventory and quicker shipping times. 

In fact, order fulfillment goes as far as impacting brand reputation and customer experience, saving you on overlooked expenses, and allowing your business to grow. Without a clean order fulfillment system, the consequences are detrimental. 

So, if this is you, what can you do? Don’t panic. The solution is simple: leverage your best-fit fulfillment center to transform the operations of your business.

How exactly? Read on to learn more about the offerings of a fulfillment center, why it may benefit your business, and how to make the switch. 

What is a Fulfillment Center?

What exactly does a fulfillment center do that’s so special? A fulfillment center is a specialized facility that sorts out all your order fulfillment logistics. 

Your fulfillment center covers everything—from storing inventory to picking and packing orders to delivering them right to the customer's doorstep.

Here’s what operations look like day-to-day:

• It starts with order picking. A big part of order fulfillment is—you guessed it—fulfilling the orders. Fulfillment centers will select the customer-ordered products from your inventory and proceed to processing. 
• Putting it all together. All day, fulfillment centers will prepare orders for shipment. This looks like choosing the right box size and attaching the correct shipping label.
• Orders are on the way! Once the orders are ready to go, fulfillment centers will hand over the packages to partnered carriers to get the orders to their respective doorsteps. 
• Don’t forget to restock.  Fulfillment centers also manage product restocking when inventory levels are getting low to avoid stock-out issues that lead to order fulfillment delays.

Let’s understand this process through the eyes of this imaginary brand-new business: eSnacks, an ecommerce company focused on delivering healthy snack products and alternatives made with natural ingredients. 

For eSnacks, a fulfillment center would:

• Pick the correct customer-ordered healthy snacks: trail mix, apple chips, and granola bars!
• Use packaging materials that keep the snack pack safe from crushing.
• Ship the order to the organic snack enthusiast.
• Restock their snack inventory to avoid a hungry customer.  

Fulfillment Center vs Warehouse: Key Differences

Now that we know what fulfillment centers are and what they do, let's talk about warehouses.

Many ecommerce businesses start by managing their own inventory.

You might have one yourself, with all the shelves, pick carts, shipping stations, and employees that go with it.

If so, you already have some idea of how these two seemingly similar places differ—and how, when trying to scale your business, employing a fulfillment center may be tempting.

Here is a table of key differences to keep in mind when differentiating between the two. 

	Fulfillment center	Warehouse
Primary function	Focuses on order fulfillment—picking, packing, shipping, and returns. Often managed by ecommerce brands or outsourced to 3PLs specializing in B2C/DTC.	Focuses on long-term storage and bulk shipments optimized for efficiency. Can be self-managed by the business or outsourced to a 3PL that handles both bulk storage and logistics.
Typical clients	Primarily serves B2C, DTC, and ecommerce brands that ship directly to customers.	Serves B2B clients, such as wholesalers and manufacturers and ecommerce brands that need long-term bulk storage. May be self-managed or operated by a 3PL.
Offered services	End-to-end order processing: picking, packing, shipping, returns, real-time inventory updates, and handling just-in-time inventory.	Inventory storage and bulk management via warehouse layout design. Self-managed warehouses offer full control over processes, while 3PL warehouses handle external logistics and distribution.
VAS (Value-Added Services)	Extensive: custom packaging, kitting, subscription boxes, returns management, and quality control.	Limited: palletization, labeling, light assembly for warehouse productivity. Self-managed warehouses may provide more customization, while 3PLs offer standardized bulk storage services.
Pickup frequency	High turnover, with daily pickups to ship out individual customer orders.	Low turnover, with infrequent pickups, often for bulk shipments. Self-managed warehouses can adjust pickup schedules; 3PL warehouses follow standardized timelines.
Technology integration	Integrates with ecommerce platforms and uses order management systems (OMS) for real-time order management and tracking.	Uses warehouse management systems (WMS) for inventory tracking and storage optimization. 3PL warehouses often include their own integrated logistics platforms.
Shipping partners	Partners with parcel carriers like UPS, FedEx, and DHL for fast, individual order shipments.	Works with logistics providers for bulk freight shipments or palletized goods. Self-managed warehouses choose shipping partners; 3PLs use established freight networks.
Scalability	Highly scalable to handle seasonal spikes and fluctuating demand.	Self-managed warehouses need additional space or facilities to scale, while 3PLs offer faster scalability through distributed locations and resources.
Geographic reach	Part of a network of centers for faster shipping and lower costs.	Self-managed warehouses may be limited to specific regions. 3PL warehouses offer broader geographic coverage through multiple locations and logistics networks.
Flexibility in inventory	Handles finished goods ready to ship to customers.	Self-managed warehouses provide flexibility for storing a wide range of inventory, including raw materials and unfinished goods. 3PLs focus on bulk storage.

Fulfillment Center vs Warehouse: Comparison

While fulfillment centers and warehouses can work together, we can still compare them based on the highlighted details above. 

Our new brand, eSnacks, needs to know how differently a fulfillment center may benefit them compared to a self-managed warehouse.

To get a better look, let’s see how they compare in a table format:

	Potential fulfillment center	Self-managed warehouse
Fulfillment	Use an OMS to manage and process incoming snack orders, and have the fulfillment center pick and package snack bundles on behalf of eSnacks.	Store raw materials, work-in-progress products, and goods ready for sale in their warehouse, ready to be manually picked and packaged by eSnacks.
Inventory	Will handle the ready-to-go snacks prepared to be shipped to customers.	Contain flexibility in the inventory stored: raw materials, unfinished goods, and finalized snacks.
Shipping speed	Already partners with established parcel carriers to quickly deliver individual order shipments so eSnacks doesn’t have to. Using a network of fulfillment centers, eSnacks can get their products out quickly.	eSnacks will find and work with shipping partners or other 3PLs to deliver their orders. Shipping speeds will differ depending on the expertise of the chosen carrier and their warehouse’s location.
Brand customization	eSnacks’ products are immediately recognizable due to the custom packaging VAS that fulfillment centers offer.	Self-managed warehouses often only allow for simple and generic packaging due to scaling and price.
Costs	eSnacks doesn’t incur the overhead costs of owning a facility, dropping the costs of leasing a warehouse, purchasing equipment, hiring additional staff, and more.	eSnacks is paying for costs associated with maintaining and running a self-managed warehouse. These expenses include rent, packing equipment, hiring staff, and shipping partnerships.
Returns	Fulfillment centers are customer-facing, offering more structure to the returns process simplifying things for you and your customers. This includes automated return shipping labels, returns inspection, and automated inventory reconciliation.	A self-managed warehouse makes the returns process vary from brand to brand. The process depends on your ecommerce shop’s policies, which allows for customization but limits automation. Many rely on manual returns processes like manual inspection and inventory reconciliation.

How Fulfillment Centers Work

Ever wonder how fulfillment centers work their magic? Let’s break it down step-by-step to see how a fulfillment center works for eSnacks. 

Step 1: Receiving inventory 

Your fulfillment center receives products from partnered suppliers and manufacturers, where staff check each item for accurate quantity and quality.

Step 2: Storing inventory

Here, inventory is stored, organized, and waiting for order placement, with inventory management systems like software being heavily used to track product location, stock levels, and movement.

Staff organize inventory by specific categories or characteristics, such as product range, color, size, and sales velocity.

Step 3: Order processing

At this stage, customer orders are received and passed on to the fulfillment center. 

When customers click “purchase,” the order flows to the fulfillment center via an integrated OMS on the ecommerce platform, processing the order details and shipping information.

Step 4: Packing

The fulfillment center will be in charge of preparing the picked products to be delivered to the customer. 

Packaging materials are chosen based on the size and weight of the ordered products for cost efficiency, avoiding using excess packing materials for smaller product items. 

Correct shipping labels and instructions are secured to the package, including destination address and tracking numbers. 

Join our Newsletter

Stay in the loop! Discover what’s new in the world of ecommerce.

• Your email*
• This field is hidden when viewing the form
  First Name
• This field is hidden when viewing the form
  Last Name
• By submitting this form, you agree to receive our newsletter, and occasional emails related to The Ecomm Manager. For more details, please review our Privacy Policy. We're protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
• Email
  This field is for validation purposes and should be left unchanged.

Step 5: Shipping

The final step that gets the package to the customer's doorstep. 

Fulfillment centers are partnered with shipping carriers (UPS, Amazon, FedEx, DHL, for example), which determine the appropriate shipping methods and then deliver the order. 

Customer choice plays a role in this process, with shipping carriers differentiating between items paid to be expedited and which orders are entitled to standard shipping. 

Types of Fulfillment Centers

Not all fulfillment centers are created equal. The one you choose needs to fit your specific needs to help you grow. 

Here’s a breakdown of key types of fulfillment centers and how they can help you meet customer demand, scale efficiently, and optimize operations.

Ecommerce fulfillment centers

Ecommerce fulfillment centers are built to manage the entire order process—from picking and packing to shipping. 

Designed for online retailers and B2C brands, these centers integrate seamlessly with ecommerce platforms, ensuring fast and accurate delivery.

Advantages

• Fast shipping. These fulfillment centers are optimized for quick order fulfillment, leading to faster delivery times and higher customer satisfaction. 
• Technology integration. Because we’re dealing with ecommerce platforms here, ecommerce fulfillment centers know how to integrate their tech with yours, providing automated inventory management and real-time updates. 
• Easy scalability. These centers are built for flexibility, allowing you to adjust inventory size and manage order spikes seamlessly during high-demand seasons. 

Drawbacks

• Costs. Because ecommerce fulfillment centers are automated, speedy, and use advanced technology solutions, there’s no doubt that this system will raise higher expenses than others. 

Retail fulfillment centers

Retail fulfillment centers support brick-and-mortar stores by managing inventory for in-store sales and enabling omnichannel fulfillment, including in-store pickup and delivery.

Advantages

• Inventory efficiency. Retail fulfillment centers ensure the right stock levels, helping you avoid stockouts and overstock issues, so customers always find what they need on your shelves.
• Omnichannel availability. Many retail fulfillment centers support incorporating both in-person and online sales to diverse sales channels. 
• Focus on customer experience. Retail fulfillment centers focus on quick in-store stock replenishing, which allows customers to find what they’re looking for at all times. 

Drawbacks

• Complexities. Your inventory management and order fulfillment process can be tricky when including multiple sales channels in-store and online. There is a risk of inaccurate stock counts, demand pattern discrepancies, and different shipping logistics between channels.

Climate-controlled fulfillment centers

Climate-controlled fulfillment centers specialize in storing temperature- and humidity-sensitive products, ensuring that perishable goods, cosmetics, pharmaceuticals, and electronics maintain their quality. 

For our healthy snack brand, this may be the ideal fulfillment center type because eSnacks deals with perishable food products that aren’t made for sitting around for long periods of time.

Advantages

• Diverse product ranges. With a climate-controlled fulfillment center, you have the legroom to expand your product offerings to temperature-sensitive products. 
• Quality control. By maintaining a precise temperature in your fulfillment center, you maintain the quality of products that require temperature control. 
• Policy compliance. In many industries, it’s common to have specific regulations about fulfillment center temperatures. With a climate-controlled fulfillment center, you can be sure that you check those regulatory boxes. 

Drawbacks

• Costly equipment. Climate-controlled fulfillment centers require specialized equipment and more energy to run the facility, which may make a hefty bill—but it’s a necessary investment to maintain product quality and comply with industry regulations.

Automated fulfillment centers

Often employed by large ecommerce businesses, these fulfillment centers use advanced software solutions and AI to automate inventory and order fulfillment processes with minimal manual labor. 

Advantages 

• Streamlined order processing.  Automated order fulfillment means that processing times are sped up, there is a lower risk of human error, and general order inquiries are more efficient. 
• Reduced labor cost. Automated order processing means that less manual work and input is required, which lowers labor expenses. 
• Easy scalability. Automated fulfillment centers can use accurate demand forecasting to handle higher fluctuations in order volume during spiking order seasons. 

Drawbacks

• High upfront costs. Setting up an automated fulfillment system requires significant initial investment, but it can deliver long-term savings and efficiency.
• Technical issues. Technology isn’t perfect; it requires ongoing testing, maintenance, and updates to avoid system failures that can delay the order process.

Benefits of Using a Fulfillment Center

Customer surveys show that 87% of online shoppers choose shipping speed as a key factor in buying from an ecommerce brand again. 

This means that the order fulfillment process is a critical cog in the machine of the business, and its efficiency trickles down to affect customer experience and retention. 

Employing a fulfillment center for ecommerce businesses can greatly benefit your order fulfillment process. Here are a few advantages:

1. Cost efficiency

Although setting up a fulfillment center may involve significant upfront costs, the long-term savings can be substantial as it consolidates warehousing, staffing, and inventory management expenses.

Outsourcing to third-party logistics (3PLs) means you don’t have to maintain your own facilities, pay for rent or equipment, or hire additional staff—resulting in reduced overhead.

Order processing typically accounts for 46% of overall operational costs.

By partnering with a fulfillment center, you can reduce this to as low as 30%, thanks to smarter resource allocation and economies of scale.

For example, eSnacks saved big by avoiding the overhead costs of maintaining a business-specific warehouse! 

2. Scalability

Fulfillment centers are built to be prepared for fluctuating demand and order volumes.

This can come in handy when looking to grow your product sales or when gearing up for peak shopping seasons like the holidays.

Because fulfillment centers can handle high order volumes, this often leads to efficient uses of resources and economies of scale.

Ecommerce companies have experienced upwards of a 200% increase in orders shipped when partnering with a fulfillment center. 

Our imaginary brand eSnacks is ready for any order spike they encounter.

The holiday shopping craze doesn’t phase eSnacks with the help of a fulfillment center ready to scale as the business grows.

3. Better shipping rates

Fulfillment centers partner with major delivery carriers and often secure bulk shipping rates, helping ecommerce businesses reduce shipping costs. 

Using multiple fulfillment centers, you can cater to more shipping zones with fast delivery options and lower transportation distances and costs.  

Having fulfillment centers in multiple regions also makes for even faster delivery.

Take it from Bloom Nutrition: after partnering with a fulfillment center, they were able to strategically split and distribute inventory across their network to reduce shipping costs. 

4. Improved customer experience

Fulfillment centers increase the speed of order processing and, therefore, faster delivery times for eager customers. 

The increased efficiency that comes with fulfillment centers makes for accurate order picking and packaging, reducing both error and return rates. 

Many fulfillment centers offer 24/7 real-time order tracking, giving customers peace of mind and fostering trust in your brand.

A recent analysis found that companies recognized for fast shipping experienced a 34% increase in sales, proving the connection between fulfillment speed and revenue growth.

Choosing the Right Fulfillment Center for Your Ecommerce Business

Choosing the right fulfillment partner for your ecommerce business is crucial for managing costs, improving shipping times, and keeping customers satisfied. 

To help you make the best decision, here are four key factors to consider.

1. Location. Choose a fulfillment center close to your target customers to reduce shipping costs and delivery times. It’s also worth considering centers with multiple locations to diversify your fulfillment network and expand coverage.
2. Services. Make sure the fulfillment center provides services that align with your needs. If inventory management is a challenge, choose a center that offers specialized support, or if your business is focused on providing personalized unboxing experiences, look for VAS (Value-Added Services) that include custom packaging.
3. Technology integration. Look for fulfillment centers with advanced technology that supports your business needs. If customer insights and analytics are crucial, select a center that captures granular data. Also, ensure the center can seamlessly integrate with your existing ecommerce platform to avoid disruptions in your order management. 
4. Pricing. The scale of your business will impact the costs of your fulfillment center. However, when choosing which one to go with, look for transparent pricing models, and watch out for any hidden fees related to returns, packing materials, or seasonal change. 

To help you out further, we’ve compiled a list of the best fulfillment services available.

1. 1. GoBolt — Best for same-day shipping
2. 2. Linnworks — Best for retailers, wholesalers, and manufacturers
3. 3. ShipStation — Best for multiple storefronts
4. 4. ShipMonk — Best for small to mid-sized businesses
5. 5. ShipBob — Best for personalized unboxing experiences
6. 6. eShipper — Best for Canadian shipping services
7. 7. Saltbox — Best for small-sized subscription businesses
8. 8. ShipHero — Best for rate shopping
9. 9. Fulfillment by Amazon — Best for leveraging Amazon fulfillment centers globally
10. 10. Shipfusion — Best for inventory management help

Show More (5)

Fulfillment Center Costs: What to Expect

As good as it is discussing the benefits of a fulfillment center, it’s just as important to think about the associated costs.

This way, you know exactly what you’re paying for, and can evaluate if that aligns with the needs of your business.

Here are a few typical costs involved with fulfillment centers:

• Storage fees. These fees are charged for keeping inventory in the fulfillment center, and they vary based on product size, type, and how long items are stored. Larger or slower-moving inventory may increase costs.
• Shipping rates. These rates are tied to delivering products to customers. Fulfillment centers often partner with major carriers, which can offer discounted bulk shipping rates based on order volume and destination.
• Kitting fees. Kitting involves assembling individual items into a single package, such as bundling products for a promotion. While this can increase costs, it’s valuable for creating custom offers or improving packaging efficiency. 
• Custom packaging fees. Custom-branded packaging enhances your brand recognition and improves the customer unboxing experience, but it may come with higher fulfillment costs due to the price of materials and additional labor.

Cost structure and considerations for fulfillment centers

It’s important to note that these costs differ in how they are accumulated and structured. Take a look at this handy table.

Cost	Cost structure	Considerations/tips
Storage fees	Typically charged per cubic foot or pallet, based on inventory size and storage duration.	Keep inventory lean to minimize storage fees, especially for slower-moving products.
Shipping rates	Depends on package size, weight, destination, shipping speed, and carrier terms.	Leverage bulk shipping discounts or use multiple fulfillment centers to reduce shipping time and costs.
Kitting fees	Charged per kit or unit assembled; varies based on complexity and labor required.	Use kitting for promotional bundles but manage complexity to avoid high fees.
Custom packaging fees	Includes the cost of custom packaging materials and additional labor for assembly.	Balance branding with cost by using custom packaging for premium products or limited campaigns.

Tips for fulfillment center budgeting 

A smart budgeting strategy can help you avoid unnecessary charges and hidden fees. Here are some key considerations to keep your fulfillment costs in check.

• Get a detailed quote. Ask your fulfillment center for a detailed quote that breaks down all fixed and variable costs. Ensure the pricing structure covers key areas like storage, shipping, kitting, and any additional fees, so there are no surprises down the line. 
• Plan for seasonal fluctuations. Busy sales periods, like the holidays, can drive up your fulfillment costs with surcharges for higher order volumes. Plan your budget ahead of time to account for seasonal fluctuations and avoid unexpected spikes in spending.
• Negotiate shipping terms. If your fulfillment center partners with major delivery carriers, negotiate bulk shipping discounts for orders above certain volume thresholds. Securing favorable shipping terms can result in significant long-term savings for your business.
• Regularly review performance. Regularly review your fulfillment center’s performance by tracking key metrics like order accuracy, shipping times, and return rates. Identifying issues early on can help you address inefficiencies and avoid unnecessary costs. 

How to Transition from Self-Fulfillment to a Fulfillment Center

If you’re currently managing your own fulfillment center, it can be intimidating to transition to a 3PL provider. 

You may be worried about losing control of your business, challenges with new tech integration, and overall adaptation to this new system. 

There is a risk of these common challenges happening. Here’s how to mitigate them:

• Detailed service agreements and quotes. Clear agreements and quotes will help you determine what part of your business you can still control, and exactly what your fulfillment expenses will look like. 
• Evaluate and test the tech.  Before solidifying your 3PL choice, make sure that their integration runs smoothly alongside yours, and test the integration if possible. 
• Gradual integration. To ensure a smooth transition to a 3PL provider, follow the step-by-step guide below. 

Assess your current fulfillment process

Before you know what you need, you must know what you already have. It’s important to evaluate your current fulfillment strategy, and here’s how:

Map out your current strategy

This involves measuring your current order fulfillment speed, evaluating your inventory and order accuracy rates, evaluating your current inventory storage space and what you can fill up, and assessing your current staff’s productivity levels.

As a brand, ask yourself questions like “How quickly are orders processed and shipped?” and “How often do packages get returned?” 

This way, you can asses your current strategy to see what you're doing well and what areas need improvement.

Identify inefficiencies and pain points

Asking yourself those important questions often reveals what works and where your order fulfillment needs help. 

Identify points in the process that slow down your order fulfillment.

This may be assessing your inventory management, shipping process and associated costs, customer dissatisfaction, or an unorganized returns process.

When you identify where your ecommerce business is struggling, you know what to look for when choosing a 3PL.

Calculate the true cost of self-fulfillment. 

To genuinely value your inventory, you have to consider all the costs associated with self-fulfillment. These costs include:

• Direct and indirect labor
• Storage and holding expenses
• Shipping and handling costs
• Technological software and solutions costs,
• The cost of product returns

Understanding your current fulfillment expenses will help you determine if it is feasible to scale your fulfillment in-house. If not, look towards a 3PL. 

Research and choose the best 3PL

Now that you know what to look for when choosing the right fulfillment center for you (as explained above), you can look at actual fulfillment partners. 

Lucky for you, we’ve compiled a list of the best 3PL fulfillment center providers for your ecommerce business.

1. 1. GoBolt — Best for eco-friendly delivery
2. 2. ShipBob — Best for fast global fulfillment
3. 3. Penske Logistics — Best for optimizing supply chains
4. 4. CEVA Logistics — Best end-to-end freight management
5. 5. Ryder Supply Chain Solutions — Best for reverse logistics
6. 6. DB Schenker — Best for real-time GPS tracking
7. 7. XPO Logistics — Best coast-to-coast network
8. 8. Kuehne + Nagel — Best for combining sea and air logistics
9. 9. UPS Supply Chain Solutions — Best for managing supply chains
10. 10. Expeditors International — Best for shipping high-value products

Show More (5)

Prepare your inventory for the move

Once you choose our desired fulfillment center and technology, you have to prepare your current business structure for the transition. Consider these precautions:

• Conduct an inventory audit. Check your inventory by performing an inventory count, either through your inventory management system or a physical count. Support your inventory count by reviewing sales data, pinpoint slow-moving stock that you might not want to send to the 3PL during the transition, and reduce your inventory. 
• Label your inventory. Label and organize your inventory for quick product identification during the move. Use physical labels with consistent formatting and mark special products. 
• Document handling instructions. Create handling guidelines, especially for fragile or temperature-sensitive products. This helps to avoid product damage during the move. 
• Determine initial stock levels. Forecast future demand and schedule reorder trigger points for when inventory levels or your cycle inventory levels drop under a specific threshold. Once you have those numbers, you can determine the stock quantity of products to provide the 3PL. 
• Schedule the transfer. Schedule an appropriate date and time for the move, use a reliable carrier to facilitate the process, and confirm product reception with the 3PL via a verified receipt. 

Migrate your data and integrate systems

Before you integrate your ecommerce management systems with the 3PL, you must assess its compatibility and system requirements. 

This way, you will know the best way for your system to integrate and synchronize inventory data.

For example, you can determine whether you can use native integrations and if you will need third-party integration tools.

However you choose to integrate, it’s crucial that you test the integration to ensure smooth data flow. Here is how you can do that:

• Use an appropriate testing method. Create a test environment to simulate the integration working with your inventory. Perform a series of tests to ensure that everything is running smoothly. 
• Verify your data and accuracy. Verify that any inventory movement is accurately recorded in your 3PL data sets. Also verify that updates like purchase delivery status are displayed correctly to customers. Here is where you can identify errors, resolve them, and then re-test. 
• Set up automated real-time updates. Set up notifications that indicate internal shipping, order, and inventory alerts. This may look like alerting low inventory levels for both the 3PL and your inventory system to avoid discrepancies in your software systems. 

Test the fulfillment process and finalize the transition

Once you properly integrate your inventory systems with the 3PL, it’s important to conduct test orders to truly evaluate your 3PL’s performance. Follow these simple steps:

• Plan the test orders. Select the products and qualities you want to test, along with clear performance criteria with expectations to hit. 
• Place the test orders. Submit your test orders through your ecommerce platforms and monitor the order process, status, and overall smoothness. 
• Evaluate the results. Evaluate order accuracy, delivery speeds, packaging branding and quality, and overall customer experience. 
• Address and solve issues. Document your feedback and look for any errors. Mistakes caught during the testing process can quickly be addressed and resolved before finalizing the transition. 

Monitor performance and adjust

Once your fulfillment process is up and running with your fulfillment center, continuous monitoring is key to ensuring long-term success. 

Tracking the right KPIs will help you measure performance, identify areas for improvement, and ensure you’re delivering a great customer experience.

Track the following metrics for success:

• Order accuracy rate. This will show you the percentage of orders that are picked, packed, and shipped correctly.
• On-time delivery rates. This measures the percentage of orders that are delivered within the promised timeframe.  
• Return rate. This measures the percentage of orders that are returned, and tracking the reasons for returns can help you identify potential issues with product quality, fulfillment errors, or shipping damages. 
• Inventory accuracy. This measures how well your recorded stock levels match the actual inventory available at your 3PL.

Regular check-ins with your fulfillment center are essential for tracking KPIs, resolving issues, and preparing for peak seasons. 

Use these meetings to review performance metrics like order accuracy and delivery times, address operational challenges, and ensure you're ready for upcoming demand spikes.

Customer feedback is also key to refining your fulfillment process. 

Monitor reviews related to order accuracy, delivery speed, and packaging, and collaborate with your 3PL to fix recurring issues that impact customer satisfaction.

Actionable steps:

• Track KPIs regularly (order accuracy, on-time delivery, return rates).
• Schedule check-ins to address issues and plan for peak periods.
• Optimize inventory and processes based on sales data and feedback.

By aligning with your 3PL and using customer insights, you can continuously improve fulfillment and enhance the customer experience.

Final Thoughts

A fulfillment center handles all the logistics from the moment the customer presses purchase, to the moment they get their package at the door. 

There are many types of fulfillment centers, and it's crucial you take the necessary steps to evaluate which methods best fit your business based on service, ecommerce business needs, and cost. 

Finally, when you solidify which 3PL and what type of fulfillment center you want to work with, you can take appropriate steps to take a stab at the transition. 

3PLs immensely change the game when it comes to order fulfillment, saving costs, expediting the order fulfillment process, and improving customer experience. 

So you must know about them to level up your fulfillment!

The world of ecommerce moves fast—and so do you. Subscribe to our newsletter with the latest insights for ecommerce managers from leading experts in ecomm.

Fulfillment Warehouse FAQs

Now, time for Q&A! Here are all the questions you might be asking your computer now, complete with answers.

How do fulfillment centers handle peak-season demand?

Fulfillment centers will take the necessary steps to prepare and handle peak season demand. These include:

• Automated inventory processes
• Enhanced demand forecasting
• Temporary warehouse space expansion
• 3PL partnerships for specialized services

These actions help make sure that order fulfillment runs smoothly no matter the shopping season.

What are the pros and cons of outsourcing fulfillment to a 3PL?

Pros of outsourcing fulfillment to a 3PL include:

• Easy scalability depending on your business needs.
• Cost savings on warehouse maintenance, labor, shipping, equipment, and technology.
• Speedy shipping with a strategic network of warehouse locations.

Cons include:

• Less control over the order fulfillment process of your business.
• Considerable upfront costs when transitioning to a 3PL.
• Significant adaptations and adjustments within the operations of your business.

Can fulfillment centers handle international shipping and customs?

Yes, some fulfillment centers can handle international shipping and customers depending on the provider. Here is how they would manage that process:

• Pre-established partnerships with global carriers like DHL, FedEx, UPS, and more.
• By preparing customs documents to ensure that shipments comply with customs regulations.
• Handle duties and taxes by billing them to the reception as an extra fee, or prepaying them for the customer.

What is the process for managing returns through a fulfillment center?

Returns through a fulfillment center don’t have to be complicated. Here’s how it can work:

• The customer initiates and finalizes the return.
• The fulfillment center provides a return shipping label to the customer.
• The returned items are received and inspected to assess if it’s re-stockable, repairable, or neither.
• If accepted, the return is processed and a refund is issued to the customer.
• Inventory levels are adjusted to account for the returned product on both your end and your 3PLs systems.

How do fulfillment centers support subscription box businesses?

Fulfillment centers can support subscription box businesses through the packaging and shipping processes. Here is how:

• Accurate kitting and assembly to make sure that each box is consistent.
• Custom packaging and branding to support the subscription box’s specialness.
• Map out shipping logistics so that customers in differing regions can receive their subscription boxes at the same time.

What services do fulfillment warehouses offer?

Fulfillment centers focus on the order fulfillment process, from receiving the order through to getting the order to the customer’s doorstep. They primarily serve ecommerce businesses, B2C brands, and online retailers that deliver directly to customers.

Fulfillment centers handle end-to-end order processing, meaning order shipping, returns, and customer service, which is ideal for managing ecommerce orders

How do fulfillment warehouses reduce shipping costs?

Fulfillment warehouses reduce shipping costs because they often partner with a major delivery carrier, there is a good chance they provide discounted shipping rates for orders above a certain volume threshold.

Also, a fulfillment center is usually one of many. This means that you can ship as close as you can to your target customer area, reducing shipping costs associated with transportation