Fulfillment Center
Also known as: Fulfillment Warehouse, Distribution Center, FC
Definition
A fulfillment center is a specialized warehouse designed to receive, store, and ship customer orders for e-commerce businesses. Unlike traditional warehouses that store goods for extended periods, fulfillment centers are optimized for rapid order processing and same-day shipping.
Fulfillment Center vs. Warehouse
| Fulfillment Center | Traditional Warehouse |
|---|---|
| Ships individual orders | Ships bulk/pallets |
| Rapid turnover | Long-term storage |
| Optimized for picking | Optimized for storage |
| Connects to e-commerce | Manual order processing |
| B2C focused | B2B focused |
What Happens at a Fulfillment Center
Receiving
- Inventory arrives from supplier/manufacturer
- Products inspected and counted
- Barcodes scanned into system
- Items placed in storage locations
Storage
- Products organized by size, velocity, category
- Fast-moving items near packing stations
- Inventory tracked in real-time
- Regular cycle counts for accuracy
Order Processing
- Order received from sales channel
- Picker locates items in warehouse
- Items brought to packing station
- Order verified against packing slip
- Items packed with appropriate materials
- Shipping label generated and applied
- Package sorted for carrier pickup
Shipping
- Carriers pick up multiple times daily
- Rate shopping for best prices
- Tracking synced to order management
- Customer notified of shipment
Types of Fulfillment Centers
In-House Fulfillment
- Company operates own facility
- Full control over operations
- Higher fixed costs
- Better for large, stable volumes
3PL Fulfillment
- Third-party handles fulfillment
- Variable costs (per order)
- Scalable up and down
- Less control, less capital required
Marketplace Fulfillment
- Amazon FBA, Walmart WFS
- Access to Prime/fast shipping badges
- Higher fees, less flexibility
- Built-in customer trust
Key Fulfillment Center Metrics
| Metric | Description | Target |
|---|---|---|
| Order accuracy | Correct items shipped | 99.5%+ |
| Same-day ship rate | Orders shipped same day | 95%+ |
| Inventory accuracy | Physical vs. system | 99%+ |
| Cost per order | Total fulfillment cost | Varies |
Choosing Fulfillment Center Location
Consider:
- Proximity to customer base
- Carrier hub locations
- Labor availability and costs
- State tax implications
- Multi-location strategy
Zone optimization: Central locations (Texas, Ohio, Nevada) minimize average zones to all customers.
Fulfillment Center Costs
| Cost Type | Range |
|---|---|
| Receiving | $25-50/pallet |
| Storage | $15-40/pallet/month |
| Pick & pack | $2-5/order + $0.50-1/item |
| Shipping | Carrier rates |
| Returns | $3-10/return |
When to Use a Fulfillment Center
Good fit:
- Scaling beyond home/garage operations
- 200+ orders per month
- Need for 2-day or same-day shipping
- Seasonal demand spikes
- Multi-channel selling
Keep in-house:
- Low order volume
- High-touch products
- Custom packaging requirements
- Tight margins
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