Fulfillment center checklist: 7 things you need to know
In this article, we will delve into the operations of Fulfillment Centers in the US and explore the question of whether it is beneficial to outsource your logistics.
Your online store is growing, more and more orders are coming in, and the packages are starting to stack up. In the past, you were easily able to arrange shipment yourself in addition to your daily business, but now you land your employees are pulling extra shifts to ship all packages as quickly as possible.
Sound familiar? Then maybe you should look for a fulfillment center to give you a hand. In this article, you will find out exactly how a fulfillment center works!
- What is a fulfillment center?
- When do you need a fulfillment center?
- Here’s what a fulfillment center will do
- What's the difference between a warehouse and a fulfillment center?
- How does a fulfillment center work?
- The advantages and disadvantages of using a fulfillment center
- How much does using a fulfillment center cost?
What is a fulfillment center?
A fulfillment center is the central hub in logistics for bringing goods from merchants to their customers. These specially designed warehouses are designed to take over the logistics processes of e-commerce retailers and effectively supply their customers.
Orders are registered in the fulfillment center, processed, packaged and, finally, shipped. In modern fulfillment centers, this is done completely automatically, which saves a lot of time and resources and thus relieves the burden on companies:
There are logistics service providers who use the services of external fulfilllment centers to handle fulfilllment for their customers. Some fulfillment providers – such as LOGSTA– do not rent premises in existing buildings, but rely on their own warehouses in the US, which serve as a fulfillment center. This means that a consistent quality of logistics services can be guaranteed across countries. We offer you 8 proprietary fulfillment locations, which form the core of our worldwide logistics network.
What does Fulfillment mean and what are Fulfillment providers?
- The concept of "fulfillment" refers to the completion of all necessary steps following an order placement in an online store. These steps encompass the entire order processing workflow, including activities such as order acceptance, storage, packaging, shipping, and returns management for e-commerce businesses.
- Fulfillment providers with their own fulfillment centers specialize in handling these tasks and operate as dynamic warehouses that efficiently process a large volume of daily orders.
Their primary objective is to alleviate your logistical concerns, allowing you to focus on your core business of marketing your products. As your business expands, outsourcing fulfillment becomes increasingly beneficial. With growing order volumes, the effort required on your part also increases, while the cost-effectiveness of utilizing a fulfillment center improves.
Scenarios in which a fulfillment center can support you:
- Your online store is growing and the order volume is increasing. The packages are stacking up and the pressure is mounting. Ultimately, you want your customers to receive their orders as quickly as possible so that they are satisfied with your service.
- You'll need to rent additional storage space and hire staff purely to handle the shipping of your products. This entails salaries, insurance, regulations,
- Organising packaging materials and pick-ups and managing returns is very time-consuming and costly.
- You no longer get round to developing new ideas and taking care of your marketing channels, or you have less time and energy for enquiries from your customers.
Here’s what a fulfillment center will do:
Your products will be received and stored professionally.
Orders will automatically arrive in the fulfillment center and will be processed.
Orders will be picked – that is, put together and packed – by employees.
Labelled parcels will be handed over to shipping service providers:
Returns: returned parcels will be checked, classified and managed appropriately according to customer requirements.
Fulfillment providers like LOGSTA with their own transport department will also take care of the pallet transport of goods for companies on request – whether from the production site to the customer or to the fulfillment centers.
What's the difference between a warehouse and a fulfillment center?
Fulfillment centers serve as a flexible hub where goods enter and exit again relatively quickly. The purpose of a fulfillment center is to process orders from companies’ customers as quickly as possible. It is not designed to store goods on a long-term basis. Thus, the shorter amount of time the products are in the fulfillment center the better, because this only costs unnecessary storage space. What’s more, a large number of logistical processes take place here that do not take place in a warehouse, such as the packaging and shipping of products.
Conventional warehouses are more static and specialise in the long-term storage of goods. The logistics processes are usually limited to the storage or retrieval of goods and the management of goods.
How does a fulfillment center work?
The goal of a fulfillment center is to get online orders from the customers of a webshop to their doorstep as quickly as possible. This requires various processes that intertwine in a fulfillment center:
- The systems are connected to each other so that the so-called order fulfillment functions and orders are automatically sent from the webshop to the fulfillment center. Fulfillment providers use modern logistics management tools that continuously synchronise the data.
The LOGSTA Connector, for example, connects all common webshop systems, such as Shopify, WooCommerce or Billbee, in no time at all through prepackaged interfaces. The entrepreneurs then only create the items that need to be stored in the logistics tool and can already deliver their products to the fulfillment center.
- Of course, a company's inventory must first reach the fulfillment center. Companies can have the goods delivered themselves or, for example, commission all-in-one fulfillment providers like LOGSTAto pick up their products and take them to the fulfillment center.
- Employees receive the companies’ inventory and store it in a strategically favourable manner so that the subsequent picking of the products requires as little effort as possible. As soon as an order comes in, the prepared products are packaged and handed over to shipping service providers with their labels ready.
The advantages and disadvantages of using a fulfillment center:
Fulfillment providers are strategic partners for companies due to their extensive experience and well-established processes, as they ship thousands of parcels every day.
A fulfillment center can greatly accelerate the processing of your logistics since all processes in the warehouse are designed for maximum efficiency. This leads to greater customer satisfaction as orders are sent out immediately, which, in turn, strengthens your brand.
In addition, fulfillment centers are usually very flexible: whether during peak times around Christmas or during the silly season where nothing is going on – business remains the same. You don't have to hire any additional staff or worry about not keeping up. Your logistics are scalable and simply grow with you.
The disadvantage is that you have less control over the logistics procedures, since the processes in a fulfillment center, which are often automated, vary depending on the service provider. Customised branding or personalisation of packages is carried out at an additional cost.
Every order that comes in is automatically forwarded, processed and dispatched. You no longer have to worry about anything being overlooked. The fulfillment center will handle tim—consuming aspects such as:
- Inventory management in the warehouse
- Negotiating favourable rates with shipping service providers
- Packaging, labelling and shipping parcels
- Coordinating with shipping services and customs clearance
- Returns management, incl. classification
- Additional service at LOGSTA: B2B shipments
In the case of very low order volumes or large, bulky products, the entire process can be too laborious or will hardly pay off for you once all costs are factored in. In the case of returns, especially, consultation and precise coordination are often necessary, which can take quite some time.
Time is money. And a fulfillment center gives you an enormous amount of time to focus on the essentials. Outsourcing your operational logistics means you can focus on marketing and growing your e-commerce store. This allows you to plan things more strategically and to take care of the things that only you and your employees can do. However, you keep a full overview of all your logistics processes.
The disadvantage with this: in the event of a very low order volume, outsourcing to a fulfillment center can often be more expensive than shipping items oneself. In most cases, it is only worthwhile outsourcing a certain quantity of packages per month. It will depend on the individual case in question. Contact us – together we will find a suitable solution for you.
How much does using a fulfillment center cost?
If you handle your logistics yourself, you will face various costs and obligations, which are often underestimated. Without taking into account the time involved, these would include:
- Renting storage space
- Using warehouse management software
- The salaries of (warehouse) employees
- Warehouse vehicles, equipment and insurance
- Boxes and packaging materials
- Postage and shipping costs
Each fulfillment provider charges its own prices for its services. These usually depend on the effort involved in order to pick and ship a package. In addition, there are storage costs, individual fees or surcharges for special requests, such as specially branded packages, additional content, elaborate packaging, etc.
Fulfillment itself is a very individual process – it can sometimes be even more expensive for you to outsource things. Most of the time, however, it is worthwhile even in that case, because you can save a lot of time and effort, and the fulfillment center can take a great deal off your hands. It is best to clarify the details with your particular fulfillment provider.
The more you ship, of course, the cheaper your logistics will become, because the optimisation of the processes will result in less outlay per package.
The rule of thumb is:
Aggregate all the logistics costs involved in shipping items yourself and compare these with the costs of using a fulfillment provider – if you arrive at approximately the same price, it is worth using a fulfillment center.
At LOGSTA, there are no commitments, fixed costs or minimum volumes of parcels that you need to ship per month. What’s more, your goods will be stored at a very reasonable price, and you will only pay for what you use.
Write to us if you are looking for a fulfillment center – we will find a flexible fulfillment solution that will pay off for you!
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