Distribution Centre vs Fulfilment Centre: Are They One and the Same?

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What is a Warehouse?

A warehouse is a large open building (often 2,000 to 50,000 square meters) used to store products until they are needed by the retail stores, distribution centres or wholesalers. They are considered business-to-business operators. The warehouse space is designed partly by the inventory management or storage needed. There are different categories of warehousing, which break down further in function and design.

Private warehouse

An organization might own a private warehouse to support its supply chain operations.

Public warehouse

A public warehouse is used by multiple companies, like online retailers or others needing long-term storage for inventory.

warehouse space might also be automated, using robotics or other technology to make the storage process more efficient and decrease labor costs. The warehouse space may be climate-controlled, if it stores products requiring refrigeration or are temperature-sensitive. On-demand warehouse operations provide short-term storage, inventory management and transportation on a monthly basis, without needing long-term contracts.

What is a Fulfilment Centre?

A fulfilment centre is a type of warehouse, storing inventory from various sellers and distributing the products through an order fulfilment process. Fulfilment centres are different than warehouses, though, as they’re usually operated by third-party logistics providers. These third-party logistics providers offer a variety of services to clients like e-commerce companies and retail stores, by handling e-commerce orders and offering fulfilment solutions. Fulfilment centre are more focused on business-to-consumer operations.

Amazon is a good example of what fulfilment centres look like. A small business might choose to work with a fulflment centre rather than operate their own warehouses, performing their own order fulfilment services and handling of customer orders. Fulfilment centre often negotiates discounted shipping rates, so shipping costs could be lower than the e-commerce business would get on its own. They may not have a choice, however, in shipping carriers. A fulfilment centre might also handle reverse logistics.

What is a Distribution Centre?

So distribution centre and fulfilment centre are they one and the same? Not necessarily… A distribution centre (not to be confused with “centre of a distribution” – a term used in statistics)  is more of a business-to-business storage facility than a fulfilment centre. A distribution centre is used to receive inventory, temporarily store the goods and redistribute them. It may be owned directly by the retailer or it could be leased. The distribution centre focuses on the retail store customer, receiving items from the supplier and sending them on to the various stores. Hence sometimes this is also referred to as “retail distribution centre”. Consider the distribution centre as a bridge between the supplier and the stores. Products arrive on pallets and are moved in on a forklift, but then items are removed from the pallets as order processing demands. Smaller quantities of goods are sent on to the ultimate customers, the stores. These centres are part of a distribution network of facilities located closer to retail locations, and don’t typically house inventory for an extended period of time. Distribution centres might also ship items to fulfilment centres as needed for e-commerce fulfilment. 

Types Of Distribution Centres

There are three different types of distribution centres: 

  • Conventional – Material movement is performed by people and mobile equipment.
  • Mechanized – Material movement is assisted by mechanized, conveyance and sortation systems. 
  • Automated – Material movement is performed in part or in full by machines or robotics.

The Required Quantity of the Right Product in the Right Place at the Right Time

The new supply chain rule is to have “the required quantity of the right product in the right place at the right time”. When choosing a warehouse space, fulfilment centre or distribution centre, keep in mind the services needed, whether it’s intended for long-term storage or short-term storage, if the services are business-to-business, whether order fulfilment is required, if there’s a choice in shipping carriers, and whether the facility can handle online orders if needed. Make sure the centres can work with your warehouse management system to track inventory and provide visibility.

Waredock helps companies put together a distribution network with whatever their storage, order fulfilment and transportation needs are, short-term or long-term. We offer fast quoting from a network of suppliers. Let us know how we can help you.

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