Every product undergoes an elaborate journey to reach the end customer—from resource extraction to manufacturing to distribution and fulfillment. When it comes to handling the latter two logistics operations for your ecommerce business, two types of facilities are central to storing and shipping items: fulfillment centers and distribution centers.
Although these terms are often used interchangeably, fulfillment centers and distribution centers serve distinct roles in the supply chain. Both, however, are crucial for fulfilling customer orders and maintaining customer satisfaction.
What is a fulfillment center?
A fulfillment center, or order fulfillment center, is a facility dedicated to storing inventory and shipping orders to customers. Ecommerce merchants use fulfillment centers to handle the order fulfillment process for sales made through their online stores. When a shopper places an order, associates at a fulfillment center pick and pack the items and ship them out using a third-party shipping carrier.
You can operate your own warehouse for order fulfillment or partner with a third-party logistics (3PL) company with a network of preexisting fulfillment centers. For example, Shopify merchants have access to the Shopify Fulfillment Network—a service that gives entrepreneurs access to a wide range of fulfillment centers across the United States and Canada.
Here are some services that fulfillment centers provide:
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Managing inventory. Fulfillment centers store and manage your inventory, typically by using a warehouse management software that offers real-time updates about inventory levels to avoid stockouts.
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Picking and packing. Associates at fulfillment centers can perform pack fulfillment services, which involves picking the right items from warehouse shelves, packaging them with other items in the same delivery, and labeling packages for shipping.
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Shipping items. Fulfillment centers coordinate with shipping carriers to pick up packages and deliver them to end customers.
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Managing returns. Fulfillment centers can inspect the condition of returned items and decide whether to return an item to inventory for resale.
What is a distribution center?
A distribution center stores products for resale or distribution to retailers, wholesalers, and other warehouses, including fulfillment centers. Distribution centers are an important stopping point during the supply chain process, typically for freight shipping bulk quantities of products. Manufacturers use distribution centers as waystations between production facilities and wholesalers or retail outlets.
Fulfillment center vs. distribution center: 3 key differences
Fulfillment centers and distribution centers serve different functions and operate at different scales. Here’s a breakdown of the key differences between distribution and fulfillment centers.
1. Purpose
Fulfillment centers perform pick and pack fulfillment services for your online store sales. Warehouse associates receive incoming goods from suppliers, store them, then pick and pack individual orders as customers place them. Distribution centers meanwhile handle bulk inventory—redistributing it to retail outlets or other warehouses rather than shipping directly to end customers.
Put simply, a fulfillment center serves you by fulfilling orders directly to customers while a distribution center helps manufacturers and suppliers optimize their supply chain by redistributing bulk inventory across a larger network of warehouses.
For example, an ecommerce company selling cosmetic products could hire a third-party logistics company to run its fulfillment operations, packing and shipping beauty products directly to customers. In contrast, a major cosmetic retailer could use a distribution center to redistribute bulk inventory across its network of physical stores.
2. Size
Distribution centers are large warehouses with enough space to store inventory in bulk on pallets and operate forklifts and freight trucks. Fulfillment centers can vary in size based on the needs of a particular ecommerce company or 3PL company. Since distribution centers ship out larger orders to wholesalers and retailers, they typically use more warehouse space than fulfillment centers.
3. Capabilities
Both fulfillment and distribution centers handle inventory management, but they offer different services to businesses. Since fulfillment centers handle the order fulfillment process for ecommerce merchants, they’re equipped with storage bins, labeling machines, handheld scanners, and packing stations with materials like boxes, tape, and other packing materials.
In comparison, distribution centers have different equipment to handle storing and distributing bulk items, like platform trucks, pallet jacks, and hand carts. Since distribution centers cater to manufacturers sending their inventory in large quantities to retailers rather than directly to customers, they use different technologies. Some distribution centers are even equipped with fridges for perishable items or offer cross-docking services to speed up the process of delivery.
Fulfillment center vs. distribution center FAQ
What are the cons of using a fulfillment center?
You’ll have less control over the order fulfillment process, and the costs can add up—especially for newer merchants—because you’re essentially outsourcing the storage and shipping process.
What differentiates a distribution center and a fulfillment center?
A distribution center primarily redistributes bulk inventory to retailers, wholesalers, and other facilities. A fulfillment center handles pick, pack, and ship services for customer orders.
Is a fulfillment center a warehouse?
Yes, a fulfillment center is a specialized warehouse designed to handle the order fulfillment process for ecommerce companies.
