What is a Fulfilment Centre?
6 Min Read
Written by: Parcel Pending
Third-party logistics (3PL) providers, also referred to as fulfilment service providers, utilise multiple fulfilment centres to help eCommerce retailers complete order processing or order fulfilment for online orders. Below, we’ll discuss how fulfilment centres operate and why adding a parcel locker solution might be an ideal solution for an eCommerce business or brick-and-mortar retailer to support the order fulfilment process, reduce fulfilment fees (and shipping costs!), and improve customer satisfaction.
What Is a Fulfilment Centre?
So, what is an eCommerce fulfilment centre? As online shopping and overnight delivery became a more critical facet of a retailer’s success, many retailers soon realized that there simply was no logistical way to store all their inventory in one location. There was not enough space in any one warehouse, nor was there a centrally located spot that made it possible to ship orders the next day or overnight.
In response, many companies started building or investing in fulfilment centres in various places (often referred to as hubs) around the country. These buildings are spaced out and located by key shipping hubs (such as those owned by UPS or FedEx) in order to minimize delivery times and shipping costs, as well as streamline the order fulfilment process.
How a Fulfilment Centre Works
So what is order fulfilment how do fulfilment centres tie into the process? Whether outsourcing fulfilment service or operating an in-house fulfilment warehouse, this is a crucial part of order processing.
Fulfilment centres, not to be confused with distribution centres, help complete the online order process. There, an online retailer stocks their inventory, stores it, and sends it out when a customer places an order. Once a customer makes a purchase, the fulfilment centre closest to them is notified. Warehouse staff find the inventory, package it, label it, and ship out the customer order. A fulfilment warehouse can process orders for:
- B2B – Business-to-business customers, where high volume orders (e.g., bulk or wholesale orders) are sent to retailers.
- B2C – Business-to-consumer customers, where orders are shipped directly to a customer’s home.
Many retailers choose to outsource their eCommerce fulfilment to a third-party logistics provider so that they can focus on selling more products, fulfilling orders quickly, and improving customer service. Third-party logistics providers and fulfilment companies save them from having to manage their own inventory, negotiate shipping rates with carriers, and fulfil orders.
Fulfilment Centre vs. Warehouse: What is the Difference?
A fulfilment centre is different from a warehouse in that it is a complex and continuously moving operation and facility. A warehouse space is simply a static inventory storage space. Unlike warehouses, fulfilment centres provide services ranging from:
- Receiving inventory
- Grouping goods into a unit
- Locating goods
- Packing and shipping boxes
- Labelling packages
- Shipping customer orders
- Handling returns
However, like a fulfilment centre, it is important to ensure your warehouse is running efficiently to help reduce fees and enhance quality.
What is a Micro Fulfilment Centre?
Where fulfilment centres are as large as 300,000 square feet and typically located in rural areas, micro fulfilment centres are normally 3,000 to 10,000 square feet and located closer to the customer, cutting down on costs associated with the fulfilment operation and delivery time.
Over the past few years, a new micro fulfilment option has emerged in the form of “dark stores” – a fulfilment centre where store owners or an eCommerce company can process goods and returns rather than a place for customers to browse and shop. Turning vacated retail space into a fulfilment centre allows behemoth retailers and eCommerce retailers to create delivery hubs in the middle of cities (and closer to customers) that typically prohibit new construction.
By leveraging multiple fulfilment centres, retailers can slash delivery times for online orders, allowing products to reach customers in just a few hours versus a day. In short, flexible fulfilment options matter. In fact, a recent analysis concluded that micro-fulfilment could reduce order-related costs by as much as 75%1.
Fixing Inventory Management Problems
An inefficient fulfilment process is one of the fastest and most common ways to lose business and decrease customer satisfaction, especially for larger brands. Common problems within these operations include:
- Inventory Discovery – A disorganized warehouse or an uncommunicative third-party logistics provider can make it very difficult to locate specific pieces in inventory. An inefficient item location process can lead to delays and slow down delivery times.
- Damaged or Incorrect Items – If a customer receives the wrong item or a damaged item, that could create a sense of distrust towards the company they purchased the item from, and could even result in them taking their business to a competitor. Proper inventory management, storage protection, and packaging combined with thorough item inspection can prevent such issues from occurring.
- Shipping Notifications – Customers have grown accustomed to being able to monitor their shipment at all times, knowing both exactly where it is and exactly when to expect it. A lack of transparency around order status can lead to customer dissatisfaction and increased customer service calls.
- Poor Inventory Management – A fulfilment centre that does not keep close tabs on its inventory may sell out of an item before realising it. As a result, customers order the item, expect it, and only later are informed that it is out of stock or will take longer than expected. Lack of oversight is an easy way to lose customers and sales.
How Parcel Lockers Can Help
However your eCommerce company chooses to operate this aspect of its business there’s a solution that can streamline the process in-store or at convenient delivery hubs in retail storefronts.
That fulfilment option is known as Buy Online, Pick-up in Locker (BOPIL®) by Parcel Pending. When figuring out how to improve in-store experience, taking advantage of providing this offering can increasingly help your business. With this technology, customers place their order online, the fulfilment centre ships their order to a nearby brick-and-mortar store and places the item(s) in the electronic locker for the customer to retrieve at their convenience.
Customers are increasingly likely to use a smart parcel delivery system because:
- Their orders are securely stored (unlike home deliveries)
- Shipping costs are significantly reduced or completely eliminated
- Delivery time is reduced to a matter of hours as opposed to several days
- Customers are instantly notified by text or email when their order is ready
- Allows for express, contactless order pick-up in less than 2 minutes
Many retail stores prefer this method, as it optimises order fulfilment by:
- Reducing shipping costs and times associated with home delivery
- Providing a convenient, self-service click-and-collect option for customers
- Improving order status transparency with full chain of custody visibility
- Indicating which orders have been picked up and which items can be returned to the shelf
- Keeping orders safe and secure until customers are ready to retrieve them
Retailers using BOPIL have saved an average of 45 hours per month that were previously spent managing click-and-collect orders2. Most importantly, with BOPIL, 61% of customers make an incremental purchase just by virtue of entering the store!
Efficient Fulfilment Is Key
An efficient, streamlined fulfilment centre is critical to a retailer’s success. Disorganisation and lack of oversight can lead to significant delays and slower shipping times. If you want to improve your fulfillment services, smart retail lockers are an easy, scalable method to streamline the order fulfilment process and keep customers happy. Lockers also help companies realise significant savings by reducing the cost of last-mile delivery.
Looking for a service to help optimise your fulfilment process? Learn more about our retail locker solutions here.
- Devanesan, Jon. TechHQ. Retailers turn to the micro fulfillment center to keep supply chains flowing. (2021, February 22). https://techhq.com/2021/02/retailers-turn-to-the-micro-fulfillment-center-to-keep-supply-chains-flowing/.
- Reidel, Kate. Parcel Pending. Omnichannel Retail Strategy: Bringing Online Shoppers to Brick & Mortar Stores. (2020, June 1). https://www.parcelpending.com/blog/omnichannel-retail-strategy-bringing-online-shoppers-to-brick-mortar-stores/.