A fulfillment center is a third-party logics (3PL) warehouse where incoming orders are received, processed and filled. To manage inventory with an outsourced fulfillment house, the vendor can either receive and review goods prior to shipping them to the fulfillment center or have them sent to the warehouse directly from the manufacturer.
Outsourcing fulfillment allows the vendor to hand off the responsibilities and costs associated with warehouse management and focus on selling. The fulfillment center becomes responsible for inventory problems such as “mispicks” (in which the wrong product is selected to fill an order) and “misships” (in which the wrong item is sent to the customer). If mistakes are made, the fulfillment center absorbs the costs.
Using a fulfillment center can also make shipping faster and returns easier. Major shipping companies typically negotiate pricing with fulfillment centers with high volumes of business, a savings that allows vendors to offer free shipping to customers. Additionally, returns can be sent to the fulfillment center rather than directly to the vendor. This frees the vendor from having to charge the customer restocking fees.
Amazon has a network of fulfillment centers, which also handle warehousing, order processing, picking, packing and shipping for partners through their Fulfillment by Amazon (FBA) program. Other popular fulfillment centers include ShipBob, RedStag and FulfillmentCompanies.net.
E-commerce companies interested in using a fulfillment center should ensure that they can integrate with merchants’ e-commerce software to track orders.
These centers help companies handle one of the biggest challenges in online commerce: fulfillment.
Instead, the vendor sends product to the fulfillment center, and the outsourced provider ships them to customers for the sellers.