What is a Fulfillment Center and Why is it So Important for E-commerce

If your company works with e-commerce, you’ve probably heard the term “fulfillment“. In the logistics universe, the expression refers to all the processes involved from processing the customer’s order to delivery, ensuring complete efficiency. The literal translation of the word carries the meanings of “fulfillment”, “fulfillment”, “fulfillment”, hence the idea of an operation in its entirety.
 
We mentioned that the term is common to e-commerce because many companies, especially market leaders like Amazon, for example, have chosen to manage their logistics with the format of Distribution Centers, as opposed to traditional distribution centers. Essentially, they are exclusive operations for fulfilling e-commerce orders and their respective returns and have short-term stock levels, while traditional DCs perform more operations and end up having long-term stock levels. In the more modern versions, they are sized and located in urban centers (called “urban micro distribution centers” or “hyperlocal distribution centers”), minimizing last-mile challenges and enabling same-day delivery, as they are geographically closer to customers. With this, the shopping experience is enhanced, with fast and accurate deliveries.

This new format, launched by Amazon, has been adopted by companies that want to stand out in the e-commerce market, particularly traditional retail companies (brick & mortar) that have already started their omnichannel journey, transforming their network of physical stores into urban micro distribution centers, as the benefits obtained are numerous.

Fulfillment Center = high service standard

The option for the Fulfillment Center is related to reducing inventory and the “specialization” of the site in fulfilling consumer-directed orders, meaning its main goal is to seek customer satisfaction and loyalty, since the current consumer market is not only looking for the lowest price but the best delivery service. Relying on an operation entirely focused on serving customers who place their orders online or via telesales, a company can elevate its service standard, in addition to reducing its costs.

As we have highlighted, many companies invest in their own Fulfillment Center, due to the need to qualify delivery to their customers, in other words, as a strategy to ensure faster shipping. Amazon has more than 175 operational logistics centers worldwide. According to the company’s website, “Amazon’s logistics centers are far from the concept of a typical warehouse” because “they are charged with fulfilling customer orders.” In other words, the basis of its operation is that all processes are aligned for agile order fulfillment.
 

Advantages of the fulfillment center

In addition to the advantages already mentioned, logistics centers greatly assist in order management and delivery tracking. Furthermore, in the case of outsourced operations, this format relieves companies that do not have an ideal physical space to allocate all their products, in addition to helping with inventory management, allowing company managers to have time to dedicate to other areas of their business.
 
With distribution centers, overselling or stockouts are avoided, as these operations rely on efficient stock control, ensuring that all orders are fulfilled with excellence, avoiding dissatisfaction from customers who could not complete the purchase due to a lack of product available for delivery.
 
This type of logistics operation usually has interfaces to receive orders and exchange information directly with the consumer. Through integration between warehouse management software (WMS), ERP, and systems for e-commerce sites, it is ensured that the product the customer ordered will arrive at their home in the shortest possible time. And, in the case of reverse logistics, this process also ends up being facilitated. It is worth noting that distribution centers often deal with fractional picking, hence the benefits for both productivity and cases of exchanges/returns.
 
It is for these reasons that Fulfillment Centers bring the design of logistics in its entirety, as they participate in all the stages involved from the moment the order is placed until its completion, including feedback that can be sent by customers through the shopping site, which can be used to improve the logistics operation.
 

Main questions:

Is there stock management in the fulfillment center?
Certainly! Although they have a smaller inventory compared to traditional DCs, this does not mean that there is no full control of inventory and addressing. On the contrary, this control is even tighter so that order processing occurs quickly and the operation can achieve its goal, which is efficient delivery.
 
In the case of outsourced distribution centers, many of them are capable, through management software (such as the WMS system), of sharing inventory information with companies that have contracted their services. This way, it is possible to monitor all data even remotely, ensuring perfect integration and communication.
 

Can a logistics center make a delivery in one or two days?

Yes, and it can even be in an even shorter time frame (as in the case of the Fulfillment Center ). It will all depend on the geographical location of this DC (it must be in a strategic point, close to customers), the technology it uses, and also its internal processes and the carriers used.
 

How do I process the order at the Fulfillment Center?

Everything happens through the integration between the e-commerce site systems and the warehouse management system (WMS). Once the customer has made the payment, the e-commerce platform sends the order directly to the Fulfillment software. In the case of WMS, a wave is automatically generated that creates picking, packing, and shipping activities. From there, order tracking information is sent to the e-commerce site system and can be shared with the customer so they can monitor the delivery status.

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