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Fulfillment center and fulfillment houses are modern terms for an out-of-store packaging facility. The terms were coined around the mid-1990s, and “fullfillment house” is commonly used about an in-store packing department. These facilities fill orders for products that are ordered by customers at the store. The packaging is completed at the location of the store, so all products must be picked up there, rather than at a fulfillment house offsite. Fulfillment centers also accept Pack-it or fill it order forms, as well as other large orders.

Most ecommerce sellers have purchased at least one fulfillment company within the last year. In an effort to reduce shipping costs and improve the rate of delivery, most vendors turn to an on-demand fulfillment center when they need additional packing capacity. These facilities accept both small and large orders and fulfill hundreds of orders daily. Many fulfillment companies provide both spot and bulk orders. Many provide on-demand delivery, while others place orders for in-stock items that need to be picked up as soon as possible.

Spot orders are orders that are received prior to the start of a scheduled delivery. Commonly, these include holiday decorations, holiday packs, gifts, bulk orders and more. Some fulfillment centers are equipped with full-time employees who dedicate a few hours per day to monitoring the in-stock inventory and shipping orders. Other fulfillment centers utilize an in-house call center with trained customer service representatives. Both methods tend to be much more cost-effective than shipping inventory to a warehouse, as the time taken to pack products is significantly less.

Most ecommerce businesses use third-party fulfillment services. These fulfillment centers package and ship orders to the customer using their own packing supplies and trucks. The company that placed the order typically pays a fee to the fulfillment center to handle the orders. Fees vary widely between companies. Fulfillment centers also offer on-site storage facilities for an additional fee.

When an ecommerce business uses third-party inventory and fulfillment center services, they often utilize three types of in-house employees: a single employee who manages the entire warehouse, another who manages the warehouse floor and an employee who manages the ordering desk. Most warehouses employ at least one full-time employee to manage the warehouse floor and an additional employee who specializes in order fulfillment services. Companies often hire additional employees if their workloads increase. warehouses commonly use forklifts, free-loaders and other equipment to increase productivity. Companies should carefully consider which types of employees would be best suited for fulfilling orders and determine whether or not the additional costs of hiring additional employees and providing them with benefits, create a competitive advantage for the company.

Some fulfillment centers specialize in sole-shipping or mail-order businesses. In these businesses, the company relies solely on its own employees to fulfill orders. This means that when an order comes in, it is the responsibility of the fulfillment center to process the order, obtain a customer’s approval, package the order and deliver it to the customer. Fulfillment centers may also package and deliver products to individual customers, but they do most of their business with businesses that ship orders long-term. Fulfillment centers that deal solely with mail-order businesses expect to invest more in their facilities, equipment and employees if they plan to have a thriving mail-order business.

If an ecommerce company uses fulfillment centers to keep their inventory, they will incur expenses for space rental, stocking and replenishing supplies and additional personnel. Most warehousing operations provide a large inventory of goods that must be stored in warehouse space. Warehouses usually contain around 40,000 items, including product inventory and long-term inventory. A warehouse overrun involves an item being removed from the inventory and placed on the sales floor for immediate replenishment. Other types of excess inventory include returned goods, merchandise that has been previously sold and merchandise that is obsolete. All of this inventory requires additional warehouse space, staff and resources to make it usable and ready to sell.

If an ecommerce company chooses to keep its inventory in a fulfillment warehouse, the company will be responsible for storing the extra products and for providing customer service for them. The customer service responsibilities will be determined by the type of business. Many companies handle a wide variety of customers, while others deal with a specific clientele. There are advantages and disadvantages to each arrangement and ultimately it is a matter of business preference. When an ecommerce company decides to store its extra products in a fulfillment center, the benefits that it provides can help it improve its profit margins.