Businesses Move to Fulfillment Centers to Save on Costs

As COVID-19 forces people around the world to physically distance, businesses are adapting to the fluctuating economy in their own ways. Companies of all kinds are not moving as much product and are forcing to downsize. Nearly everyone has suffered financially from the pandemic, and each business—small or large—is doing their best to survive.

Very few have benefitted from the situation surrounding COVID-19 and most are adjusting to the changing times. One way businesses can do this is to move from warehouses to shared fulfillment centers. Not only do a lot of companies need to deal with less inventory, they can save from lowering the overhead by changing from a traditional warehouse to a fulfillment center.

Types of Warehouses

Warehouses are large buildings where goods and products are stored until distribution. They range quite a bit, from 10,000 to 100,000 square feet. While the size of the warehouse can be determined by the inventory stored there, six different types of warehouses are available to business owners.

First, a private warehouse is owned by one organization used in support of their supply chain. Public warehouses are sub-leased to retailers who need extra storage space. Next, automated warehouses use technology like robotics and forms of artificial intelligence to minimize the number of full-time employees they have to hire. There are also climate-controlled warehouses that keep refrigerated, frozen, and other sensitive products at their right temperature. On-demand warehouses provide short-term storage and transportation. They can also provide month-to-month inventory management. The last type of warehouse is called a fulfillment center.

Fulfillment Centers

Fulfillment centers are similar to warehouses and are often referred to as distribution centers. This is a building where retailers and other companies store inventory until distributing it to customers. Fulfillment centers are different because they are typically operated by a third-party logistics provider. One of these providers will offer inventory storage and other operational functions that include cross-docking, freight transportation, and customer service. One company doing this already is AmericanSignCompany.com as they sent goods to a fulfillment center to save of warehouse costs.

Warehouses vs. Fulfillment Centers

The main difference between warehouses and fulfillment centers are the operations customers they intend to serve. Designed to service direct-to-consumer orders, typically in e-commerce and business-to-consumer (B2C) businesses. Warehouses, on the other hand, serve business-to-business operations. The way that online retailers can manage to ship out their products to customers around the country. By utilizing a distribution network of fulfillment centers, they can cut down on costs and keep inventory around for a shorter amount of time while fulfilling online orders.

Ways Fulfillment Centers Help Businesses Save

Fulfillment centers alleviate the cost of paying for the company’s own warehouses. Not only do they cut down on rent, fulfillment centers can provide the ability to keep inventory around for shorter periods of time. Since their operations are streamlined, they’re only designed to keep inventory around for a short period of time. Fulfillment centers manage the operations for small e-commerce businesses.

With so many businesses forced to change up their inventory in response to the fluctuating economy, a lot of these companies can move to fulfillment centers in order to save money on the costs of warehouses. Instead of hiring their own staff to work the warehouse and deal with the logistics, paying a third-party to handle these things alleviates the costs of dealing with it on their own. If you are a business-to-business company, you will probably not be able to utilize a fulfillment center. If you can manage smaller inventories, there are a few ways you can get the most out of them.

Getting Down the Costs

When you choose to switch over to fulfillment centers, you should reduce excess inventory. The company should also optimize design, size, and location of facilities if possible. Furthermore refining the packaging of your products will enable you to store more in smaller spaces. Finally, rethinking your return policy will facilitate the inventory process.

While fulfillment centers have their advantages and drawbacks, if you are working with a small business-to-consumer inventory, there is no reason to pay for a full warehouse. Do the research and find the best fulfillment center for your business and its needs. The economy is in flux and things are changing all the time. Now is the time to cut down on costs and do anything you can to lower your overhead and make more money on every product that is sold.