What is a fulfilment centre?

Understanding Fulfilment Centre Basics and Differences

Team WareOne

11 Jun 25

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Ever wondered how an online retailer can deliver your order so quickly? Or how a massive retailer like Amazon manages to send thousands of orders daily, all from various products, brands, and sellers?

The answer lies in the highly efficient world of fulfilment centres. These centres play a pivotal role in ensuring products get from the shelf to your doorstep, quickly and efficiently.

According to Grand View Research, the global e-commerce fulfilment services market generated a revenue of USD 123,689.1 million in 2024 and is expected to reach USD 272,141.6 million by 2030. As e-commerce continues to skyrocket, businesses of all sizes are looking for ways to streamline their operations and speed up delivery times.

But what is a fulfilment centre? Let's break it down in this article.

What is a Fulfilment Centre?

A fulfilment centre is a specialised warehouse where products are stored, picked, packed, and shipped out to customers on behalf of a retailer or business. Unlike traditional warehouses that primarily store inventory, fulfilment centres handle the entire process of preparing and shipping orders to customers, making them a critical part of the modern supply chain.

They are often designed to handle high-volume orders quickly, using advanced technologies like automated picking systems, robots, and real-time tracking to ensure fast, accurate delivery. Think of fulfilment centres as the bridge between a business’s inventory and its customers, efficiently moving products through the supply chain.

Now that we’ve introduced the role of fulfilment centres in e-commerce, let’s define what they really are and how they function within the logistics system.

Key Functions of a Fulfilment Centre

Fulfilment centres offer a variety of services to businesses, all aimed at ensuring that products get to customers on time and in perfect condition. Here’s what they do:

1. Inventory Storage

Fulfilment centres provide space for businesses to store their inventory until it’s ready to be shipped. Whether it’s a local business or a global e-commerce giant, fulfilment centres offer secure, organised storage solutions that keep goods in prime condition.

2. Order Picking and Packing

Once an order is placed, the fulfilment centre picks the correct products from the shelves and prepares them for shipment. Packing is a critical step. Products are carefully packed to ensure they arrive safely.

3. Shipping and Delivery

Fulfilment centres manage the final step of the order process, getting the package to the customer. This includes printing shipping labels, selecting the best delivery method, and working with carriers to get the order out the door.

4. Returns Management

Some fulfilment centres also handle returns, making it easier for customers to send back products. They’ll process the return and either restock the item or send it back to the seller, depending on the product.

With a clear understanding of fulfilment centres’ functions, it’s important to distinguish them from traditional warehouses. This comparison will highlight their distinct roles in the supply chain.

Fulfilment Centres vs. Warehouses

When it comes to logistics, the terms fulfilment centre and warehouse are often used interchangeably, but they serve different purposes in the supply chain. Understanding the distinction between the two is crucial for businesses looking to optimise their operations.

Now, let’s break down the key differences between fulfilment centres and warehouses:

Aspect	Fulfillment Centre	Warehouse
Primary Function	Focuses on order processing: storing, picking, packing, and shipping orders directly to customers.	Primarily stores products for long-term inventory management without handling order fulfilment.
Purpose	Aims to speed up the delivery process by preparing orders for dispatch to end customers.	A storage facility for bulk products, typically used to hold stock until needed.
Scope of Operations	Deals with high turnover of products and quick shipping, often integrating with e-commerce platforms.	Deals with storing goods until they're ready to be sent elsewhere, with fewer interactions with customers.
Technology Used	Employs automated systems for inventory tracking, order picking, and packing. Real-time order tracking is common.	May use basic inventory management tools but often lacks the real-time tracking or automation used in fulfilment centres.
Customer Interaction	Directly influences customer experience as it handles the final stage of order fulfilment.	Does not typically interact with customers; focuses on storing inventory for other stages of the supply chain.
Scale of Operations	Often designed to handle smaller, quicker shipments with a focus on high efficiency and fast turnover.	Typically stores large quantities of goods, often with less focus on speed and more on capacity.

Now that we know the differences between fulfilment centres and warehouses, it’s time to understand the various types of fulfilment centres that businesses can choose from based on their needs and goals.

Types of Fulfilment Centres

There are various ways businesses set up their fulfilment centres, and the choice largely depends on their size, operational needs, and customer expectations. Let’s explore the three primary models of fulfilment centres:

In-house Fulfilment Centres

In-house fulfilment centres are run and operated entirely by the business itself. This model is most commonly adopted by large companies or those with specific control requirements over their logistics.

What happens in In-House Fulfilment Centres?

Inventory Management: The business takes full responsibility for storing and tracking inventory, which includes receiving, stocking, and managing products.
Order Picking and Packing: Employees or automated systems handle the picking, packing, and labelling of orders. This is done according to the business’s specific requirements, allowing for customised packaging and quality control.
Shipping and Returns: Shipping is coordinated through the company’s own processes or contracted carriers. Similarly, returns are handled in-house, giving businesses more control over the process.
Customer Service: Businesses can directly manage customer inquiries related to orders, delivery times, or product quality.

Pros of In-house Fulfilment

Full Control: Businesses have complete control over their processes, allowing for customised packing, special handling, and direct customer service.
Brand Alignment: Customised packaging and direct oversight of quality can enhance the overall customer experience and reinforce the brand's values.

Cons of In-house Fulfilment

High Overhead Costs: Requires significant investment in warehousing, staff, and technology to manage the fulfilment process.
Scalability Challenges: As the business grows, managing an in-house fulfilment centre can become complex and resource-intensive.
Time-Consuming: Managing everything in-house can divert focus from core business activities, such as sales and product development.

2. Outsourced Fulfilment Centres (3PL)

Outsourcing fulfilment to third-party logistics (3PL) providers is an increasingly popular choice for small to medium-sized businesses. With a 3PL provider, businesses delegate the responsibilities of inventory storage, order picking, packing, shipping, and returns management to an external expert.

What happens in Outsourced Fulfilment Centres?

Inventory Storage: The 3PL provider stores the business's products in their warehouse facilities. Inventory is monitored and tracked through their systems.
Order fulfilment: Once an order is placed, the 3PL provider picks the correct products from the shelves, packs them according to the business's specifications, and ships them out.
Shipping and Returns: The 3PL manages all aspects of shipping, including carrier selection, delivery times, and handling returns.
Technology Integration: Many 3PL providers offer software solutions that integrate seamlessly with the company’s e-commerce platform, allowing real-time inventory tracking and order updates.

Pros of 3PL Fulfilment

Scalability: 3PL providers offer businesses the flexibility to scale operations quickly, especially during peak seasons or promotional periods.
Cost-Effective: Reduces overhead costs by outsourcing warehousing, inventory management, and logistics to an expert.
Expertise: 3PL providers have extensive experience and advanced systems, allowing businesses to benefit from optimised shipping routes, reduced delivery times, and cost savings.

Cons of 3PL Fulfilment

Less Control: Businesses may have less direct oversight over the fulfilment process, leading to potential delays or mistakes in order picking and packing.
Dependence on External Partners: Relying on a 3PL provider means that businesses are dependent on the provider’s reliability, which could impact service quality if the provider faces operational challenges.

3. Hybrid Fulfilment Centres

Hybrid fulfilment centres combine in-house and outsourced models, allowing businesses to enjoy the benefits of both. Companies with a hybrid model may manage certain parts of the fulfilment process in-house (like inventory control or returns) while outsourcing other aspects, such as shipping and packing, to a 3PL provider.

What happens in Hybrid Fulfilment Centres?

Split Responsibility: Businesses handle specific aspects of logistics internally (such as managing returns, packaging, or critical stock management), while a 3PL handles larger operations like order picking, inventory storage, and delivery.
Customisation: The company can control the critical, high-value aspects of fulfilment, like high-end packaging or complex custom orders, while relying on external experts for the bulk of the operations.
Scalability: A hybrid model allows businesses to scale more easily by outsourcing when demand rises, such as during the holiday season or sales events.

Pros of Hybrid Fulfilment

Flexibility: Businesses can customise their fulfilment process to suit their needs, balancing control with cost efficiency.
Scalable: Easily scale operations by outsourcing to a 3PL when demand increases, while retaining control over critical functions.
Cost Efficiency: Retaining some in-house fulfilment allows for greater cost control, while outsourcing non-core tasks to a 3PL helps reduce overhead costs.

Cons of Hybrid Fulfilment

Complexity: Managing both in-house and outsourced operations requires strong coordination between the business and the 3PL provider.
Potential for Miscommunication: Increased complexity can sometimes lead to coordination issues between internal teams and external partners, potentially causing delays or inefficiencies.

Key Differences Between In-House, 3PL, and Hybrid Fulfilment Centres

Aspect	In-House Fulfilment	3PL Fulfilment	Hybrid Fulfilment
Control	Full control over inventory and process	Less control over order picking and packing	Split control, maintaining flexibility
Cost	High upfront and ongoing costs	Lower upfront costs but dependent on 3PL fees	Mixed costs—control some areas, outsource others
Scalability	Limited scalability	Highly scalable, ideal for growing businesses	Highly scalable, especially during peak seasons
Complexity	Low complexity	Can be complex due to reliance on a third-party	Complex, as it involves managing multiple partners
Speed	Potential delays due to manual processes	Fast, as 3PLs have optimised systems	Fast, as it leverages both in-house and 3PL strengths

As businesses select the right type of fulfilment centre, it’s important to understand how these centres improve e-commerce operations.

How Fulfilment Centres Improve E-Commerce Operations

Fulfilment centres offer businesses the ability to streamline their operations, improve service levels, and tap into new capabilities that can directly impact growth. Beyond the typical benefits of faster shipping and reduced overhead, several unique advantages can make a real difference to your bottom line.

1. Increased Product Visibility and Inventory Management Precision

Fulfilment centres are equipped with advanced inventory management systems (IMS) that provide businesses with real-time visibility of their products. This helps businesses ensure that inventory is properly tracked, reducing the risk of stockouts or overstocking. In turn, businesses can optimise their supply chain and improve forecasting accuracy, ultimately leading to better demand management.