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Which is the right storage facility for your eCommerce business?

The usage of warehousing facilities in India has substantially increased over the last decade. At present, most of the warehouses are centered in tier-1 cities like Delhi-NCR, Bengaluru, Pune, Hyderabad, Mumbai, Kolkata, Ahmedabad, and Chennai. But with the rise of D2C e-commerce brands offering doorstep deliveries, the warehousing sector is projected to grow in and around tier-2 and 3 cities in the future.

As per a report published in MarketResearch.com, the warehousing market in the country was valued at INR 1,050 Bn in 2020. The number is expected to grow at a CAGR of 14.86% between 2021 to 2025.

Warehouses vs Distribution Centers vs Fulfillment Centers

Choosing the right storage facility for your e-commerce business can be confusing, especially when the options seem almost similar—but believe us, they are not.

If you are an e-commerce seller and looking for a place to store your goods, it is crucial to understand how much inventory you have, and where your customer base is located. Answering these questions can be the first step to finding the right storage facility.

Next, it is imperative to identify your operational needs. For example, do you want to save on shipping costs, or do you want to offer faster shipping irrespective of how much it may cost. Once you are clear on what is a priority for you, deciding would become a lot easier.

But even before you have answers to all such questions, it is important to understand the difference between all kinds of storage facilities. The know-how of the subtle differences will help you determine which kind of facility suits your business needs the most.

Understanding warehouses

The term warehouse is often interchangeably used with distribution center and fulfillment center. Let us take you through what exactly makes a warehouse.

An oversimplified definition of a warehouse you would have heard is that it’s a building that is used to store goods. If you have just started your e-commerce business, any space from your spare room to your garage can act as a workhouse.

However, if we dig deeper, we find that a warehouse is a place where the goods can be stored in bulk quantities and for longer periods of time. Apart from these, a warehouse has a few additional features like adequate shelves to store goods, or temperature control system for temperature-sensitive items, or heavy lifting equipment.

Overall, the warehouse is a traditional term used for a storage facility where goods are moved into, held in, and moved out of the building.

Pros

  • Goods can be stored for a longer period
  • Usually located in metropolitan cities
  • Offer lower shipping costs
  • Best suitable for large businesses with bulk inventory
  • Beneficial for B2B movement of goods (for example, from supplier to retailer)

Cons

  • Flow velocity of goods is slower
  • No add-on services apart from storage
  • Less customer-centric
  • Lack of advanced technology

What are distribution centers?

Now that we have understood what a warehouse is, let’s learn in detail about the distribution centers.

Distribution centers are more dynamic in nature. They function specifically on the principle of putting the right thing at the right place at the right time in the right quantity.

Similar to a warehouse, you can store bulk amounts of your inventory here as well. Such centers are usually located closer to the major markets so that you can ship out goods and materials easily and quickly.

Again, like warehouses, distribution centers do not ship goods directly to the consumers and focus on the business-to-business movement of goods. These are mainly used when goods are shifted from one mode of transport to the other. For example, goods may be unloaded from a cargo, moved to a distribution center, and then reloaded in a truck for further distribution.

The functioning of distribution centers is dependent on certain volumes of goods and not on individual orders, implying that these might not be much beneficial for small businesses.

Pros

  • Enough space to store large quantities of goods
  • Most suitable for goods that don’t need special packaging
  • Cost-effective movement from business-to-business
  • Stores inventory closer to major markets

Cons

  • Located far from interior markets that might delay delivery
  • Not available for business-to-consumer movement of goods
  • No shipping of individual orders
  • No specialised packaging services available

Are fulfillment centers different?

To put it simply, fulfillment centers are modern warehouses with advanced services.

These centers serve both the business-to-business and business-to-consumer movement of goods and are mainly used by the retailers that want to ship products faster to their customers. Since the flow velocity of goods is fast, they are not stored in bulk quantities like in the warehouses and the distribution centers.

Apart from storage, fulfillment centers also offer additional services like packaging, product mixing, labeling, and more. The team at fulfillment centers also coordinates with shipping companies on your behalf, negotiating shipping rates and ensuring safe and timely delivery.

Some fulfillment centers also have a dedicated support team that can handle your customers’ queries regarding their orders.

Of all, the best advantage of fulfillment centers is that they are equipped with the latest technology that can make storing and shipping a seamless experience. With automated processes, you can get a complete view of your inventory with real-time updates.

Pros

  • Inventory handled by trained staff
  • Easy access to the value-added services
  • Located closer to niche markets
  • Direct delivery to the end consumers
  • Smooth return and reverse logistics process
  • 360° visibility of inventory 
  • Automated processes

Cons

  • Limited storage capacity
  • Shipping restricted to small quantity of goods
  • High storage charges for unsold goods
  • Expensive in comparison to a warehouse or distribution center

So, what’s right for your business?

With all the similarities and differences, warehouses, distribution centers, and fulfillment centers all have their own specific role to play in the supply chain.

If you run a small business that focuses on making faster deliveries, fulfillment centers may make the best choice. But if you are a large business whose main objective is to store bulk inventory for a longer period, distribution centers may be the wisest pick.

That said, most e-commerce players choose fulfillment centers because of the added advantages. However, it depends on business-specific objectives.

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