Warehouse vs Fulfilment Centre vs Distribution Center: What's the Difference?

Here at Pro3PL we’re rather passionate about logistics, but what we’re not so keen on is jargon. Sadly, the two worlds are inextricably linked, and this can make it confusing for newcomers.

Well, fear not — in this article, we’re going to break down one of the most confusing topics of the logistics sector: differentiating between warehouses, fulfilment centres, and distribution centres. Distinguishing between the three is important, so without further ado, let’s dive in.

What is a warehouse?

Let’s start with the basics: warehouses.

Warehouses are secure locations used for the storage of goods — simple enough, right?

Well, no — not really, because warehouses are so much more than massive buildings filled with shelves. They’re the beating heart of supply chain management; a key node in the logistics network.

In a warehouse, inventory management is key. Goods are received, stored, and often processed for longer-term storage. Companies rely on warehouses to maintain a steady flow of inventory, ensuring that products are on hand when demand spikes.

Larger companies may own a private warehouse, where only their goods are stored. Smaller companies will typically operate out of a public warehouse, where multiple businesses will store their products and materials.

Imagining a warehouse, you might envision a dusty, dimly lit interior, complete with cobwebs and a draughty, damp-scented atmosphere, but modern warehouses couldn’t be any further from this.

Modern warehouses are strategically located, highly-optimised storage hubs. They often employ a sophisticated warehouse management system as well as robust security measures; along with climate controlled storage and automation tech, they’re a far cry from the barebones facilities of old.

It doesn’t stop at storage, either — many warehouses will also provide additional services such as packing and shipping, labelling and quality control, ensuring your goods are in tip-top condition before being sent on to their final destination.

Types of warehouses

Warehousing isn’t a one-size-fits-all affair. There are all kinds of warehouses, each suited to different use cases. Here are a few of the most common types:

Private warehouses

Owned and operated by large companies for their exclusive use, private warehouses are tailored to meet specific storage and logistical needs. Take major supermarkets for example — they’ll typically have access to their own, private facilities, stocked full of seasonal goods and bulk items. With it, they’ll get full control over their store inventory and can ensure everything is set out just how they like it. As you might expect, private warehouses don’t come cheap, but the payoff is that direct control over your inventory at all times.

Public warehouses

Public warehouses are the logistics equivalent of co-working spaces. Owned by governmental agencies, these warehouses are available for multiple businesses or individuals to use, often on a rental basis, they’re ideal for small to medium-sized businesses that don’t have the budget for their own space. A decent compromise, public warehouses provide great flexibility, allowing you to scale your storage allocation up or down depending on your needs. This can be a lifesaver for managing order fulfilment services when customer orders fluctuate, and it means no long-term leases or hefty financial commitments.

Bonded warehouses

If you’re juggling global logistics, this type of warehouse can be a game-changer. Bonded warehouses let you store imported goods without paying import duties until they’re sold or removed. Ideal for businesses in international trade, bonded warehouses provide a secure spot for your inventory while helping you defer taxes and manage your cash flow.

Cooperative warehouses

These warehouses are owned by multiple businesses, all working closely together. Unlike a public warehouse, the companies themselves all own a share of the warehouse itself, rather than renting a space within it. They’re an ideal middle ground between private and public warehouses, and are perfect for groups of businesses all requiring similar storage needs, such as winemakers, or dairy farmers.

What is a fulfilment centre?

OK, time to shift gears slightly — let’s talk fulfillment.

Like warehouses, fulfilment centres (or fulfillment centers to our transatlantic cousins) are used to store products — but they also deal with the entire order fulfilment process, from receiving inventory to shipping products out to customers. This also includes fetching the items from the shelves and packing them securely.

From bookmarks to binbags — if you’ve ordered it online, it’s come through a fulfillment center brimming with automation, robotics, real-time tracking systems, and an army of hard-working humans. Thanks to fulfilment centres, we can all enjoy lightning-fast deliveries and hassle-free returns and exchanges.

What’s the difference between fulfilment centres and warehouses?

The lines between warehouses and fulfilment centres can seem a little blurry, so in the interests of absolute clarity, let’s address the main difference between the two: inventory turnover.

While both types of facilities handle inventory, a warehouse is only used to store goods until they’re needed elsewhere. Companies often use warehouses to store additional stock of their hottest-selling products in anticipation of sudden spikes in demand, for example.

Fulfilment centres, on the other hand, are all about meeting demand here and now. In these facilities, products are flying in and out constantly, with staff working to tight delivery deadlines and managing returns and exchanges.

Fulfilment centres work by removing the burden from business owners of having to pick, pack and ship orders themselves — something they’ll have to do if all of their stock is held in a warehouse.

What is a distribution centre?

The terms ‘fulfilment centre’ and ‘distribution centre’ are often used interchangeably, but this is incorrect — here’s why:

Fulfilment centres process and sell orders to consumers; a D2C (direct to customer) model. Distribution centres send goods to retailers and merchandisers. They deal in bulk orders, and are typically geared towards large-scale B2B (business to business) transactions.

Distribution centres don’t package individual items, nor will they offer additional services like kitting or assembly. They send wholesale orders out in cases or pallets.

Of course, there are exceptions — some distribution centres will also dabble in D2C fulfilment, but for the most part the above distinctions hold true.

Types of distribution centres

Distribution centres come in a variety of different flavours, and we’ve outlined a few down below:

• Retail distribution centres: These facilities distribute products to individual stores — no surprises here!
• Cross-docking centres: Cross-docking centres rapidly transfer goods from inbound to outbound transportation, with no long-term storage. Goods ‘cross the docks’ from vehicles on the receiving dock, to those accepting the goods at the shipping dock.
• Consolidation centres: These centres receive products from multiple suppliers and bundle them up into larger shipments for distribution, optimising efficiency and reducing costs.
• Refrigerated distribution centres: Specialised facilities built to handle temperature-sensitive, perishable goods, such as food or medicine.
• Bulk storage centres: For items that are sold in large quantities or are not typically handled in individual units, like building materials, grains, or industrial chemicals

Warehouses vs fulfilment centres vs distribution centres

The table below details all of the key functions of each type of facility, so you need never be in the dark again when it comes to differentiating between the three!

Fulfilment centre FAQS

What’s the main purpose of inventory management software?

Inventory management software is essential for keeping track of products, managing stock levels (such as monitoring excess inventory), and ensuring that customer orders are fulfilled accurately and on time. It helps businesses maintain a smooth operation by preventing overstocking or stockouts and provides real-time data for better decision-making.

Do I need a specific type of warehouse for storing inventory like medicine or perishable goods?

Yes, for storing inventory such as medicine or perishable goods, you need a specialised warehouse space with climate control. This ensures that sensitive items are kept at the right temperature and humidity levels to maintain their quality and safety.

Is a fulfilment centre worth it?

Absolutely! Fulfilment centres ensure your business operations run smoothly with streamlined order fulfillment services. They handle everything from picking and packing to sending orders via various shipping carriers, allowing you to focus on growing your business. The convenience and efficiency they offer can significantly boost your customer satisfaction.

Is using a fulfilment centre expensive?

Using a fulfilment centre can be cost-effective, especially when you consider the time and resources saved. While there are costs involved, the benefits of efficient fulfilment services and reduced shipping times often outweigh the expenses. Plus, many fulfillment providers offer scalable solutions to fit various budget sizes.

Do fulfilment centres offer international shipping?

Many fulfilment centres (ours included!) offer international shipping services, helping you reach customers worldwide. They manage customs, tariffs, and international logistics, making global expansion easier for your business. Need help with your international orders? Contact our team today — we’re proud to offer highly competitive prices and we’re experts in reducing shipping costs.

By leveraging the expertise and resources of a professional fulfilment company, you can streamline your operations, enhance your customer satisfaction, and ultimately grow your business.

How do fulfilment centres manage store inventory?

Fulfilment centres use advanced systems to manage your store inventory effectively. They keep track of stock levels, monitor incoming and outgoing products, and provide real-time updates to ensure you always know what you have on hand.

How do fulfilment centres increase customer satisfaction?

Fulfilment centres play a crucial role in meeting customer demands by ensuring orders are processed quickly and accurately. With advanced systems for inventory management and efficient shipping processes (like our own fulfillment center network), customers receive their orders faster and with fewer errors. Plus, the ability to handle returns and customer inquiries smoothly further enhances the overall shopping experience.