The Function of Logistics Centers in the Supply Chain - ChicagoShipper

If you want to grow your online business, you must have a ‘scale up’ mindset. 

Scaling your business means investing in optimizing your logistics operations in order to stay competitive, expand customer reach, and meet customer expectations for fast and affordable shipping. 

Logistics centers play an important role in supply chain optimization because they determine how well inventory is distributed and how efficiently orders are filled. 

This article will explain how logistics centers work, the various types, and why most online retailers prefer to work with a fulfillment provider that has a large distribution network. 

Logistics Centers Definition 

Logistics centers are warehouses that provide storage space for brands as well as additional logistics services in some cases. 

It is normal for logistics centers to have multiple locations within the same network. This enables online retailers to strategically distribute inventory across multiple locations, streamline the picking and packing process, and have finished goods shipped to another location or directly to the end-user. 

Some logistics centers, however, have more restrictions than others. Some logistics centers, for example, specialize in moving goods from one distribution location to the next, whereas others specialize in storing, fulfilling, and shipping orders to their final destination.

Comparison of Various Types of Logistics Centers and Facilities 

All logistical centers and facilities are not created equal. There are numerous logistics centers that provide a range of services, from warehousing to order fulfillment. 

Before deciding on the type of logistics center to use or establishing your own network of logistics centers, it’s critical to understand your requirements. Do you only require inventory storage? Or are you looking for assistance with fulfillment and other value-added services? 

Some logistics centers only provide inventory storage, whereas others specialize in logistics automation, which allows goods to be moved quickly, efficiently, and accurately throughout the fulfillment process. 

Here is an overview of the various types of logistics centers from which e-commerce businesses can choose. 

  • Fulfillment Centers 

Fulfillment centers are physical locations run by third-party logistics (3PL) providers that store inventory as well as fulfill orders on behalf of online retailers. 

Fulfillment centers are designed to streamline the fulfillment process, reduce logistics costs, and accelerate last-mile delivery. 

Fulfillment centers are frequently powered by 3PL software, which enables merchants to integrate their online store with their technology. Orders placed online are automatically routed to the nearest fulfillment center, where they are picked, packed, and shipped as soon as possible. 

Storing inventory in a fulfillment center and outsourcing fulfillment to a 3PL allows you to better manage inventory, meet customer expectations, and spend less time and money on logistics tasks like packing and shipping orders. 

  • Distribution Centers

Though the terms ‘distribution center’ and ‘fulfillment center’ are frequently used interchangeably, some distribution centers do not provide fulfillment services for online brands. 

Because of the ability to split inventory across multiple locations within the same network to efficiently distribute products, some 3PLs consider their fulfillment network to be a distribution center. Orders can then be fulfilled from the fulfillment center closest to the customer’s location. 

Distribution centers can also serve as transit hubs for finished goods that need to be moved further down the supply chain or redistributed. Many big-box retailers use this method for internal transfers, such as restocking their physical stores. 

Products are sometimes sent to a distribution center to be transferred to a new mode of transportation so that they can reach their final destination as quickly as possible — whether that is the end-user or a different warehouse to be stored. 

  • On-demand Warehousing 

On-demand warehousing solutions enable e-commerce businesses to store and have orders fulfilled by a third party on a temporary basis using warehouses with excess space. This means that the on-demand warehouse serves as a go-between during the fulfillment process, matching warehouse supply with order demand. 

On-demand warehousing has advantages, such as the lack of a long-term commitment. However, unlike 3PL-operated fulfillment centers, on-demand warehouses lack consistency and operational oversight, putting your e-commerce supply chain at risk. 

If your growing ecommerce business wants to outsource fulfillment while maintaining control and streamlining your supply chain, selecting a 3PL with a growing fulfillment network that operates locations with the same software deployed at each location may be the smartest, most efficient, and most cost-effective option while also providing extensive expertise and hands-on customer support. 

  • Dark Stores 

Dark stores are retail stores that have been converted to micro-fulfillment centers (such as grocery stores, household goods, and clothing brand retail stores), and retail online orders, often local orders (such as local retailers). The layout has been organized and optimized for fulfillment to provide services to urban neighborhoods).

Dark stores are not open to the public, but instead, provide more space for inventory storage and the fulfillment of customer online orders. They also provide pick-up or home delivery options, allowing local customers to order online and pick it up in person. 

Dark stores are frequently used by retailers who previously only sold products in a physical location but now want to expand their business online and have the space to run fulfillment operations efficiently. 

The Importance of Logistics Centers in Ecommerce 

The primary advantage of e-commerce is that you don’t have to invest in expensive physical retail spaces and storefronts, allowing you to sell to anyone, at any time. 

On the other hand, the absence of a physical store necessitates the development of a strategy for storing inventory and efficiently fulfilling orders as soon as they are received. 

Fulfillment centers play an important role in e-commerce as they determine where inventory is stored, how quickly customers’ orders can be delivered, and the different types of delivery options they can offer to their customers. 

Finally, how well you distribute inventory in order to fulfill and ship customer orders quickly and affordably is critical to scaling your online brand. 

For example, if you keep all of your inventory in a logistics center in New York, orders to the West Coast will take longer and cost more to ship. 

However, if you store inventory in multiple locations across the United States or in a centralized location in the middle of the country, such as Chicago, you can reach more customers faster, reduce transit times, and reduce shipping costs. 

It is critical to understand the distinction between a warehouse and a logistics center that provides fulfillment services. 

Logistics centers run by a 3PL company that offers fulfillment services go beyond warehousing to assist e-commerce businesses in optimizing their supply chain. 

These centers are run by fulfillment experts who provide services and expertise in inbound and outbound logistics, ranging from warehousing receiving to automated shipping. 

These e-commerce logistics solutions take a more customer-centric approach, such as packing orders that emphasize the unboxing experience and managing returns. 

3PL-operated logistics centers also provide dedicated support as well as infrastructure, technology, data and analytics, and best practices to save a company time and money in the long run.