If you’re an online retailer that wants to grow your business, it’s important to have a ‘scale up’ mindset.
To stay competitive, expand customer reach, and meet expectations around fast and affordable shipping, scaling your business means you’ll have to invest in optimising your logistics operations.
Logistics centres play a key role in supply chain optimisation as it determines how well you distribute inventory and how efficiently you fulfil orders.
In this article, you will learn how logistics centres work, the different types, and why most online retailers choose to partner with a fulfilment provider that offers an expansive distribution network.
What are logistics centres?
Logistics centres are warehouses that offer brands storage space and in some cases additional logistics services.
It’s not uncommon for logistics centres to offer more than one location within a single network. This allows online brands to distribute inventory strategically across various locations, streamline the picking and packing process, and have finished goods shipped to another location or to the end user.
However, some logistics centres are more limited than others. For instance, some logistics centres specifically focus on the transfer of goods from one distribution location to the next, whereas other types of logistics centres focus on storing, fulfiling, and shipping orders to their final destination.
The different types of logistics centres and facilities compared
Not all logistic centres and facilities are equal. There are a variety of logistics centres that offer different capabilities, from warehousing services to order fulfilment solutions.
It’s important to understand your needs before you choose what type of logistics centre to store goods in, or build out your own network of logistics centres. Do you need simply need inventory storage? Or are you looking for support in fulfilment and other value-added services?
Some logistics centres solely offer inventory storage while others specialize and implement logistics automation to move goods quickly, efficiently, and accurately throughout the fulfilment process.
Here is an overview of the different types of logistics centres that ecommerce businesses have to choose from.
Fulfilment centres are physical locations operated by third-party logistics (3PL) providers that not only store inventory but also fulfil orders on behalf of online retailers.
Fulfilment centres are designed to optimise the fulfilment process, keep logistics costs low, and speed up last-mile delivery.
Oftentimes, fulfilment centres are powered by 3PL software that allows merchants to connect their online store with their technology. This enables orders that are placed online to be automatically sent to the closest fulfilment centre to be picked, packed, and shipped as soon as possible.
Storing inventory in a fulfilment centre and outsourcing fulfilment to a 3PL makes it easier to manage inventory, meet customer expectations, and spend less time and money on logistics tasks, such as packing and shipping orders.
“ShipBob has multiple fulfilment centres, and all locations filter back into one centralised warehouse management system, so everything is under the ShipBob umbrella.
By distributing our inventory across these countries and regions, all of our customers are able to get their orders much faster while paying reasonable domestic shipping rates.”
Wes Brown, Head of Operations at Black Claw LLC
Though the term ‘distribution centre’ is often used interchangeably to refer to a ‘fulfilment centre,’ some distribution centres don’t offer fulfilment services for online brands.
Some 3PLs like ShipBob consider their fulfilment network as distribution centre due to the ability to split inventory across different locations within the same network to efficiently distribute product. That way, orders can be fulfiled from the fulfilment centre closest to their destination.
In some cases, distribution centres act as transit hubs for finished goods that need to be further moved down the supply chain or redistributed. Many big box retailers use this method for internal transfers, for example to restock their brick-and mortar stores.
Sometimes, products are sent to a distribution centre to be transferred to a new mode of transportation to efficiently reach their final destination — whether it’s the end user or a different warehouse to be stored.
On-demand warehousing solutions offer ecommerce businesses the ability to store and have orders fulfiled by a third-party on a temporary basis with warehouses that have excess space. This means that the on-demand warehouse acts a middleman, matching warehouse supply with order demand, during the fulfilment process.
There are benefits to on-demand warehousing, such as no long-term commitment. But unlike fulfilment centres operated by 3PLs, on-demand warehouses lack consistency and operational oversight, so it puts your ecommerce supply chain at higher risk.
If your growing ecommerce business is looking to outsource fulfilment but still maintain a sense of control and streamline your supply chain, choosing a 3PL with a growing fulfilment network that actually operates locations with the same software deployed at each location may be the smart, efficient, and cost-effective option that also provides vast expertise and hands-on customer support.
“With an on-demand fulfilment network we briefly worked with, each process relied heavily on someone else rather than feeling like we have control of our store. We couldn’t actually see what their warehouse associates were picking.
We always had to play detective. Their response to any issues were very slow with lots of uncertainty.
It was the exact opposite of our experience with ShipBob, where you can outsource your fulfilment while still maintaining full control.”
Gerard Ecker, Founder & CEO of Ocean & Co.
A dark store is a retail store (e.g., grocers, home goods retailers, and clothing brands) converted into a micro-fulfillment centre, and its layout is organised and optimised forretail fulfilment for online orders, often for local orders (e.g., to service the neighborhood in an urban area).
Dark stores are not open to shoppers but instead provide more space to store inventory and fulfil online orders for customers. They also offer pick-up or home delivery options, which allows local customers to place an order online and pick it up in-person.
Dark stores are often used by retailers that once only relied on selling products at a physical location but want to also expand their business online and have the space to efficiently run fulfilment operations.
The role logistics centres play in ecommerce
The core benefit of ecommerce is that you don’t need to invest in premium physical retail spaces and storefronts, allowing you to sell to anyone 24/7.
On the other hand, not having a brick-and-mortar store means you need a plan to store inventory and fulfil items efficiently as soon as orders are placed.
Logistics centres play a key role in ecommerce because they determine where you will store your inventory, how soon you can deliver customer orders, and the different types of shipping options you can offer your customers.
Ultimately, scaling your online brand comes down to how well you distribute inventory in order to fulfil and ship customer orders fast and affordably.
For instance, if you store all your inventory in a logistics centre in New York, orders that need to be delivered to the West Coast will take longer and it will cost more to ship.
But if you store inventory in multiple locations across the US or a centralised location in the middle of the country, such as Chicago, then you can reach more customers quicker, speed up transit times, and reduce shipping costs.
The important thing is to note the difference between a warehouse and a logistics centre that offers fulfilment solutions.
Logistics centres that are operated by a 3PL company that provides fulfilment services go beyond warehousing to help ecommerce businesses optimise their supply chain.
These types of centres are run by fulfilment experts that offer services and expertise in inbound and outbound logistics, from warehousing receiving to automated shipping.
These types of ecommerce logistics solutions provide a more customer-centric approach, such as packing orders that focus on the unboxing experience to managing returns.
Logistics centres operated by 3PLs also provide dedicated support as well as the infrastructure, technology, data and analytics, and best practices to save business time and money in the long run.
“My end goal when I started Drop FX was to create something that was fully automated, so I could focus on driving sales. I didn’t want to have to worry about inventory and distribution as much.
When I was gearing up to launch the business, I was looking for someone who would automate fulfilment for us. I chose ShipBob, and it turned out to be a very easy and scalable solution.”
Josh Hollings, Founder & CEO of Drop FX
Leave logistics to the experts
The processes involved in running logistics centres can be overwhelming for a retailer or logistics director to manage all on their own. Not to mention the coordination with suppliers, transportation and shipping couriers, and fulfilment staff makes it a full-time job (or jobs) that many ecommerce business owners don’t have the bandwidth or knowledge to manage.
That’s why direct-to-consumer (DTC) brands prefer to leave logistics up to fulfilment companies like ShipBob, a best-in-class 3PL that offers a growing international fulfilment presence, advanced fulfilment software, expertise, and premium customer support.
By scaling your operations and partnering with a global fulfilment provider, you can expand customer reach and still provide a consistent customer experience no matter where they live.
ShipBob’s entire logistics centre network is powered by the same premium tech stack, which allows you to track inventory across locations in real time, view orders by status, and get access advanced data and analytics reporting you to make smart decisions.
“With our old fulfilment solution, because of a lack of ownership of the entire fulfilment stack, it was difficult to rectify, unlike with ShipBob who owns the entire stack: inventory and order management system, warehouse management system, and their fulfilment centres.”
Gerard Ecker, Founder & CEO of Ocean & Co.
As you grow your business and optimise logistics systems, ShipBob’s vast partner ecosystem provides a wide range of ecommerce solutions, from custom branded packaging and returns management to inventory and logistics planning and marketing help. This allows you to establish an end-to-end ecommerce solution with ShipBob as your logistics operational hub.
To learn more about how ShipBob can optimise your supply chain, click the button below.
Logistics centres FAQs
Here are answers to the most commonly asked questions about how logistics centres work.
What do logistics centres do?
Logistics centres are distribution hubs for finished goods that need to be transported to another location. There are different types of logistics centres, and some offer space to further distribute products before they reach their final destination, while others offer on-demand storage space. In most cases, ecommerce inventory is stored in a fulfilment centre operated by a 3PL that offers not only storage but also fulfilment and shipping capabilities.
How does distributed logistics centres work?
For the best shipping experience, you want to have the goods located close to the end customer. This is where centres work best. For instance, ShipBob is a 3PL that offers a growing network of fulfilment centres that allow you store inventory, streamline fulfilment, and automate shipping. ShipBob partners with a major and regional couriers that pick up packages daily.
Can you outsource ecommerce logistics to a 3PL?
Yes, many fast-growing online brands choose to outsource fulfilment to a 3PL. Partnering with a 3PL enables you to keep fulfilment costs low while optimising your logistics operations. For instance, tech-enabled 3PL ShipBob offers international fulfilment solutions with a robust distribution network, premium technology, and hands-on customer support.