Advantages & Disadvantages of Fulfillment Centers

Dedicated fulfillment advantage

- eliminates the problems with integrated fulfillment thus, no rivarly for inventory and no adjustment to current operations necessary

Integrated fulfillment advantage

- low start up cost since already established network can be used to fulfill online orders - no need for new DC - no duplication in inventory (lower cycle stock and safety stock levels) - efficient use of work force (move more volume through a fixed cost facility)

Outsourced fulfillment advantage

- low start up cost to provide online fulfillment - use existing capabilities from other firms to fulfill individual demand

Integrated fulfillment disadvantage

- need to pick and ship individual size orders and store orders - if two orders arrive at the same time for the last unit, which channel gets the order fulfilled? (Rivalry for inventory)

Store fulfillment disadvantage

- reduced control and consistency of fulfillment since each store will be responsible for its own order fulfillment - conflict/rivarly for inventories for brick and mortar customer and online customer - need real time inventory visibility for store inventory -> cost - limited space to store additional inventory

Drop shipping advantage

- retailer doesn't not hold inventory -> risk is transferred further upstream in the SC - product touch point is eliminated (less chance of mistakes and damage)

Drop shipping disadvantage

- retailer loses control of inventory - lack of visibility - not suitable for all products

Store fulfillment advantage

- short time to customer - lower startup cost since store is used as stocking locations close to the customer

Flow through fulfillment advantage

Eliminates the inventory conflict/rivalry the store might realize for store vs. online sales

Flow through fulfillment disadvantage

Space needed within the store for in-store pickup and storage (a lot of retailers have dedicated spaces in the store)

Dedicated fulfillment disadvantage

duplicated facilities and inventories = higher cost

Outsourced fulfillment disadvantage

loss of control over inventory and service in fulfillment