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What Is a Fulfillment House?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 December 2016
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    2003-2016
    Conjecture Corporation
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A fulfillment house is a type of business operation that provides the means for filling customer orders on the behalf of a product manufacturer or owner. For a fee, businesses of this type will receive customer orders, process and ship them, and in some cases even create and send the invoice directly to the customer. There are a number of benefits to the fulfillment house approach, including the ability to keep inventory costs to a minimum and streamline the costs associated with order fulfillment in general.

Retailers who sell products by catalog or web sites are often structured to process orders with the aid of a fulfillment house. Depending on how the process is designed, orders may be received by the retailer and forwarded directly to the business partner for order fulfillment. The fulfillment house in turn processes the customer order, handling the retrieval of items ordered from a warehouse, executes the packing of the items, arranges the details of shipping the order to the customer, and ultimately delivers the prepared order to the designated shipper. At that point, the fulfillment house confirms with the retailer that the order is completed and on the way to the customer.

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There are variations in how a fulfillment house works with its clients. In some instances, the house itself will receive orders directly from the client’s customers, a situation that is common with many online retailers. In this scenario, the fulfillment house manages the receipt of the payment via a credit card or similar transaction, clears the order for filling, then executes the actual fulfillment and shipment, down to the preparation of the packing slip that is included in the package. At that point, the house forwards the proceeds from the sale, less the fees charged for the service, to the retailer. Depending on the terms of the agreement, the client may receive cumulative reports on a weekly, biweekly, or monthly basis, along with cumulative payments that reflect the ordering activity.

While the structure of a working process with a fulfillment house may vary, the end result is the same. Companies are able to quickly process customer orders and deliver the goods, which in turn makes customers happy and more likely to place another order. At the same time, businesses have the benefit of not having to maintain large inventories of their own, which helps to reduce overall operating expenses. For many businesses, the use of remote product fulfillment house means lower costs, happier customers, and an improved bottom line.

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