How Micro-Fulfillment Aids the Supply Chain August 26th, 2022
New consumer preferences require new processes to meet their expectations.
The growth of global e-commerce continues. Retail e-commerce increased from USD 3.535 trillion in 2019 to USD 4.206 trillion in 2020 and is projected to reach $6.542 trillion by 2023. This growth has driven an adaptation to the supply chain—micro-fulfillment centers—which help retailers get e-commerce orders to customers as quickly as possible.
What is a Micro-Fulfillment Center?
The quick and dramatic rise in e-commerce created the problem of how to fill orders. Even some large e-commerce merchants and big-box retailers struggled to deal with the increase in volume, not to mention competitive pressures to deliver orders faster, offering two-day, one-day and even same-day fulfillment.
When stores closed during the pandemic, grocers and other retailers could quickly fulfill online orders for curbside pickup by picking from the store’s aisles. However, when customers returned to brick-and-mortar shopping, the process became more complicated and interfered with customer experiences in the store. Plus, building additional distribution centers, which require significant investment and months to open, was not viable for retailers who needed an immediate solution.
Micro-fulfillment centers allow retailers to fill orders in locations close to their customers, so they are ready for pickup or delivery faster. Some retailers chose to create a “dark store,” closing one store in a chain to foot traffic and using it solely for fulfilling online orders. In some cases, however, a dark store may still be located at a distance from some customers, making on-time, last-mile delivery a challenge.
Another option is to create a micro-fulfillment center that uses space within the store. For example, the retailer can reallocate floor space to fulfillment, reducing retail space for in-store shoppers and creating a fulfillment center for e-commerce orders.
Micro-Fulfillment Center Technology
To create an efficient micro-fulfillment center, retailers need solutions for productivity, time savings and accuracy. Retailers need solutions that allow their employees to quickly retrieve the correct items from bins or shelves, for example, voice-directed picking or pick-to-light systems that eliminate paper lists and keep hands free. Retailers can also benefit from deploying mobile computers and mobile printers to allow employees to scan and label orders immediately.
Racking, conveyors, and other equipment for micro-fulfillment centers often have a modular design that’s adaptable to smaller spaces—and they can be deployed in weeks, not months or years like full distribution centers. Modular equipment also makes it easier for the retailer to scale the center if the balance between their brick-and-mortar and e-commerce revenue streams changes in the future.
Additionally, solutions for micro-fulfillment centers often consider that retailers want to automate processes or will automate in the future. For example, mobile automated storage and retrieval (AS/RS) systems can make the best use of space, allowing retailers to store vertically and horizontally across the center. Plus, these systems can use robots to address the issue of picking from several SKUs stored in a small space.
With each solution, software and integration with the retailer’s management system are vital for real-time inventory updates, accurate tracking and labeling, and timely delivery.
How Micro-Fulfillment Helps Overcome Supply Chain Challenges
Well-designed micro-fulfillment centers are helping retailers navigate current challenges. Efficient designs decrease the demand for labor, which is key to operating during a labor shortage. They also result in greater accuracy, lowering the time and costs to ship replacement items. Global supply chain consultant Chainalytics has found that micro-fulfillment centers can reduce the cost per order by USD 3 to USD 5.
Also, because goods for both the brick-and-mortar store and e-commerce fulfillment can be delivered to the same location, they can be loaded on the same truck, saving fuel and shipping costs. Micro-fulfillment centers can also help retailers decrease their reliance on third-party fulfillment services.
Micro-fulfillment centers aren’t the solution for every retailer, but it’s worth analyzing how they can increase order picking and delivery times, streamline processes, and lower costs. The e-commerce growth trajectory continues. Consider micro-fulfillment centers as a way to keep up.