What is Micro-Fulfillment?
Micro-fulfillment is a strategy that places small-scale warehouse facilities in densely populated urban locations closer to the consumer to improve delivery times.
Two-day or less shipping has become the norm in the past few years. If you're a retailer other than Amazon or Walmart, it's tough to keep up the pace. In some cities, the bar has been raised to same-day delivery.
Last-mile costs represent 41% of the total supply chain costs for a product. The goal of micro-fulfillment is to move inventory and fulfillment as close to the consumer as possible and allow smaller retailers to be competitive in shipping times. It's less costly to meet two-day or fewer delivery times from large regional DCs in terms of infrastructure and shipping costs. Micro-fulfillment makes the last mile shorter and less expensive.
What is a Micro-Fulfillment Center?
A micro-fulfillment center (or MFC) is a small, sometimes highly automated fulfillment center that serves e-commerce as well as local store pick-ups.
They may be located in an existing store or warehouse or a dedicated small distribution/warehouse space, usually 10,000 square feet or less. Traditional warehouses are in the 300,000-square-foot range. If it's located in a store, the MFC should be set up to allow fulfillment workers to pick and pack orders without disrupting the store's operations. An MFC may have inventory for 24-48 hours worth of operations and must be restocked regularly. The store serves as a base for ship-from-store orders and local pickups within a zip code or designated region.
An micro-fulfillment center may be a purpose-built space with an existing facility, such as a retail store or a warehouse, within the location's existing footprint. Automated and robotic systems can be installed without expanding the facility, which can cut the cost of filling an order by about 75%. Giants like Amazon, Walmart, Nordstrom and others are investing in automated MFCs to fulfill online orders and replenish stores.
They can be sited inside an existing warehouse or fulfillment operation. You may find MFCs in existing stores, garages or parking lots, and basements for small companies. The "dark store" concept is based on converting idle retail space into an MFC.
Another model is the independent FMC operation. Warehouse providers create an MFC and lease space and/or provide services to multiple retailers. Warehouse Anywhere operates under this model, offering more than 900 storage facility locations in major metro markets. It's a unique offering in the REIT storage industry, and traditional fulfillment 3PLs are turning to Warehouse Anywhere to support their e-commerce customers with an MFC concept.
MFCs have found their niche as a rapid response for the small-to-medium-sized e-commerce shipper. A traditional warehouse is too large and rigid. Legacy fulfillment operators like 3PLs don't have the agility to handle specialized merchandise such as garments on hangers or other out-of-the-box packaging.
With an MFC retailers and online sellers transform the efficiency of their fulfillment process. An MFC makes it easier to meet Service Level Agreements for shipping cutoff times with delivery carriers. If a shipment requires last mile or white-glove delivery, costs are lower due to the lesser distance required. Shipping rates for parcel deliveries cost less because there are fewer zones involved.
When the pandemic shutdowns hit, retailers with separate fulfillment operations for e-commerce and store channels found they had inventory stocked in the wrong warehouse. As online shopping soared, e-commerce fulfillment struggled to find product, while the store replenishment channel was not set up for that level of e-commerce. A pop-up MFC could bridge the gap by adding e-commerce capability where the inventory was already located.
Developing a micro-fulfillment strategy gives retailers the power to scale quickly. Shippers of electronics, health and beauty products, fitness gear, supplements and accessories can ramp up to meet demand in dense metro market areas with flexible space in existing structures. For example, Warehouse Anywhere can stand up a micro-fulfillment center in as little as 30 days.