How Micro-Fulfillment Benefits the Supply Chain

The world of e-commerce continues to expand, and as customer shopping habits and delivery expectations change, companies must find ways to adjust. This is where the concept of micro-fulfillment comes into play.

Micro-fulfillment refers to small-scale distribution centers that are positioned closer to the end-consumer. These tiny urban warehouses, or micro-fulfillment centers (MFC), are often attached to local retail stores or contained within larger distribution centers in the area.

These smaller, more compact fulfillment centers generally use high-end automated systems to complete online orders quickly, more efficiently, and with less staff on site. If you are struggling to find a way to get shipments to your customers quicker.

Whether you are considering opening your own micro-fulfillment center or you are just looking for ways to optimize the MFC you are already operating, Redwood Logistics can help. Our team of experts can assess your position in the market, help you build a solid MFC integration strategy plan, and give you actionable advice to put it into place without too much hassle.

Getting Closer to the Customer

With the advent of two-day shipping expectations and the increase in online grocery shopping, retailers are looking to get closer to their customers. Space in urban areas is priced at a premium, and the idea of reducing the need for a typical 600,000 square foot grocery fulfillment center to a 10,000 square foot micro-fulfillment center laden with automation makes good financial sense when few spaces of that size are available. This is especially true for areas densely packed with delivery customers.  

One of the primary benefits for grocery retailers, in particular, whose business model caters to online delivery, is a reduction in costs for crucial last-mile delivery efforts. Grocery retailers are known to suffer from particularly thin margins, and shaving costs wherever possible has even more of an impact. But the question is how can they cut costs while preserving their quality assurance efforts? 

Micro-fulfillment centers allow for goods to be placed much closer to their end-users and for more specialized stocking of the miniature warehouses with a methodical use of customer data in that area.

All of this streamlining leads to a much more positive customer experience, faster shipping, better margins, and cost-savings.

Automation for Efficiency

Efficiency is another benefit of utilizing the micro-fulfillment model. There is a whole new category of startups focusing on the automation needed to manage these sites, and their aim is to make e-commerce even faster and more streamlined within a smaller footprint model. Some systems can process as many as 4,000 orders a week and still be housed in the back of a store, restructuring the typical “back-stock” model or other dead space. 

Retailers not currently using this model often rely on in-store picking- whether in grocery or other forms, and this can lead to congestion, inventory issues, and other threats to profitability. Automated inventory in conjunction with automated picking leads to faster fulfillment with fewer errors, and less need for intervention.

Reducing Footprint and Costs

Retail has been following a trend of smaller stores across the board, including big box giants Target and Walmart. Smaller stores allow for more access to customers in urban areas and college towns, and much like the idea of MFC, utilize what space is available where there is little to be had. Reduced footprints are becoming the norm.

Retail space is a huge investment for retailers, and as retail continues to evolve in order to accommodate the increasing pressure from e-commerce, micro-fulfillment presents a clever solution. In the case of stores that are currently oversized, utilizing an MFC allows for the optimization of store space, strategic stacking of goods, and the use of more vertical spaces. With robots retrieving items, the storage of inventory possibilities is increased. After switching to this model, many stores are then able to reduce their size while maximizing efficiency.

As many retailers shift to automated warehouses, micro-fulfillment centers present a flexible solution to many trouble spots and areas in need of cost reduction.  Using an MFC simultaneously cuts the costs of picking through automation and real estate due to the reduced size. With space at a premium and access to customers a priority, it’s easy to see why there are so many companies looking into this trending solution.

Ready to set-up your own MFC? Contact Redwood Logistics for a free consultation.