Micro-fulfillment is shaking up warehouse logistics and prompts industry players to rethink their fulfillment strategy. The small warehouses close to the city have become a popular alternative, especially in e-commerce, to meet the changing demands in logistics. That's reflected in the numbers: the micro-fulfillment market is expected to reach a cumulative opportunity value of approx. $10 billion. What does this mean for the business of growing e-commerce brands – and which industries benefit most from micro-fulfillment?
Micro-fulfillment brings goods closer to the consumer
With micro-fulfillment, companies no longer rely on just a few central distribution centers for delivery. With smaller decentralized warehouses in densely populated urban areas, logistics is moving closer to the end consumer.
Thanks to their small size, micro-fulfillment centers (MFCs) are ideal for use in hubs such as metropolitan areas, cities and suburban residential areas. By being close to the recipient, they help businesses meet customers' increased expectations for delivery terms. MFCs can be set up either in the back of existing retail stores or in unused spaces as a stand-alone solution.
Fast and efficient delivery through micro-fulfillment
The digital networking of warehouse management and shop systems is essential for the success of micro-fulfillment logistics. Micro-fulfillment warehouses are often highly automated. This allows for fast, flexible and sustainable delivery to consumers thanks to more efficient, technology-based picking and short routes to the end customer. Inventory quantities can be viewed in real time. Data transparency reduces errors and facilitates automated returns management.
Robots collect ordered items from shelves and assemble them for delivery or pickup. Pickers can process multiple orders simultaneously at goods-to-person stations . Time-consuming picking by hand is thus a thing of the past. This combination of manual and mechanized work reduces the likelihood of human error and speeds up e-fulfillment.
But who is a micro-fulfillment strategy suitable for and what do you need to consider when setting it up? Here are the answers to the most important questions:
Which industries may consider micro-fulfillment?
Suppliers of fast-moving consumer goods (FMCG) can particularly benefit from micro-fulfillment, as these are high-turnover, perishable products that are associated with high volatility and fluctuations in demand. In Germany, Flink, Gorillas, or Getir, among others, use a decentralized network of micro-fulfillment warehouses and thus revolutionize shipping and distribution in retail. But other e-commerce niches are also predestined for micro-fulfillment - e.g. products with seasonal sales peaks.
For which industries does micro-fulfillment not make sense?
Micro-fulfillment is not suitable for every industry. Goods such as luxury items or furniture have lower trade volumes than food and therefore require long-term storage of goods.
How long does it take to convert a retail store to micro-fulfillment?
In-store fulfillment can be set up and installed in just a few weeks. Through the connection to the stationary store, goods can be flexibly delivered or picked up. The choice between different delivery options increases the bond between retailer and customer. Warehousing1 already provides an overview of how the business models of Omnichannel Retailers and Pure eCom Players differ and what advantages and disadvantages they bring with them.
How does the picking process work in a micro-fulfillment center?
Micro-fulfillment centers are often characterized by a high degree of automation. The picker receives support in the work process through Robotics as a Service (RaaS). As a result, retailers create same-day fulfillment and delivery, which increases conversions from end consumers. This helps not only to successfully manage increasing volumes, but it also satisfies the growing demand for same-day delivery.
Is micro-fulfillment expensive?
Short answer: yes. Setting up an MFC can drive up costs for retailers. Especially if new real estate has to be purchased or rented in the city. In addition, vendors face increased expenses when shipping is handled by local last-mile carriers.
Aren't conventional fulfillment centers better than MFCs?
It depends on the industry. Because of the small size of MFCs, you can't match the turnaround and economies of scale of a traditional fulfillment center. In addition, the same items must be stored at multiple locations to meet demand as quickly as possible. This in turn leads to increased capital lockup.
Many e-commerce merchants may benefit from micro-fulfillment
When it comes to competing for retail market share, offering best-in-class last-mile delivery services is a critical success factor. At least since the introduction of next-day or even same-day delivery, providers are increasingly confronted with the fact that customers expect fast and sustainable solutions when it comes to delivery.
50 percent of consumers listed same day delivery as one of the most attractive services. This was noted by PWC in their Consumer Insights Survey. A different survey found that 63 percent of consumersrequire fast shipping for a positive shopping experience. With the short delivery times that MFCs enable, they can help retailers improve the shopping experience of their customers.
The gateway to greener logistics
Local fulfillment centers have the potential to significantly reduce the environmental footprint of e-commerce logistics – especially when combined with environmentally friendly delivery vehicles. Last-mile emissions can be reduced by between 17 and 26 percent by 2025 according to Accenture. This will require strategic investments in innovative solutions that break down traditional processes and bring greener fulfillment to the forefront. Alternative modes of transportation not only reduce greenhouse gas emissions. The use of bicycle messengers also significantly relieves traffic in congested inner cities.
The economic efficiency of classic picking by hand is reduced the more orders are placed online. The right software increases the efficiency of the processes and automation by robots accelerates handling times. In combination with the physical proximity to the customer, MFCs enable extremely short delivery times. At the same time, retailers can tap into an environmentally conscious market with sustainable delivery solutions. This creates ecological and social advantages, which can additionally lead to an improvement in market reputation.
Next Day Delivery without Micro-Fulfillment with WH1+
But what if the micro-fulfillment strategy is not currently feasible or desired for a company, but the customer still needs to be offered competitive delivery times, quality and personalized fulfillment? Warehousing1+ enables orders to be delivered within one to two business days. Thanks to late cut-off times and multiple daily pick-ups from our partners, customers can typically receive goods within 24 hours. As a customer of WH1+ you bear no risk: no contract periods, no setup fee, no ongoing fixed costs and with flexible termination you can easily scale your growth with us.
If you want to learn how you can manage your fulfillment and warehouse logistics digitally via a central platform, expand it easily and flexibly and optimize it efficiently, contact us!