What is Micro-Fulfillment?
In the age of next-day delivery, environmental concerns, and heavy competition throughout all industries; finding ways to cut costs while still meeting consumer demands has become an interesting balancing act for businesses.
In 2021, consumer trends were hyper-focused on a few different things, two of the most prominent being the desire to get items quickly and the preference for online ordering. Here are a handful of stats that reflect these various trends, which all essentially lead right back to online shopping and better fulfillment options:
- According to Statista, the number of online shoppers in the U.S. has grown to over 230 million in 2021. Shoppers who have ordered more than one item online have consistently grown each year, and this trend is likely to continue.
- Curbside pickup (and similar options), which boomed during the COVID-19 pandemic, is well-liked by consumers. Per a 2020 survey by Medallia Zingle, 87% of shoppers have reported the desire for continued services that limit in-person contact and allow easy item pickup. Even once pandemic concerns are no longer as much of an issue for consumers, many people report the desire to continue using no-contact pickup and delivery methods.
- Mintel’s analysis of consumer trends in 2021 demonstrated the importance of environmentally sustainable practices. The report cited that many consumers are willing to switch to another brand or company if they feel that the brand’s values and sustainability efforts are more in line with their own.
For these reasons and more, many retailers and grocers are now utilizing facilities known as “micro-fulfillment centers” or MFCs.
In this article, we will examine the concept of micro-fulfillment and outline the benefits of implementing a well-designed micro-fulfillment strategy.
Micro-Fulfillment: What is It?
Micro-fulfillment involves consumers placing an order (often online) which is then received and filled through mostly-automated processes at what is known as a micro-fulfillment center.
Micro-fulfillment centers are small facilities positioned near densely-populated areas or are otherwise in close proximity to consumers’ homes. Often, these facilities are hosted in smaller retail locations that are not being used for in-person shopping.
However, some of these micro-fulfillment centers are a bit of a hybrid, opting to have an in-person shopping option in addition to operating as a micro-fulfillment center. This continues to be a trend that a lot of companies who implement this order fulfillment strategy are starting to take part in.
There are many different micro-fulfillment center strategies that have been considered and trialed by companies thus far. Regardless of the specific structure of a given MFC, these facilities primarily use AI. But they also utilize employees to quickly process orders and package goods so that they can be picked up by consumers at a convenient time.
Benefits of Utilizing Micro-Fulfillment
Some of the major consumer trends include the ability to shop online, easy pickup options, and environmentally-conscious practices.
Micro-fulfillment centers effectively address:
MFCs rely on online ordering so that consumers can easily select what they want to purchase as well as a pickup method and time that works for their schedule. Immediately after the order is placed online, micro-fulfillment software takes care of the rest of the process, with employees performing certain duties as necessary.
Easy, contactless pickup
One of the biggest costs and burdens which companies have had to navigate for years is related to last-mile delivery. Delivering goods to consumers is the last part of the order fulfillment process and one that has been made much more difficult with the push toward e-commerce.
However, MFCs or “Dark Stores” make this much easier for everyone involved. Consumers can pick up their items at a convenient location and time. Further, companies save on transportation and logistical costs related to last-mile delivery.
Small Environmental Footprint
Concerns related to the environment have become extremely important. Brands have had to find ways to be adherent to the best eco-friendly practices while still delivering an excellent customer experience. At the same time, many customers are unwilling to purchase from brands that don’t appear to be committed to improving the state of the environment.
Beyond consumers and companies: governments around the world are now mandating that companies implement practices that reduce carbon emissions and generally improve sustainability measures.
Beyond the three main mutual benefits for companies and consumers outlined above, many businesses are being drawn toward the micro-fulfillment movement due to the inherent ease of expanding operations.
Because MFCs are often smaller facilities that don’t have to consider appearance or other issues related to in-person stores, it’s easy to build new facilities wherever they will benefit customers most. These small, highly-efficient MFCs can be placed nearly anywhere and require much less monetary investment than does a larger retail or grocery store.
Furthermore, after just a short time in operation, companies can analyze consumer ordering trends and determine which goods need to be available in higher supply within the MFCs and which may only need to be stocked in small amounts. This allows for less waste and more efficiency within a company’s structure.
Cost of Opening a Micro-Fulfillment Center
Reports on the cost of opening a micro-fulfilment center can vary widely. Some experts estimate between $3 and $5 million in startup costs, depending on the size of the space.
However, MFC strategies can significantly reduce the cost-per-order from roughly $10 or $15 down to $3-$5. Each company will need to consider their specific needs and whether or not an MFC makes sense for their business and industry.