The pandemic changed everything, including and maybe especially, ecommerce.
When supply chains experienced pandemic-related disruptions, businesses were left struggling to keep up with the adjacent, almost immediate spike in demand for one- and two-day shipping. Coming out of that pressure-filled period, the demands stayed the same, but smart companies changed the way they operate.
One of the biggest changes in this “need it now” economy is the addition of micro-fulfillment centers (MFCs). These smaller, tech-powered distribution centers exist throughout the country, and most importantly, closer to customers. MFCs offer the speed, scalability, and customer satisfaction required to stay ahead, but without the cost and complexity of building a nationwide warehouse network.
It’s a concept that’s catching on, too. By 2030, there may be as many as 5,600 MFCs across the nation. Let’s dive in!
The race to faster delivery
Fast delivery has become table stakes for brands in the ecommerce world. If you can’t get products to consumers in two days or less, they are going to turn elsewhere. In fact, one survey shows that 88 percent of customers abandon their online shopping carts due to “poor shipping terms” like slow delivery and high shipping costs. That’s lost revenue now and potentially in the future, too, as shoppers go elsewhere to find brands that meet their needs
The truth of the matter is that traditional, centralized fulfillment models can’t always keep up with today’s customer demands. They are often too far away from the customer and too big to quickly and efficiently respond to demands. Micro-fulfillment centers, however, are small and nimble, making them ideal for meeting today’s fulfillment demands.
What is micro-fulfillment?
Micro-fulfillment is a strategy that allows brands to get their products closer to customers. These smaller centers often range in size from 3,000 to 10,000 square feet in size, holding around 10,000 to 15,000 items. Brands place these MFCs in urban or highly populated areas so that they can quickly and easily reach their customer base. This last-mile strategy can reduce fulfillment costs by 75 percent per order.
A variety of industries are turning to MFC solutions. They include grocery chains, which were early adopters of the strategy thanks to the pandemic. Many retailers are also adopting MFCs to keep up with the “Amazonification” of delivery windows, as are direct-to-consumer brands.
The role of micro-fulfillment in ecommerce logistics
MFCs allow brands to place their inventory closer to customers, especially items that are in high demand and move quickly, shortening the delivery window. Compare this to traditional warehouses, which you can usually find on the outskirts of cities or in rural areas. Companies vary in where they place their MFCs, but there are several options, including a re-purposed existing building, a backroom in an existing brick-and-mortar store, or even “in-fill” warehouse developments. The options are nearly unlimited.
When a retailer or DTC company establishes an MFC, they gain access to alternative carrier solutions for faster last-mile delivery. These range from small parcel carriers like UPS and FedEx, to non-traditional services like DoorDash and Instacart. Having these options available increases the speed and reliability of delivery.
Technology and automation behind MFCs
Micro-fulfillment centers skew toward the higher tech in warehousing networks. By relying on automated picking systems, robotics like autonomous mobile robots, and smart storage solutions like ASRS, MFCs can operate efficiently, with fewer errors and lower labor rates.
Seamless integration with ecommerce platforms and WMS systems is essential for the MFC equation to work. Together, the integrated systems provide data-driven decision-making for stocking the right SKUs in each MFC location. With that strategy in place, MFCs are ideally located for their specific customer base.
Benefits of micro-fulfillment
Because MFCs are located so near customers, they ensure that packages reach them as promised and when expected. This helps build brand loyalty and a lasting relationship.
The cost to build or create an MFC is significantly lower than a traditional warehouse, and companies can get one up and running in just a few months. The cost to operate an MFC can also be lower when compared to manual picking and order fulfillment.
Challenges and considerations
For all their benefits, MFCs don’t come without their challenges, including the cost to get one off the ground. This may include the infrastructure needed, along with the technology and automation required to run them efficiently. At the bare minimum, an MFC requires robust software management systems to process online orders, and automation like robots for picking and shuttling.
Other issues that companies must address when considering an MFC include the complexity of inventory management in an MFC. Micro-fulfillment is best suited to the fastest-moving SKUs, which can change from season to season or sometimes, even week to week. Understanding which inventory to keep in an MFC versus a traditional warehouse can be a difficult puzzle to solve.
Micro-fulfillment vs. traditional fulfillment models
Deciding to use micro-fulfillment instead of, or in addition to, traditional fulfillment models require careful consideration. In most cases, companies will adopt a hybrid strategy that involves a mix of regional warehouses plus strategically placed MFCs.
Many companies are identifying the need for MFCs. Whether a big-box retailer like Walmart, which established its first MFC back in 2019 for servicing its grocery customers, or a smaller brand that is trying to keep up with its larger peers, MFCs make sense for many types of brands.
How Kase supports micro-fulfillment strategies
Kase is ideally situated to provide micro-fulfillment to its partner brands. With a multi-node fulfillment network already in place close to customers, Kase can provide the agility and technology required to execute effective micro-fulfillment. Kase has a highly qualified and experienced team that can support real-time integration, getting an MFC up and running in short order. And if your brand scales quickly, Kase has flexible solutions in place to meet those demands.
Micro-fulfillment can serve as a strategic, competitive advantage for brands that adopt it. MFCs deliver speed and accuracy, meeting and exceeding customer expectations. With the right partner, micro-fulfillment delivers both customer delight and operational efficiency.
Think micro-fulfillment might be right for your brand? Talk to a Kase expert about building your micro-fulfillment strategy.
