Microfulfillment is a new trend in the supply chain field, changing how businesses fulfill customer orders. It’s about improving the efficiency of the supply chain and making the delivery process quicker.
Instead of using large distribution centers to deliver products, businesses are shifting to smaller warehouses, usually located in densely populated areas. These small distribution centers are geographically closer to customers, delivering inventory more quickly.
Using quality shipping materials is an essential part of efficiently delivering products to customers, as is staying up to date on new trends in the supply chain field, such as microfulfillment.
What Is Traditional Fulfillment?
The foundation of a supply chain network is its distribution centers. Traditionally, businesses use large distribution centers to ship products. These massive facilities are usually dispersed across multiple states or regions and, from that location, inventory is transported to retail stores and directly delivered to customers.
The problem with traditional distribution centers is that they are expensive and difficult to operate. Smaller fulfillment centers offer lower costs and can move inventory a lot more quickly because they are closer to customers and stores in a region.
How Is Microfulfillment Different from Traditional Methods?
Essentially, the main objective of microfulfillment is to improve delivery times. Fast and efficient delivery is something customers are starting to demand from businesses. In recent years, two-day shipping or faster has become the norm, with companies such as Amazon raising the bar for delivery time. Same-day delivery is increasingly common, and it’s the standard that many businesses are trying to attain.
The microfulfillment strategy involves fulfilling customer orders from small-scale warehouses that are spread out in a region. These small warehouses are typically located in dense urban areas, where they can deliver products and reach customers in a timely and cost-efficient way.
Why Is Microfulfillment Growing?
The main reason why microfulfillment is gaining popularity is that retail has shifted. Online shopping and eCommerce are rapidly expanding compared to traditional retail, with millions of customers across the U.S. buying products online.
During the COVID-19 pandemic, consumers relied on eCommerce for almost all their shopping needs. Many people started buying online, which accelerated the shift from traditional brick-and-mortar stores to digital stores.
Many consumers no longer want to go to traditional stores, and they want businesses to deliver products to their doorstep. It’s even becoming common for people to order grocery deliveries online. Grocery stores are some of the primary businesses embracing microfulfillment strategies.
What Is a Microfulfillment Center?
A microfulfillment center or MFC is a small warehouse that works as a small distribution center. Usually, a microfulfillment center is about 10,000 square ft. or less. By comparison, traditional warehouses are around 300,000 square ft. or larger. The advantage of small microfulfillment centers is that they can be located in many different places. Products can be delivered quickly to customers from an MFC, but customers can also pick up their orders directly at the warehouse.
Since MFCs don’t require much space, they are set up in different places. For example, an MFC can be located at the back of an existing store, at a pre-existing warehouse, or in the basement of a building.
The term “dark store” refers to the fact that microfulfillment centers are a new type of store that’s invisible. It’s not a traditional shopping experience where the customer walks around looking for products.
What Role Does Technology Play in Microfulfillment Centers?
The idea behind a microfulfillment center is to increase delivery speed as much as possible. This is done by bringing small warehouses closer to customers and applying high-end technology to make the warehouses more efficient.
There are two main ways in which businesses are trying to improve the efficiency of delivery systems. One is through automation and the other is by using AI technology. The combination of the two creates efficient and fast delivery systems.
What Major Businesses Are Betting on Microfulfillment?
Some of the largest U.S. companies are embracing microfulfillment as a new business strategy. Walmart is one of the companies that is investing in automated MFCs. During the coronavirus pandemic, Walmart saw its online sales increase dramatically. In the third quarter of 2020, the company saw its online sales grow by 79%, compared to a 6.4% growth in physical store sales.
With this increase in online shopping, Walmart is shifting its focus from in-store sales to better delivery services for online customers. The company now offers a same-day delivery service for groceries in some states. To increase the efficiency of its delivery system, Walmart is relying on its 5,000+ stores across the country. Instead of building new MFCs, it’s building microfulfillment centers in the back of existing stores.
Amazon is another company that is investing in microfulfillment, and it’s focusing on high-end technology to increase delivery speed and efficiency. It has partnered with a company called Dematic to create robot-operated fulfillment centers across the country. In total, Amazon has spent billions of dollars in shipping infrastructure and has 175+ fulfillment centers across the world.
How Can a Business Apply a Microfulfillment Strategy?
High-quality container and packaging supply is essential for any business shipping products to clients. Once you have covered this basic requirement, you can start thinking about improving delivery speed and efficiency in other ways.
For many small businesses, building a microfulfillment center is too costly and complex. However, a model that could interest different types of companies is using independent microfulfillment companies. These are companies that create MFCs and then lease space or provide services to multiple retailers.
For example, Warehouse Anywhere is a company that operates over 900 storage facility locations in metropolitan areas across the U.S. Many eCommerce businesses are partnering with Warehouse Anywhere to deliver products quickly to their customers.
The Future of Microfulfillment
Essentially, microfulfillment will continue growing alongside automation and artificial intelligence technology. It’s possible, in a decade or less, we will see completely automated delivery systems. Companies are already investing in intelligent vehicles that can automatically sort, load, and deliver packages.