Micro-Fulfillment | Why are Retailers Inclined Towards It

Micro-Fulfillment | Why are Retailers Inclined Towards It

Author:
Kellye Snodgrass

E-commerce has been growing steadily and the shopper journey is no longer linear. As more shoppers turn to buying online, many retailers are shifting their online order fulfillment strategies to stay competitive. Recently, there has been a striking increase in the number of brands and retailers looking to implement a micro-fulfillment strategy as a means to meet their business goals and delight their customers. Micro-fulfillment is a retail strategy where small-scale storage facilities are used to fulfill online orders closer to shoppers, resulting in faster delivery times. These facilities typically take up less space and require fewer resources than traditional fulfillment, making it an attractive option for businesses that don't have the resources to set up a large warehouse.

There are several approaches to micro-fulfillment, but one of the newest approaches is using stores as micro-fulfillment centers. By turning stores into micro-fulfillment centers (MFCs), retailers can take advantage of existing floor space and staff while reducing the need for additional warehouse space and personnel. Micro-fulfillment is well suited for eCommerce and omnichannel retailing, as it can help meet the growing demand for faster delivery times. In addition, MFCs can be used to support click-and-collect operations, also known as BOPIS/curbside pickup. The convenience of in-store pickup is becoming increasingly important to shoppers, and retailers who don't offer this option risk losing sales to competitors. Micro-fulfillment allows retailers to meet this demand without incurring the high costs associated with traditional distribution centers or warehouses. 

Retailers considering micro-fulfillment should carefully assess their needs and requirements before making a decision. Read on to learn why retailers are inclined towards this business model and the key considerations to have before implementing a micro-fulfillment center.

What Is Micro-Fulfillment? 

Micro-fulfillment is a retail fulfillment strategy that enables retailers to store inventory closer to the shopper, fulfill online orders faster and improve delivery times. It aims to reduce the distance between the shopper and the ordered item and make last-yard delivery quicker and cheaper. Retailers nowadays have adopted a proactive approach to micro-fulfillment, i.e., turning their stores into micro-fulfillment centers.  

Today, micro-fulfillment is not restricted to setting up small and separate distribution centers in accessible and densely populated urban areas only. There are several other ways to achieve micro-fulfillment, such as performing fulfillment operations inside the store or utilizing other owned spaces like dark stores for fulfillment purposes. Many big-box retailers and merchants are honing their ability to use their stores for fulfilling online orders. For this purpose, they are investing in automation technology such as robotic systems, automated storage & retrieval, pick & pack, labeling & identification systems and inventory management software, which is making micro-fulfillment more efficient, streamlined and cost-effective.  

Similar to micro-fulfillment is micro-warehousing, a process of utilizing the space outside the traditional warehouses for stocking inventory. The primary goal of microwarehousing is also to move inventory closer to the shopper for quick and low-cost fulfillment. It is a great inventory management approach for retailers that distribute goods with an enduring shelf life, such as clothing, furniture, or other non-perishable goods, whereas perishable inventory (food, pharma, or beverages) is better suited for a climate-controlled storage environment. 

Why Is Micro-Fulfillment a Big Deal for Retailers? 

Micro-fulfillment is a frontline consideration for retailers because it can help them meet the demands of shoppers who want their orders faster. By implementing a micro-fulfillment strategy, some retailers can have orders fulfilled and delivered to shoppers in less than an hour. This is a big advantage over traditional fulfillment methods that can take days or weeks to complete. In addition to significantly quicker order fulfillment, retailers lean towards micro-fulfillment to help save inventory and shipping costs.  

Benefits of Micro-Fulfillment  

Retailers can reap a number of benefits by leveraging a micro-fulfillment strategy. Some of them are listed below:  

  1. Inventory Optimization – Retailers can optimize their inventory per local demand and requirements by adopting micro-fulfillment. In addition, by increasing the accuracy of inventory data, businesses can avoid overstocking or understocking their products, which can also lead to significant cost savings. 
  1. Automated Processes - Combined with automation, micro-fulfillment helps accelerate order fulfillment. Modern inventory and fulfillment software streamlines and automates order fulfillment operations, including picking, packing, and shipping, which speeds up the fulfillment process and reduces the delivery time. This way, the orders are sent out of the store shortly after they are received. 
  1. Lower Shipping & Operation Costs - One of the key benefits of micro-fulfillment is that it lowers shipping and operation costs. Automating the inventory management tasks helps retailers reduce the need for manual labor, and performing fulfillment inside retail stores or dark stores closer to shoppers reduces the shipping cost. 
  1. Speed & Responsiveness - Compared to traditional fulfillment methods, micro-fulfillment can provide significant decreases in order turnaround time. In many cases, retailers employing this strategy can fulfill orders within minutes or hours rather than days, accelerating manufacturing and inventory cycles.  

Key Considerations in Micro-Fulfillment  

Micro-fulfillment is one of the most innovative solutions for addressing the limitations associated with the traditional fulfillment process. That said, it’s not a one-size-fits-all solution, so retailers should keep certain things in mind before executing a micro-fulfillment strategy.  

  1. Site/ Store Selection 

Site selection is crucial for micro-fulfillment, whether from a brick-and-mortar store, a micro-warehouse, or a dark store. Not every site or store is an ideal environment for micro-fulfillment. Retailers must consider which store or location is suitable for this type of deployment. In some cases, enabling in-store fulfillment requires rezoning the property. They’ll need to consider the site’s logistical setup, such as whether the existing loading docks are sufficient and the accessibility of highways for truck traffic. Also, the store might require additional preparations such as training staff and modifying store layout if retailers are considering automation.  

  1. Inventory Implications  

Retailers thinking about converting their store into a micro-fulfillment center must ensure that it is strategically situated within the network and can be restocked immediately. This will help them avoid out-of-stock situations that can result in losing shoppers and sales.  

  1. Software/ Systems  

Another critical component of micro-fulfillment solution deployment is software or system integration. Retailers need to be proactive with their inventory reorders and management. For this purpose, automated inventory management software must be integrated with their enterprise resource planning system or order management system. Furthermore, other tools that should be utilized to make micro-fulfillment easier for the warehouse or BOPIS/Curbside teams include:

Smart devices: Devices such as tablets, smartphones, and OCR scanners make it easier for teams to access data and automate data entry.

Voice picking systems: Voice picking systems help teams quickly and accurately pick items from the warehouse and ensure accuracy.

Automated fulfillment solutions: They help streamline the order picking and packing process and make it easier for teams to complete orders quickly and accurately.

Pick-to-light systems: Pick-to-light systems are automated systems that use lights to indicate where items should be picked from, helping teams quickly and accurately pick items from the warehouse.

RFID Tracking Systems: RFID tracking systems are an excellent way for teams to quickly and accurately track items in the warehouse and ensure inventory accuracy.

  1. Transportation  

Retailers must consider transportation costs and logistics when adopting micro-fulfillment, especially when using their own last-mile transportation network. It includes factors like the number of trucks or other vehicles needed to transport goods, the security of goods during transport and the cost of transporting goods.  Outsourcing delivery to a 3PL is an alternate solution, but they still need to take into account things like disruptions in store operations and inventory availability. 

The Future of Micro-Fulfillment 

Automation will be a real game changer for all sorts of micro-fulfillment approaches. Retailers have already started piloting semi-automated and voice-enabled pick-to-cart/pick-to-robot solutions in brick-and-mortar stores, back rooms, distribution centers and dark stores to optimize micro-fulfillment. In the coming three to four years, many retail stores will use robotic micro-fulfillment technology in store to pick and pack orders and may even employ driverless vehicles or drones to automate last-yard delivery. 

The micro-fulfillment market is projected to have a cumulative opportunity worth $36B by 2030. This is substantiated by the  68% of the world’s population and 89% of the U.S. population who are projected to be living in urban areas, increasing the demand for micro-fulfillment. More than $6B market revenue of micro-fulfillment automation is expected from Grocery Omnichannel and eCommerce/ Q-commerce players only by 2030. 

In short, future retail stores will offer a frictionless and personalized experience to shoppers, where micro-fulfillment will streamline order fulfillment and omnichannel customer service will extend the store's reach.  

How Can PackageX Support Micro-Fulfillment? 

No matter what micro-fulfillment strategy retailers choose, a platform that provides a comprehensive set of tools to optimize micro-fulfillment operations is crucial to success.  PackageX, with its modern and all-in-one logistics platform, enables and supports micro-fulfillment operations for retailers and eCommerce businesses. It offers complete inventory management, order fulfillment, shipping, and receiving solutions on a unified platform. Our logistics mobile/web apps and APIs are designed to digitize, connect and streamline every aspect of the micro-fulfillment process, eliminating manual processes from logistical touchpoints.   

PackageX Inventory provides real-time inventory levels across all locations, so retailers can use that information to understand stock and prioritize shipping and fulfillment for every order. Similarly, PackageX Fulfillment allows retailers to pick, pack and ship orders effortlessly across all fulfillment locations, from stores to micro-warehouses. And with PackageX Ship, you can easily generate shipping labels within seconds from a network of 100+ national carriers and local delivery services. Our powerful shipping integration makes it easy to ship products to shoppers fast. 

By bringing all these operations together on a single platform, PackageX provides unparalleled efficiency and cost savings that are not possible with traditional siloed logistics solutions. The platform offers complete visibility, coordination, and automation across every touchpoint of the fulfillment process. The best part is businesses can set up our logistics platform in a couple of clicks, as it is easy to use and very flexible. 

If you're looking for a connected logistics stack that can help you take your micro-fulfillment operations to the next level, PackageX is the right choice. Contact us today to learn more about how we can help you streamline your fulfillment process and improve your shopper experience. 

Get started with PackageX

Kellye Snodgrass
Director of Product Marketing
A results-driven product marketer with 10+ years experience working with retailers, Kellye has a passion for unlocking new and innovative ways to drive retail profitability. As a Product Marketing leader at PackageX, Kellye is focused on making it easy for logistics and retail leaders to unlock more efficient logistics stacks that delight their customers. When she’s not at work, you’ll find her pulling on her cowboy boots and spending time with friends and family in her home state of Texas.

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