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How micro-fulfillment can help companies win big markets

Where speed meets satisfaction in the retail revolution, micro-fulfillment plays a pivotal role in shaping the future of commerce and last-mile delivery.
Where speed meets satisfaction in the retail revolution, micro-fulfillment plays a pivotal role in shaping the future of commerce and last-mile delivery.
25 April 2024 •

In the dynamic and fast-paced world of retail, customer expectations are constantly evolving.

Research conducted by Salesforce revealed that a staggering 88 percent of buyers prioritize the overall experience offered by a company as much as the quality of a company's products or services.

It is no wonder businesses are driven to seek innovative solutions to meet consumers' demands more efficiently. One such strategy gaining traction is micro-fulfillment – a modern approach to order fulfillment that changes how goods are picked, packed, and delivered to customers.

Small spaces, large impact

Micro-fulfillment involves using small-scale automated fulfillment centers designed to be compact and agile. Typically ranging from 3,000 to 10,000 square feet, micro-fulfillment centers (MFCs) are strategically located within existing retail spaces or near densely populated urban areas.

Thanks to that, they can offer more fulfillment options, including curbside pickup, online purchases, and in-store pickups. However, they can only store up to 48 hours' worth of inventory.

In contrast, traditional fulfillment centers are large, non-automated warehouses exceeding 30,000 square feet, storing huge amounts of inventory. This is why they are located outside of urban areas, which causes longer delivery times and more significant transportation costs.

Micro-fulfillment making global waves

In the post-pandemic era, consumers have maintained the reliance on e-commerce that they developed during Covid-19, expecting faster fulfillment options. Hence, many companies are investing heavily in micro-fulfillment solutions.

According to Precedence Research, the global micro-fulfillment market size was valued at US$3.5 billion in 2022 and is projected to increase to US$114 billion by 2032. This means a whopping 42 percent growth from 2022 to 2032.

Popular supermarket chain Walmart, for example, partnered with technology companies Alert Innovation, Dematic, and Fabric to open Market Fulfillment Centers inside select Walmart stores in the United States (U.S.). This significantly increased the number of orders each store can fulfill in a day, while freeing up associates to help customers shop in-store.

From order to doorstep

At the start of each purchase process, customers place orders through the retailer's website or mobile app, specifying their desired products and delivery preferences.

Once the order is received, it is automatically routed to the nearest MFC for processing.

Automation lies at the heart of these MFCs.

The facilities are equipped with advanced technologies such as automated guided vehicles (AGVs), robotic arms, and conveyor systems that work seamlessly to pick, pack, and ship orders with remarkable accuracy and efficiency.

MFCs are equipped with the latest technology to speed up the process of order fulfillment.
MFCs are equipped with the latest technology to speed up the process of order fulfillment.

The picking process begins with algorithms meticulously optimizing routes to minimize time spent and maximize overall efficiency. AGVs are then deployed to swiftly gather items from designated storage areas based on the order requirements.

Once all the goods are gathered, they are packed securely via robotic arms and conveyor systems for shipping.

After that, completed orders are dispatched for delivery to the customer's specified location, such as a residence, office, or designated pickup point.

Retailers often leverage partnerships with trusted delivery partners like DHL Express to fulfill orders to ensure a streamlined delivery process.

Creating a streamlined micro-fulfillment process offers several key benefits for retailers and consumers alike.

For retailers, micro-fulfillment is a cost-effective solution to the challenges posed by the e-commerce boom. By reducing the distance between fulfillment centers and end consumers, retailers can significantly decrease shipping costs and transit times, ultimately leading to greater efficiency and higher customer satisfaction.

Moreover, the scalability of micro-fulfillment allows retailers to seamlessly adapt to fluctuations in demand. Whether peak shopping seasons or unforeseen spikes in order volumes, retailers can rapidly adjust their operations capacity and resources, ensuring optimal efficiency and resource utilization based on changing market conditions.

Seamless shopping experience for customers with micro-fulfillment

From a consumer perspective, micro-fulfillment promises unparalleled convenience.

With orders processed and shipped from nearby MFCs, customers can order online and collect their purchases in-store, opt for same-day delivery for online orders, or even place orders in-store and deliver goods to their doorstep.

Throughout the fulfillment process, customers receive real-time updates on the status of their orders, allowing them to track their shipments and plan accordingly.

Indeed, buying online and self-pickup is a growing trend. Based on the 2023 Global Digital Shopping Index by PYMENTS and Cybersource, globally, excluding India, 26 percent of consumers opted to pick up their e-commerce purchase in-store or curbside in 2022, compared to 21 percent of consumers in 2021.

MFCs offers unparalleled convenience by allowing customers to quickly pick up their online orders.
MFCs offers unparalleled convenience by allowing customers to quickly pick up their online orders.

The flexibility of self-pickup enhances convenience and empowers modern consumers to choose the fulfillment method that best suits their schedules.

Moreover, micro-fulfillment eliminates the frustration of encountering out-of-stock items in-store. By leveraging a network of fulfillment centers and integrating inventory data across channels, MFCs can quickly replenish stocks based on demand patterns, so customers can access a wide range of products, including those temporarily out-of-stock.

Additionally, the accuracy and precision of automated fulfillment systems minimize the likelihood of errors or discrepancies in orders, further enhancing the overall shopping experience for consumers.

The macro challenges in going micro

However, while the rise of micro-fulfillment presents exciting opportunities for the future of logistics, it is not without challenges.

The initial capital investment required to establish MFCs and implement automated systems can be substantial, posing a barrier to entry for smaller retailers.

Furthermore, the integration of complex technologies and the need for ongoing maintenance and upgrades require a skilled workforce capable of managing and optimizing MFC operations.

Retailers must remain proactive in training their staff, embracing emerging technologies, and optimizing their fulfillment strategies to rise up against these challenges.

Despite the above problems, micro-fulfillment remains a key driver of success and sustainability for forward-thinking businesses in the commerce and quick commerce industry.

Companies must embrace the efficiency that micro-fulfillment offers to meet rising consumer demands for speedy delivery and to stay ahead of the curve.