IWhy is Micro Fulfillment Going to Rule Retail

Why is Micro Fulfillment Going to Rule Retail?

Digital technologies are transforming the world of retail. As omnichannel retailing takes prominence, the quest to deliver goods and merchandise to customers is quickly and steadily increasing. At a time when economic conditions are changing and consumer behaviour is shifting, logistical changes are paramount too. According to a Forbes report, one of the industries that have been impacted by the recent changes is the grocery industry. The grocery industry has witnessed a 43% increase in e-grocery sales between March 2020 and 2021. Automation in logistics and optimising the supply chain are therefore important practices for retailers to adopt, to be able to stay ahead in a competitive market. This is where micro fulfillment comes in.

What is micro fulfillment in retail?

Micro fulfillment is a strategy retailers leverage to make the fulfillment process more efficient. Micro fulfillment in retail aims to enhance logistics infrastructures so that processes, from receiving an order online to delivery becomes easy and fast. It includes using automated storage facilities which help reduce delivery time and enable smooth operations. Micro Fulfillment Centers or MFCs consist of modern automation technologies and robotics which retailers install in their warehouses or stores for automated output. A typical Micro Fulfillment Center consists of two components, one is a software management system to process online orders and the second is physical infrastructure with online assets, to pick up items.

MFCs are the next big thing with higher efficiency and faster delivery

One of the main challenges that MFCs solve in the grocery segment is pick-up time and delivery. An online order which takes about 60 minutes for grocers to deliver is delivered in half the time, with the help of an MCF. These Micro Fulfillment Centers can be installed in supermarkets too, to enable a hyper-local function and to decrease the time of delivery. These MFCs help retailers lower grocery fulfillment costs from in-store pickup to last-mile deliveries. Industry experts also state that Micro Fulfillment Centers as a solution (MaaS) will allow retailers to combine multiple technologies to provide an end-to-end solution for the fulfillment of orders. In an in-depth report, Forbes states that Automated Guiding Vehicles (AGV) improve efficiency and minimise human intervention, last-mile delivery softwares optimise routes and schedule deliveries, and logistics software will replenish inventory to MFCs.

Agility and enhanced customer experiences in the retail industry

MFCs are generally smaller than traditional fulfillment centers. It is also a very agile unit that can be set up anywhere, be it a localised area of a single-store or a spoke-hub distribution where one center serves many purposes. Another option is a ‘dark store’ that can be set up as an MFC. Dark stores are like fully stocked physical grocery stores but are exclusively used for customers to pick up their online orders. Agile technologies like dark stores and MFCs are not only increasing the scalability of retail businesses, but are also offering customers exceptional flexibility. MFCs hold the grocer’s most popular SKUs and combine the proximity of a brick-and-mortar store with the automation of a larger warehouse. This helps provide an elevated customer experience and allows easy adaptation to modern shopping habits and needs of shoppers.

Following the trend, some of the biggest retail giants have forayed into MFCs. According to a report by New York Engineers, Walmart, the retail giant has already invested $10.3 billion in the automation of the supply chain in 2020 and started using MFCs earlier this year. It also plans to install 100 more Micro Fulfillment Centers in a short span of time. The Kroger Company too opened 375,000 automated fulfillment centers in Cincinnati earlier in April 2021.

The future of micro fulfillment

Innovation is key for retailers to adapt to modern shopping needs. Retailers need to provide shoppers with flexibility, to meet their expectations, and this can be best achieved with advanced technologies. Hence, investing in technologies like MFCs enable retailers to leverage the benefits of automation, while also reducing the costs of fulfillment with improved results.

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