– Supply Chain Insight –
Meeting Today’s Customer Expectations…
Is Micro-fulfillment the Answer?
Today’s retailers are scrambling to meet consumer expectations to deliver precisely the product the customer is looking for within just a few days or even hours. The fulfillment strategies of the past simply can’t meet consumer expectations, so how can retailers cope?
Micro-fulfillment is an effective option for companies to meet high service expectations through speedy, direct delivery to the customer or other pickup locations.
The Evolution of Consumer Expectations
Consumer demands have changed a lot over the past several decades, and so it makes sense that retail models and the logistics operations that support them have changed, too.
In the 70s, wholesalers and suppliers commonly shipped directly to retail locations. In the 80s, many retailers began utilizing distribution centers that were often located 50-70 miles from stores. Globalization in the 90s led to freight moving through distribution centers from both domestic suppliers and import centers and then on to retailers.
The e-commerce revolution in the 2000s brought e-fulfillment centers and an increased use of last-mile delivery methods to get goods into consumers’ homes, further complicating the logistics behind getting products into consumer hands.
Though the online shopping revolution was already well underway, the pandemic ramped up the timetable. Companies had to find ways to adjust and provide their customers with the products they needed when brick-and-mortar shopping was less feasible.
Many Companies are Struggling to Profitably Meet Expectations
Though many companies adapted admirably to the circumstances, the solutions put in place were oftentimes not cost-effective enough to be considered long-term solutions.
- 72% of consumers consider availability of 2-day delivery an important factor when deciding whether to purchase
- 36% of consumers abandon their shopping cart because shipping is too long
- 90% of retailers are losing money attempting to emulate Amazon’s highly-efficient shipping program
One study conducted by Incisiv for Wynshop showed that 86% of national grocers reported that low profitability of online sales was their number one problem. While this study was specific to grocery retailers, other retail sectors are experiencing similar issues as they try to compete with the super-fast shipping offered by mega-retailers like Amazon and Wal-Mart.
Retailers who are struggling to meet consumer demands without cutting into their margins need to find a new solution.
Micro-Fulfillment is an Ideal Solution for Many Retailers
When you need to get products to customers faster without paying exorbitant prices for expedited shipping methods, it makes sense to get the product closer to the end customer. That’s why Micro-fulfillment centers (MFC) are a practical and cost-effective solution for many companies.
What is a Micro-Fulfillment Center?
Micro-fulfillment centers are small distribution centers that are positioned carefully to serve as the engine that drives last-mile delivery. Here are some common specs:
- Between 5,000 and 25,000 square feet
- Commonly less than 48 hours’ worth of inventory; requires frequent replenishment
- May be located inside a retail location (i.e., in the back room)
- Dark stores are commonly being utilized as micro-fulfillment centers
- May be housed in a stand-alone building
- Large cities could require up to 10-15 micro-fulfillment centers to keep product close to consumers
Both Automation and Manual Labor are Being Utilized
Micro-fulfillment often involves a blend of manual labor and automation (i.e., robotic elements) to fill orders in the most efficient way. Effectively synchronizing both order-filling elements requires technology that is designed to manage both.
Advantages of Micro-Fulfillment
- Low CapEx and Total Cost of Ownership (TCO)
- Faster to implement (many MFC can be operational in 4-8 weeks)
- Doesn’t typically require conveyors
- Enables faster delivery
- Low labor costs when automation is utilized
- Enables true omnichannel strategy
- Maintains relationships between retailers and customers by cutting out third party involvement in the customer experience
Companies Must Lean on Solid Tech Solutions to Find Success
Micro-fulfillment is inherently fast, and the combination of elements can make it complicated. Companies need a solid tech stack that can keep pace, manage varied operations, and carry orders through the entire fulfillment process, from the consumer order to the package being delivered at their front door, or other pick-up site.
Since micro-fulfillment centers and pop-up distribution sites are often expected to be up in running in a couple of months, solutions should be quick to implement and simple for end-users to learn.
An Ideal System Will Facilitate Collaboration Between Human and Automated Elements
Solutions for micro-fulfillment should be able to direct and synchronize both human labor and automated elements – like robotics – to ensure that each element is being used in the most efficient way possible.
Order Info Needs to Be Synchronized
Tech solutions must be able to manage and synchronize orders coming from various platforms, including app, online, and in-store orders. Because the idea is that orders can be filled quickly, the system must be able to prioritize which orders need to be handled first.
Real-Time Inventory is Critical
Smaller inventories and consumer expectations for reliable, fast delivery leave little margin for error. Because of this, real-time inventory that’s both accurate and actionable (automatically calls in replenishments, for example) is key.
Micro-fulfillment Requires a Mastermind to Bring It All Together
The fast-paced, omnichannel nature of micro-fulfillment means that technology must work together seamlessly to support all operations, from receiving to routing to auditing and packing orders. The right Warehouse Management System (WMS) / Warehouse Execution system (WES) is the orchestrator of the many components in a Micro-fulfillment facility, integrating all components to synchronize and optimize the equipment, labor, orders and processes.
The ideal WMS to master the Micro-fulfillment Center should be:
- Scalable to support future growth
- Configurable to manage the ever-changing nature of consumer expectations
- Robust to be able to oversee and synchronize the various technologies within the operation
- Fast to deploy and expand when necessary
The Warehouse Management (WMS) and Warehouse Execution System (WES) is the mastermind that brings every part of the micro-fulfillment center’s operations into line, and is the key component that makes this strategy go beyond functional to enter the realm of profitability while truly improving the customer experience.
Successful micro-fulfillment is all about managing time and customer expectations, both of which are difficult to do without a WES/WMS to coordinate operations.
A key component to a successful micro-fulfillment operation is the proper planning and design of the facility, the processes and item slotting, which all together enable better operational efficiencies. For more information about the importance of how all of this ties together, and how a fulfillment optimization system is a great solution to help you optimize your operation, check out Syncontext’s Fulfillment Optimization System, SKUStream.
In closing, synchronization of operations in real-time orchestrated by top-tier technology allows this type of fulfillment center to achieve the end goal: getting products into consumers’ hands faster, more efficiently, and more cost-effectively.
About the Author:
Amit Levy is Executive Vice President of Customer Solutions and Strategy for Made4net. With more than 25 years of experience in supply chain technology, Amit brings to bear experience honed working with hundreds of customers, helping them improve processes and gain efficiencies in their warehouse operations.
Made4net is a leading global provider of best-in-class, cloud-based supply chain execution and warehouse management software for organizations of all sizes to improve the speed and efficiency of their supply chain. The company’s end-to-end SCExpertTM platform offers a robust WMS software that enables real-time inventory visibility, labor management, and equipment productivity with performance analytics that drive faster, more accurate order fulfillment and improved supply chain efficiency. In addition to the best-of-breed WMS, the platform offers integrated yard management, dynamic route management, proof of delivery and warehouse automation software solutions that deliver a true supply chain convergence.
For more information, visit www.made4net.com