Leverage Store Locations as
Micro-Fulfillment Centers

Micro-fulfillment relates to the strategy of companies using smaller scale distribution centers, warehouse facilities or utilizing dark stores in highly populated areas to improve product delivery speed. With two-day shipping becoming more normalized, micro-fulfillment has become a more commonly used strategy among retailers.

The purpose of micro-fulfillment is to maintain inventory closer to the consumer. This saves the retailer on shipping costs and increases customer satisfaction due to quicker delivery.

Micro-fulfillment centers (MFCs) are small fulfillment centers that fulfill ecommerce orders in addition to providing inventory for local stores.

Micro-fulfillment centers can be added to existing warehouses or stores, or they can be created within a small distribution center/warehouse space. In-store MFC spaces are set up to allow workers to pick and pack orders without getting in the way of regular store operations. In general, MFCs stock 24-48 hours’ worth of inventory and are restocked regularly.

Many micro-fulfillment centers utilize automated and robotic systems, which can dramatically lower the cost of fulfilling orders. MFCs are popular among small- to medium- sized ecommerce companies, since traditional distribution centers and warehouses may be too large and structured depending on the type of business.

A well-developed micro-fulfillment strategy provides retailers a with a way to scale fulfillment capacity quickly. It allows shippers of smaller items such as electronics, dietary supplements, etc. to increase inventory availability to meet demand in highly populated areas.

Localized inventory and data

Micro-fulfillment centers feature highly compact, streamlined designs. This allows retailers to hold more inventory locally, reducing the chance that a customer will go to order an item, only to find it out-of-stock. This also allows retailers to gather localized data on their consumer base, such as information on brand preferences and order sizes. This data can be leveraged to create projections around inventory demand in specific areas, helping retailers improve customer service and shipping times.

Quicker order fulfillment

Micro-fulfillment centers are often highly automated, reducing the time spent on the picking and packing process, increasing productivity and driving down order fulfillment costs. Automated processes became especially important during the COVID-19 pandemic when labor shortages impacted retailers worldwide.

Faster delivery

One of the main reasons more retailers are implementing MFCs is that they reduce the costs of last-mile delivery. Last-mile delivery is the part of the fulfillment process where an order is sent from a warehouse directly to the customer. This part of the fulfillment process tends to be one of the most expensive. MFCs help to lower shipping costs and reduce delivery times because orders are fulfilled closer to customers, and automated fulfillment processes reduce labor costs.

Customer experience

The modern consumer expects rapid online order fulfillment times, and delayed delivery times can cause a decrease in customer loyalty and retention. With just about any item available online, retailers are now using ease and speed of delivery to differentiate from competitors, meet consumer demands and retain customers. For retail segments such as grocery, same-day delivery and curbside pickup have now become standard. MFCs’ focus on hyperlocal inventory requirements allows retailers to have products ready to ship the same day (or even the same hour).

Expansion opportunities

Since MFCs are smaller and cheaper to implement than typical warehouses and distribution centers, it may make it easier for retailers to expand their operations to new locations by implementing in existing retail locations or smaller storage centers. MFCs are particularly useful in densely populated areas, where storage space is costly, but demand for quickly delivered items is high. Automated storage systems in MFCs make the most of all available space, reducing the cost of product storage.

In addition to being cheaper than traditional warehouses, MFCs are also quicker to establish. A company can set up a small urban fulfillment center in just a few months, often utilizing previously existing retail spaces, while a traditional fulfillment center can take years to establish.