The Indian Ecommerce market has experienced tremendous growth over the years. Digital buyers, particularly in this sector, are expected to reach 400 million by 2027. As the buyers grow, their delivery expectations also change. Now they want their ordered products delivered fast and seamlessly without extra charges. Hence, e-commerce businesses constantly strive to find new ways to meet customer expectations. To fulfil customers’ expectations, companies adopt a micro fulfillment model to distribute goods.
The micro fulfillment model is gaining popularity in ecommerce businesses day by day. It involves storing and shipping products from small and localised fulfillment centers. They can be located closer to the customer and hence reduce shipping costs and do faster order fulfillment. Some micro fulfilment centres use robotics and advanced software to enhance the picking and packaging operations.
What is Micro Fulfillment?
Micro Fulfillment centers are small and automated storage facilities. They are closer to customers to speed up order fulfilment and enhance customer satisfaction. The micro fulfilment centres are leveraged with robotics, conveyor systems, and advanced software, which pick, pack, and do shipping in a fraction of the time compared to traditional warehouses.
There are approximately 23.5 million ecommerce websites globally. New e-commerce websites are even added daily. Most online shoppers desire same or next-day delivery. Hence, most reputed sites like Amazon pressure traditional retailers to innovate their order fulfilment strategy. Micro Fulfilment centres are among the best ways to meet online shoppers’ demands and increase brand reputation.
Different Types Of Micro Fulfillment
1. Standalone Micro Fulfillment Centers
Standalone micro fulfillment centers are present within a one to 5-kilometre radius of the targeted customers. They are usually 3000 to 10,000 square feet and can be built within a few months. Some can be even bigger depending on the availability of land. The standalone micro fulfilment centres can store 6000 to 15,000 different types of products.
2. Store Integrated Micro Fulfillment Centers
Some stores don’t build micro fulfillment centers. They utilize the parking space or basement for a back room for product storage. Utilising existing space can save money and time and make order fulfilment faster. It is perfect for stores that are closer to target markets.
3. Dark Stores
Dark stores look almost similar to grocery stores. However, only staff pick, pack, and do all the essential supply chain operations in a dark store for fast order fulfilment. No customers are allowed here.
Key Elements of Micro Fulfillment Centers
During covid 19, most of the stores remained shut down. Hence, most customers shift to online shopping. Micro Fulfillment centres are one of the best fulfillment solutions for meeting the growing demands of customers.
The key elements of the micro fulfillment strategy are as follows.
1. Automation
Most of the micro fulfilment centres have adopted automation. They use mobile robots and pallets to pick up the ordered product. This increases efficiency and reduces labour-intensive activities.
2. Connectivity
The automation software connects various micro fulfillment centres. It allows the store to see and manage the orders and quickly process thousands of orders daily.
3. Digitisation
Most operations in micro fulfilment centres are done digitally, such as storing products, processing orders, and many more. It speeds up the operations and delivers products faster to customers.
Why are Micro Fulfillment Centers rising and in Trend?
- Most customers prefer to do online shopping, especially after COVID-19. Today, Customers expect same-day or next-day delivery from the ecommerce company. Micro fulfillment centres are located in urban areas and can quickly fulfil orders and increase brand reputation.
- Last-mile delivery processes are pretty expensive. Research says a business has to spend 41 per cent of its supply chain costs only on last-mile delivery. So, companies are finding innovative ways to reduce logistics costs while satisfying customers. Micro Fulfillment centers are one of the best ways to serve this purpose. They reduce delivery distances and minimise the shipping and fuel costs of the business. Experts say the micro fulfilment centres reduce 75 per cent of the cost per order.
Benefits Of Micro Fulfillment Center
There are numerous benefits of micro fulfillment centers, which are listed below.
1. Speed
A recent survey says that around 41 per cent of online customers expect their rendered product to get delivered within 24 hours. Again, 21% of online customers expect their ordered product to be received within 2 hours. Micro Fulfilment centres are one of the best ways to meet the demands of impatient online customers.
2. Efficiency
Most of the manual warehouse operations result in errors and decreased efficiency. However, micro fulfilment centers are leveraged with advanced technology like robotics, which eliminates human errors and increases efficiency in picking and packaging. Automation increases productivity and decreases the operational costs of the business. It even allows a business owner to streamline the supply chain operations.
3. Scalability
Micro Fulfillment centers offer scalable warehouse solution that can expand with the growth of the business. Small and flexible, allowing companies to set them in various locations. A business can even do a micro fulfilment centre in a backup room if it don’t want to invest in physical infrastructure and land.
4. Overall Cost Savings
It reduces labour costs as they leverage advanced technology. Again, they are located closer to customers, which lowers the Company’s fuel costs.
Challenges In Micro Fulfilment
1. High Initial Costs
An automated fulfillment center can enhance the picking and packaging operations. However, implementing advanced technology and automating fulfilment centres require high investment, which may not be possible for all small and medium enterprises.
2. Order Consolidation
Customers order various grocery items at a time and anticipate that all will be delivered within 24-48 hours. However, if one product is out of stock in the micro fulfilment centre, the retailer delays order fulfilment or cancels the order. This decreases customer satisfaction and even badly affects brand reputation in the market.
3. Not Suitable For Every Product
Micro Fulfillment centres are small in size. If a business stores products of larger size, then it will occupy more space. Limited space will be available to store other products.
4. Stockout Risks
Limited inventories can only be stored in the micro fulfilment center. Hence, stockout is always risky, especially during unpredictable demand.
Micro Fulfillment Vs. Traditional Fulfillment
1. Size
Micro Fulfillment centres are usually within 30 to 100 square meters of space. However, traditional fulfilment centres can have more than 30,000 square meters of space.
2. Location
Fulfilment centres are usually located in urban areas, so shipping costs are low. However, traditional fulfilment centres are typically located on the outskirts of the town. So shipping goods from it requires higher shipping costs.
3. Labor Costs
The micro fulfillment centres are digitised and automated. Hence, employees have to do less manual work here. It thus reduces the labour costs of the business. However, not all traditional fulfilment centres are automated. So more employees are required here to do manual work.
Which Industry Must Adapt the Micro Fulfillment Service?
Micro Fulfilment centres benefit industries where quick order fulfilment is essential to increase customer satisfaction. Some of the sectors are listed below.
- Grocery
- Retail and ecommerce
- Apparel and fashion
- Pharmaceutical and healthcare
Future Trends and Latest Technology in Micro Fulfilment
- More micro fulfillment centres will use electric vehicles to reduce environmental carbon emissions.
- Micro Fulfillment centres will play an important role in omnichannel strategy and ensure proper online and offline sales channel integration.
- More advanced robotics will enhance efficiency in the micro fulfillment center. Autonomous vehicles and delivery robots will be present more to increase the efficiency of last-mile delivery.
Conclusion
Ecommerce businesses are increasing day by day. They want to fulfill fast orders to improve their reputation in the market. Micro Fulfillment centers can serve this purpose very well. They are small automated warehouse facilities that can be integrated within basements, parking areas, or existing retail locations. They do fast order processing and shipping compared to the traditional warehouse. Hence, most retailers plan to invest in micro fulfilment centres to boost last-mile delivery.
AAJ Supply Chain Management
