3 Key Mistakes to Avoid in Micro-fulfillment Technology Selection

Alex Haines | 14 September 2022

Bringing products as close and as fast as possible to customers triggered a new way of looking at fulfillment centers. In addition to large regional warehouses, microfulfillment centers (MFCs) are popular topics in retail, ecommerce and food industries.

Whether it’s operating in back of store storage areas or in no longer used retail store spaces, MFCs help to minimize travel time and cost, increase labor efficiency, and ultimately speed up online order fulfillment. Many organizations are grappling with the challenges of implementing profitable last-mile fulfillment. Common challenges include labor costs, inability to find a workforce, replenishment frequency, on-hand days of inventory stored, and space costs / constraints. As a result, many organizations are investigating opportunities for automation.  Sterling Organization, for example, just received $225 million in total capital commitments for Sterling Logistics Properties Fund, a fund to acquire space for “Neighborhood Fulfillment Centers” or MFCs.

The appeal of MFCs has only helped to create a boom in technology offerings, from compact goods to person systems to robotic and autonomous vehicle advancements.

However, before implementing any solution, it’s key to carefully review applications and properly prepare for current and future scenarios. This step can help you avoid key mistakes and select the right technology. The last thing you want to do is to install a technology that doesn’t do the job the way you expected or needed.

Key Mistakes to Avoid and Points to Consider

When it comes to MFC, there are a growing number of technology options – some come with frames and grid infrastructure, others like autonomous vehicles require space to roam, and most can be easily expanded to accommodate future business growth. When evaluating different technology options consider the following.

Order Volume

Store locations that are considering micro-fulfillment need to generate enough sales to justify the cost. Without sufficient order volume, the savings from reduced labor costs and increased efficiency may not offset the cost of implementation. Some customers, as we have experienced, are using MFCs to fulfill both in-store and online orders.

Depending on proximity, an MFC can also serve as a small distributor to nearby stores. This would, however, require a system designed for flexibility to grow or support peak season needs.

Space

For existing stores, there must be space available to accommodate a micro-fulfillment system, either transforming existing space or expansion. In-store micro-fulfillment automation is designed to work in small, back-of-store footprints with low clearance heights. Dark stores require available retail space that meets the size and cost requirements in the area where demand exists. 

According to CBRE Group, the national vacancy rate for commercial warehouse space fell to 2.9 percent in 2022. For some companies, this means taking a closer look at existing space and finding opportunities to explore order fulfillment solutions that succeed in tight spaces and/or offer high flexibility.

Also, keep in mind, the environment in which products needs to be stored. Is an ambient temperature okay or do products need to be housed in a cool or freezer environment? Some technologies are support colder temperatures than others or can be outfitted to do so.

Final Mile Costs

An MFC approach is not a one-size-fits-all solution. In fact, it is vital to explore options for distributing the products to the customer to ensure an acceptable ROI. Some may include:

• Pick up in-store
• Ship to customer
• Store delivery service to the customer
• Third-party delivery to customer (3PLs)

Reducing final mile cost is generally a major positive contributor to ROI. All of these variables should be explored before deciding on micro-fulfillment. 

Take Time to Analyze Business Objectives

Whether you are planning for an in-store microfulfillment option, dark store, or a local, smaller fulfillment center, taking time to analyze your order volume, required and available working space and final mile costs will help to identify the level of automation technology that will add the most value for you and your customers. Our process is designed to identify opportunities and optimize your operations.

Ready to talk about your microfulfillment automation needs? Our solution experts are ready to work with you to find the right combination of solutions to optimize your operations.

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Feature image credit: AutoStore

Author: Alex Haines