Micro-fulfillment: From Small Warehouses to Cities

Bailey Ludlam | 31 August 2022

In supply chain, decentralization makes it possible to obtain small urban warehouses which help to manage order preparation as close as possible to the end consumer.

We are talking about micro-fulfillment warehouses (or micro-logistics platforms), or even nano-fulfillment for the smallest of them.

Faced with the recent pandemic and the meteoric rise of e-commerce, online sales companies are increasingly interested in this logistics trend in order to get closer to customers in order to deliver orders as soon as possible.

What are these logistics hubs (or platforms), what are their characteristics, and can they be a real advantage for your company?

What is Micro-fulfillment?

Micro-fulfillment is a logistics strategy used by e-commerce companies.

In the U.S., micro-fulfillment is linked to supermarkets and mainly refers to order preparation as close as possible to the consumer, regardless of the size of the warehouse.

In Europe, the definition includes both proximity to the end customer and the fact of carrying out order preparation in a reduced storage space.

Speaking only to the European market, 40 to 50% of the companies which use this technique of constitute orders come from the agri-food sector. However, micro-fulfillment makes it possible to process any type of product, only very large items cannot be picked up.

Much smaller than traditional retail warehouses, micro-fulfillment centers in Europe owe their effectiveness to different automation solutions like conveyors, stacker cranes or even mobile robots.

As an example, Farmy is a Swiss player in the e-food sector (100% online market) transformed a former wine cellar in the heart of Zurich into a micro-fulfillment center. The objective was to satisfy nearby consumers within 24 hours, while adopting an eco-responsible delivery method, namely electric vans.

The firm worked with Scallog’s automated solution Flexypick to speed up the preparation of orders thanks to mobile robots.

Micro-fulfillment centers consist mainly of two elements:

• physical infrastructure, an automated solution
• computer software to process orders placed online

The micro-fulfillment centers were arranged in such a way as to be able to prepare a large number of orders containing few references to meet the demand of an increasingly demanding clientele.

In this same concern for customer satisfaction, after placing an order online, consumers could decide between home delivery or in-store collection (click & collect or BOPIS, buy online pick up in store).

How and Why to Adopt Micro-fulfillment

The easiest way to have a micro-fulfilment center is to transform spaces located in commercial places such as shop backrooms, storage area in supermarkets, basements and parking lots, etc. Through this approach, already available space is optimized, and the preparation of orders placed online is done as close as possible to the customer.

Through automation, the concept of the micro-logistics platform guarantees rapid order picking with a reduced error rate.

Whether located in small urban locations or in the back of brick-and-mortar stores, these facilities aim to reduce delivery times for online orders.

“E-commerce heavyweights, such as Amazon, are offering ever shorter delivery times for online purchases. The competition must align so that customers receive their orders in hours rather than days,” said Pierre Yves Minarro, COO of Scallog.

To deliver as quickly as possible, the large central warehouses, located outside the cities, serve the smaller local micro-fulfillment warehouses. The products are thus brought closer to the end consumer, in urban areas.

“Because they are in town, these order preparation platforms allow click and collect, a practice whereby you order online and then pick up your order physically. In some cases, micro-fulfillment also allows greener deliveries, with electric trucks or bicycles for example,” said Minarro.

Advantage and Disadvantages of Micro-fulfillment

Since micro-fulfillment processing centers allow companies to get closer to their end customer, it induces faster order deliveries and helps with the efficiency of omnichannel logistics thanks to the contribution of a management system.

But the phenomenon also has certain disadvantages for companies.

The cost of real estate in the city is particularly high. Even reclaiming abandoned spaces, setting up there is expensive.

At the back of a store, the micro-order preparation platform is not able to process the same quantities as an outlying warehouse.

To meet the omnichannel challenge in a way that is suitable for small logistics platforms, micro-fulfillment therefore requires the use of new logistics technologies like what Scallog offers.

Flexibility Required

The success of micro-fulfillment residing in a strategy of customer proximity, and reduction of both costs and distances traveled (in the warehouse as well as on delivery), technology goods-to-person is the most profitable option.

Indeed, flexibility is the key word of a micro-fulfillment center.

Research conducted by the Federation of e-commerce and distance selling demonstrate that in France, the online circuit for consumer products increased from 5 million monthly buyers to 7.4 million during the first month of confinement in 2020. That is 50% more.

Local Delivery

The stated objective is to be able to provide households with their everyday consumer products in the simplest possible way. The future of local commerce therefore seems closely linked to that of e-commerce.

Things are progressing at such a pace that organizations are subject to the implementation of omnichannel logistics management, which is particularly flexible and responsive to adapt to the new way consumers buy. Flexibility offered by micro-fulfillment.

So, you might have to get used to seeing small warehouses popping up.

Post originally published (in French) and provided courtesy of Scallog.

Author: Bailey Ludlam