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How micro fulfilment centres are transforming ecommerce

by Gavin Harrison, UK Sales Director, Element Logic

In response to the rise in demand for same-day and next-day delivery and click-and-collect, some forward-thinking retailers – namely those in the e-commerce space – have introduced micro fulfilment centres (MFCs).

With demand only set to increase with time, this more localised order fulfilment infrastructure will likely become a major trend.

Why micro fulfilment?

A micro fulfilment centre is small inventory storage facility – often placed within a city – that allows companies to hold items closer to their end customers. They have many advantages.

Firstly, they can be implemented within close proximity of customers’ residence – often in urban centres – for rapid distribution. Secondly, they do not require a lot of space – MFCs can be placed next to existing stores or even be set up in the back of larger outlets. There are also “dark stores,” stores that contain inventory and stage products, but also grant access to employees. The combination of the traditional storefront and the dark store – an MFC in the back of an outlet – is likely to be the future of fulfilment.

But flexibility is not the only advantage of MFCs. They also allow for predictable, reliable deliveries, both online and in store. Inventory tracking is also enhanced and returning items is quicker and faster. In some cases, transportation cost can also be lower.

Micro fulfilment centres also hold significant environmental benefits, especially in larger cities. Because MFCs are localised to customers, the last mile delivery stage does not necessitate a petrol- or diesel-powered vehicle. Instead, customers can simply travel the short distance to the MFC and pick up their order. This reduces the overall carbon footprint of each order while remaining convenient for the customer. Accenture even estimates that the increasing use of local fulfilment centres could lower last-mile emissions between 17% and 26% by 2025.

The benefits of micro fulfilment are clear to see. However, many companies still have a reliance on manual labour. This causes issues with productivity – after all, humans are limited in the number of items they can pick in an hour. To raise productivity – and reduce operating costs – companies should invest in automation solutions for warehouse fulfilment.

Warehouses are limited in the amount of shelf space they offer but storing hundreds (even thousands) of items in such a small space can overwhelm workers. This is particularly the case in the apparel sector. To obtain better control over storage and retrieval in this scenario, a scalable, modular Automated Storage and Retrieval System (AS/RS) can be installed. Doing so will rapidly improve overall storage density and throughput.

Micro fulfilment in practice

An example of an automation success story in fulfilment is the Switzerland-based company, Peterhans. The company supplies tools, fittings, machines and materials to contractors in the building industry and specialises in assembling and mounting hardware for both industrial and commercial customers. In 2018, Peterhans invested in an AutoStore ASRS system from Element Logic, using the combination of storefront and back-of-house MFC.

With ten AutoStore order picking robots and eight levels of 220mm bins, the system comprises 11,650 bins in total. However, the total area used is just 400 square metres. With this solution, Peterhans are using just 10% of the total warehouse floor space, leaving the possibility of expansion open. Employees are also supported by this and no longer need to walk long distances and do heavy lifting.

The investment in automation has also increased storage capacity at Peterhans (they have an inventory of 500,000 items in their online store) and warehouse processes are more efficient. This has made meeting the demand for same-day delivery feasible – there is a much shorter waiting time at store pick-up counters.

In fact, the average customer order now arrives at the sales counter in under two minutes. Customer experience has also been enhanced since the ports are next to the sales counter and this allows customers to watch their order get processed.

Increasing customer satisfaction

Micro fulfilment centres augment the value felt by customers – offering a real competitive advantage. They allow customers to also save money on delivery costs by ordering online and picking the items up the same day.

Ultimately, as demand for same-day delivery increases, more industries will implement MFCs into their omnichannel systems to meet customers’ expectations for reliable, fast deliveries – all without compromising on sustainability.