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When Microfulfillment Centers Work for Supply Chain or Not

Retailers are frantically trying to figure out how to get products to customers as swiftly and affordably as possible as e-commerce demand reaches all-time highs.

Micro-fulfillment centers, defined as “a hybrid model that’s leveraging smaller facilities that are much closer to consumers,” is one potential remedy. With the aim of bringing products closer to customers for quick delivery or pickup, it combines conventional technology, automation, and in-store picking.

The fulfillment approach has been adopted by a few industries and businesses. But putting up micro-fulfillment can be expensive and difficult, especially without the right tools for managing dispersed inventory.

For businesses that currently have successful logistical solutions in place, the inconvenience might not be worth the expense.

Fulfillment from grocery stores and dark retail

If merchants intend to lease warehouse space for a new type of fulfillment center, creating micro-fulfillment centers can be pricey upfront. They do have other possibilities, such as operating a micro-fulfillment facility out of a retail store’s back.

Retailers may choose to operate “dark storefronts,” which are used exclusively for fulfillment and do not accept customers. The New York Times reported that two Macy’s storefronts went dark in October.

According to Macy’s CEO Jeff Gennette, it’s an experiment to address the needs of customers who are making more online purchases and requesting free, or 2 hour delivery.

In response to an increase in customer demand, Whole Foods has also built delivery-only outlets this year. It is anticipated that online groceries would increase as a share of overall sales.

The grocery retail industry has a high turnover of products; it is the place where micro-fulfillment has already taken off and is more likely to stick around. The majority of supermarkets are familiar with client demand and are aware of the particular products with the highest turnover rates.

On the other hand, a few percent of people are now comfortable ordering food online, which may prevent some of those stores from opening for micro-fulfillment in the future.

Don’t try to fix fulfillment if it isn’t broken

Micro-fulfillment centers require strong inventory management and transportation management systems or a partner who can handle “a decentralized inventory approach. More inventory nodes merely make things more complicated.

Micro-fulfillment won’t work for large and expensive things, such as computers, furniture, TVs, and cars, without existing space.

Implementing fulfillment will cost mid-sized businesses both in terms of space and the necessary technology solutions. The majority of businesses have fairly established logistics systems.

Applications for specialized micro-fulfillment

There are other areas where micro-fulfillment can succeed if there is “volatility on the demand side, where demand could surge way up or way down. In this manner, you may respond to the market without having to wait for a very long lead time, as in a typical supply chain.

Candles, cosmetic goods, blankets, etc., are examples of small, high-turnover Christmas gifts that are suitable for micro-fulfillment. Things that are consumable reasonably rapidly and where the trend is easily changeable.

Without having to wait for the extraordinarily long lead time required by a typical supply chain, you may respond to the market.

Another strategy would be to sell a product that isn’t constantly necessary but suddenly becomes popular.

Amazon is one of those bigger businesses because millions of people are buying their stuff there. The Wall Street Journal stated in the summer that Amazon was looking at empty department store space for future fulfillment operations.

Given that they’re often situated in densely populated suburban regions and closer to the consumer. Hence, the company probably makes the best use of micro-fulfillment facilities.

After reading this, you might now be clear about when micro fulfillment centers work in favor of the supply chain and when not.