Leveraging Micro Fulfillment Can Help Retain Customers
Learn about the Complexities from Distribution Experts
The need for micro fulfillment came into play before the pandemic as e-commerce started increasing in adoption across all retail industries—apparel, department store, and even grocery retail. Now, the majority of retailers are looking for ways to adapt backroom storage facilities or underperforming locations into micro-distribution centers. Micro fulfillment is the term that industry professionals are using to depict fulfillment for e-commerce customers from either an on-site store location, which is usually the back storage area, or another smaller local facility and provides order fulfillment for either pick-up or delivery. This is different than the term dark store, which is where the facility is a stand-alone center that fulfills orders for online shopping only. It's the first step in lowering the cost of fulfillment labor.
While the concept seems quite easy, there are multiple complexities that must be thought through during the planning stages. The technology mimics that of a much smaller distribution center, but if you think about the concept, it’s a smaller fulfillment center inside of an already, and sometimes complex, distribution network. Product availability may be different, shipping will be replaced with pick-up or delivery, and even the picking may be different based on products. For example, a grocery retail chain typically ships pallets of product or mixed pallets directly from the main distribution center to a store location. From there, the items are broken down and put onto store shelves for foot traffic to browse and purchase. With a micro fulfillment center, you’re taking a subset of the SKUs normally available or limited quantities of product and placing it in a smaller area for online shoppers.
Micro Fulfillment Technology Explained
The technology that needs to support micro fulfillment centers is usually a WES or WCS type of solution. It can vary, but it must interface with the larger centralized distribution center. Essentially, one needs to segment this operation. The need for real-time is also a crucial part as well—and yes, faster real-time than a normal centralized distribution center. This is due to same-day delivery and pick-up. Inventory is moving at a much faster rate due to smaller quantities and the need for replenishment is vital depending on the size of the customer base.
In-store retail is designed for foot traffic. Every aspect of a retail store is intended for shoppers to spend as much time as possible inside. The more enjoyable the experience, the larger the basket size, which converts into more revenue. With online ordering and curbside pickup or delivery, it’s a bit different in that the online experience must be easy, convenient, and quick. While home delivery can take up to several hours, it still has to be the same day. Otherwise, shoppers will find an alternative. It’s the competitive advantage that many retailers need to stay relevant with the next generation and now, current shoppers thanks to the pandemic.
Choosing the Right Automated Solution
Several different factors go into the decision when thinking about a micro fulfillment center. One is to grow market share outside of the normal foot traffic customer base. The second is to ensure that market share doesn’t slip during the e-commerce experience.
When it comes to implementing the actual order fulfillment for online orders, it’s solidifying that complete online experience. Of course, the investment cost plays a role, but manual picking may not be a great option. Manual picking can degrade the in-store experience for regular foot traffic. This can vary depending on the type of retailer, but grocery has the largest repeat customer base. Having to navigate large carts with bins or third-party vendors shopping for two or three customers in the middle of the aisle takes away from the pleasant shopping experience that was so skillfully designed. Furthermore, manual picking is one of the most expensive ways to pick an order. Therefore, automated micro fulfillment is another reason that many retailers look for an onsite or local solution.
The technology that goes into a micro fulfillment can vary as well. This really depends on the goals of the retailer and the location. If it is a greenfield micro fulfillment center, then there are plenty of options for online fulfillment. This type of strategic planning is best suited for highly populated suburban areas that serve a larger customer base. It's also the first step in operating a dark store facility.
Types of Automated Micro Fulfillment Systems
For retailers that need to locate at an existing facility, retrofitting for a backroom can pose more challenges, but it’s doable. This is a typical situation in urban areas or where real estate costs are extremely high. The ceiling height and the amount of square feet allocated are the biggest issues. The goal is to have the ability for an extremely high-density solution that fits in a modest area. One should look for options that will hold the largest amount of SKU selections. Other factors depend on the type of retail too. If it’s grocery, then chilled and frozen items need to be taken into consideration. Everything really depends on the level of service, order history, and building. The types of equipment that are typically implemented:
Vertical Lift Modules
Vertical lift modules work well for smaller items and lower order quantities. Vertical lift modules are being utilized for both grocery fulfillment and high-value items in department stores.
Carousels are a great option for high-density storage with medium to slow-moving products and lower ceiling heights. Perfect for CPG products, OTC pharma, electronics, and fashion accessories.
Shuttle systems provide an ideal automated storage and retrieval solution. With micro fulfillment, shuttle systems are scaled down to meet the needs of the retailer and particular application. Shuttles can handle totes and cartons weighing up to 77 pounds. Shuttles can combine lifts and racking systems to allow for a flexible design and optimum performance.
Pouch Sorters and Carriers
Pouch sorters are a high throughput and low maintenance option for sorting, buffering, and distributing goods. Great for lower-weight items such as CPG, OTC, and clothing. Can be used as part of a manual solution or combined with a fully automated solution to increase throughput and distribution of goods.
Need More Information?
At SSI SCHAEFER, our team of experts can consult and provide data analysis to determine which solution is right for your application. Your micro fulfillment center project needs to run faster and more efficiently to serve your shoppers. Plus, micro fulfillment lowers picking costs at the store or local level and virtually eliminates pick errors. To get started, contact SSI SCHAEFER today. There is a reason why our team of retail experts has optimized, implemented, and serviced some of the largest grocery and retail chains in the world, and we’re happy to help you too.