background image

The expansion of micro-fulfilment centres – warehouse consultancy

Six trends are driving the expansion of micro-fulfilment centres

 Micro fulfilment speeds up the delivery of goods by bringing items for delivery closer to the consumer. Smaller facilities, located strategically in urban areas, are allowing retailers and distributors to be more agile across the entire order-to-delivery process. Micro fulfilment services are on the rise. Consumers are increasingly buying more goods online; they expect same-day deliveries, at minimum or no cost, and the ability to return unsuitable items.

Micro fulfilment warehouse consultants

What is a micro-fulfilment centre?

Micro-fulfilment centres (MFCs) are small, usually, highly automated, mini-warehouse facilities operating near consumers—sometimes even within physical retail stores. They are usually less than 50 000 sq. ft. They work well in the grocery, apparel, and other fast-moving consumer goods (FMCG) sectors. The most popular items can be located where they are most needed. An MFC can be a purpose-built facility or a dedicated space within another building or warehouse. MFCs often act as the spokes in a hub-and-spoke distribution model. Although picking and packing may be automated and a software solution drives the order process, there is still a need for some human intervention.

The features of a well-functioning MFC are:

  • it is highly automated to handle repetitive tasks. It will employ technologies such as driverless forklifts, automated shuttles, and mobile communications to maximise efficiency.
  • It is connected digitally with the hub and with other MFCs to ensure effective real-time communication.
  • It uses software solutions to manage inventory, order processing, packing, labelling, and transport logistics.

The pros and cons of micro-fulfilment

Some of the benefits are obvious: faster delivery, customer satisfaction, less staff required, and reduced warehouse and logistics costs. MFCs can be used as a pick-up point for customers or for courier deliveries. They can be sized according to need; more capacity may be needed during peak periods and at holiday time.

There are some challenges: adding new facilities comes with a cost and takes time to implement. Because storage capacity is limited, inventory management is more complex. There also may be an additional strain on transport availability and capacity. What is unknown is how the investment will provide the necessary payback as consumer preferences change and urban populations shift.

6 Trends driving micro-fulfiment

1. Automation of the last minute Traditional DCs are struggling to keep pace with the rising demand for faster delivery or click-and-collect. As the number of online marketplaces continues to grow, micro-fulfilment centres are becoming a compelling solution. Companies are optimising the picking and packing of small-size orders and will continue to build relationships with local couriers and 3PLs to guarantee fast delivery. Speed is the main differentiator.2. Dark stores Dark stores are traditional retail outlets that have been, partially or fully, converted to mini fulfilment facilities. As online orders grow and in-store visits decrease, retailers are increasingly converting unused space in their stores to mini-DCs. Supermarkets and grocery stores with underutilised refrigerated and frozen sections are ideal to fulfil online grocery orders. 3. Inventory assortmentA wider variety of items for sale means more SKUs. Because MFCs are local, they can customise and limit their inventory to suit local requirements. Artificial intelligence techniques and predictive demand planning enable them to manage stock and track shelf life in real-time.4. Growing urbanisationAs cities become more urbanised, the cost of space goes up due to the limited supply of land. This means that the cost of establishing full-service DCs in urban areas is prohibitive. MFCs can be established relatively quickly in an area of as little as 10,000 sq. ft.5. Shortage of labourMicro-fulfilment centres are harnessing the latest automation technology which will make them less dependent on humans to do repetitive jobs. Automation won’t eliminate the need for humans, it can create more skilled roles in equipment design, implementation and maintenance. 6. SustainabilityA recent report by Accenture found that last mile delivery ecosystems could reduce harmful emissions and traffic congestion within cities by using micro fulfilment centres. Of the three cities included in the study, London would likely see the largest delivery traffic reduction from the use of MFCs — 13%, equating to about 320 million fewer miles travelled by delivery vehicles.
Previous slide
Next slide

The future of micro fulfilment centres

Micro fulfilment is driven by consumers’ demand for faster delivery, but it’s also driven by retailers’ desire to cut costs and increase efficiency.  Research and Markets estimate that MFC installations will grow more than 20 times by 2030, with the UK being only second to the USA. The major growth area is likely to be in grocery. The rising trend of MFCs allows businesses of all sizes to remain competitive, meet customer demand, and better optimize their fulfilment operations.

The decision to implement one or more MFCs depends on cost, space availability and adoption of the most suitable technologies. Our experienced warehouse consultants can help guide you through the process, from planning and design to implementation and ongoing optimisation. Our consultants have a deep understanding of the latest industry trends and technologies as well as they can help you develop a customised solution that meets the unique needs of your organisation.

Contact us

Send your enquiry today.

Do you have a question about one of our services or are you working on a supply chain project and need assistance? Get in touch.

This field is for validation purposes and should be left unchanged.