Micro fulfilment centres: the future of e-commerce logistics

Gavin Harrison
5 December, 22

A growing number of retailers, particularly in e-commerce, are meeting increased demands for same- and next-day delivery with micro fulfilment centres (MFCs).

With the call for shortened delivery times expected to rise significantly in upcoming years, this localised order fulfilment model is set to become a major trend.

The benefits of micro fulfilment

An MFC is a small warehouse, usually within a city, where companies can keep items nearer their end customers. These facilities give many advantages.

Firstly, being close to customers’ homes in urban centres allows rapid distribution. In addition, they don’t take up much space. Micro fulfilment centres can be placed next to physical stores or even set up in the back of larger ones – as a ‘dark store’ where inventory and products are staged, but with access for employees only. It’s widely forecast that the traditional retail outlet and dark store combination will be the future fulfilment format.

As well as flexibility, a micro fulfilment operation provides predictability and reliable deliveries to a store’s customers who prefer to shop online. It also offers better inventory control and tracking, faster and easier returns, and lower transport costs.

There are also major environmental benefits to MFCs, especially those in larger cities. Because ever more people have one near them, a vehicle isn’t needed for the last mile delivery stage. Instead, customers can simply travel the short distance to their neighbourhood centre to collect their order.

This convenience makes each purchase’s carbon footprint significantly smaller. Indeed, Accenture recently estimated that the rising number of local fulfilment centres could reduce last-mile emissions between 17% and 26% by 2025.

While the advantages of MFCs are numerous, many retailers are still labour intensive operations. Workers can only pick so many items an hour even when on top form, which creates a productivity ceiling. Automating the order fulfilment process will boost efficiency and reduce operating costs dramatically.

The greatest difference between a manually operated and automated MFC is storage density. Keeping hundreds (even thousands) of items in such a small space can be overwhelming for workers and present control difficulties – particularly a problem in the clothing sector.

A dynamic solution is a scalable, modular Automated Storage and Retrieval System (AS/RS), which offers much greater storage and retrieval control, for greater density and improved throughput.

An MFC in action

Swiss-based Peterhans has enjoyed great success with an MFC.

The company supplies materials, tools, fittings, machines, fastening equipment and PPE to building contractors and wholesalers. It specialises in assembling and mounting hardware for both industrial and commercial customers and sells household appliances and related goods.

Peterhans installed an AutoStore AS/RS from Element Logic in 2018, working a combination of storefront and back-of-house MFC.

It features 11,650 bins across ten AutoStore order picking robots and eight levels of 220mm bins. However, the total area occupied is just 400 square metres. This means that the company is now using just 10% of its total warehouse floor space, making plenty of room for expansion or giving options to put the space to other work.

In addition, employees have also benefited by not having to walk long distances or do heavy lifting. The investment in automation has also led to more efficient warehouse processes and increased storage capacity for Peterhans – which has an inventory of 500,000 items in its online store. This has allowed the company to meet mounting demands for same-day delivery and there are now much shorter waiting times at store pick-up counters.

Increased customer experience and satisfaction

In fact, the average order now takes less than two minutes to reach the sales counter – with improved fulfilment also enhancing customer experience. As the ports are next to the sales counter, they enjoy the unique added entertainment of watching their order being processed.

Micro fulfilment centres heighten the value felt by customers, giving great competitive advantage. They also give them the chance to save money on delivery costs, by ordering online and picking their items up on the same day.

Inevitably, more industries will routinely embed the facilities into their omnichannel systems as demand for same-day delivery rises – meeting increasingly tech-savvy customers’ expectations for reliable, fast deliveries without compromises on price or sustainability.

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