Key Points:
- 41% of a company’s total supply chain costs originate from the last mile
- A micro-fulfillment center (MFC) is a small-scale warehouse facility dedicated to eCommerce fulfillment
- The key factor in affordable micro-fulfillment is proximity to a critical mass of customers
As eCommerce supplants physical retail across the globe, businesses are realizing the tension between fast delivery and affordable fulfillment. Whether your shoppers expect two-day delivery, free shipping, or both – 41% of a company’s total supply chain costs originate from the last mile. Especially in vast areas like the US, there’s a concerted push to fulfill faster, and for less.
So why not move your fulfillment center closer to customers? Micro-fulfillment is an eCommerce strategy that places small warehouse facilities in urban areas near to customers to accelerate delivery times and reduce last-mile delivery costs.
Big players like Amazon, Safeway, and Walmart favor this approach, as do small retailers with space to repurpose in customers’ vicinity. Hip to demand, warehouse providers are erecting new space for rent in densely populated areas to serve as eCommerce fulfillment outposts. Best of all, you can choose to build, convert, or rent your space – whichever fits your budget.
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What is a Micro Fulfillment Center?
A micro-fulfillment center (MFC) is a small-scale warehouse facility dedicated to eCommerce fulfillment. Unlike typical warehouses that range up to 300,000 square feet, micro-fulfillment only requires 3,000-10,000 square feet.
Source: CBInsights.com
The compact size may require inventory to be restocked every 24-48 hours, and perhaps limited to the fastest-moving SKUs. MFCs can be a dedicated fulfillment hub as well as a local pickup center for customers. As retailers look for ways to fulfill orders, we’ve seen micro-fulfillment take shape in a few ways:
Dedicated Fulfillment Warehouse
Popular with giants like Amazon, these purpose-built warehouses allow companies to fulfill orders and replenish stores with fewer workers. Facilities may use robots alongside management software to process orders faster and minimize costs. Fulfillment sites are strategically located on the outskirts of cities, allowing for quick shipments to surrounding customers.
Converted Retail Space
Space in an existing facility is repurposed for fulfillment, whether in part or in full. BestBuy innovated this approach during the pandemic, converting idle retail locations into “dark stores” to service customer pickups and process online orders.
A fulfillment zone can be sectioned off in a retail store, allowing workers to pick and pack without impeding normal store operations. A pop-up is also an option; use your garage, basement, or parking lot for fulfillment. A cheaper way to add fulfillment capabilities than building, and possibly cheaper than renting space.
Rented Warehouse Space
A warehouse provider acquires then rents space to multiple retailers. Facilities can occupy unused brick and mortar locations, storage facilities, or new buildings. In addition, providers may offer services like pick and pack, last-mile delivery, returns, and more. Additional services raise the cost, but savings on shipping can make this a cost-effective approach.
The ‘on-demand’ warehousing model is popular with growing businesses in need of capacity and fast delivery, but without the budget for investments. Space can be rented seasonally, allowing businesses to satisfy demand while also controlling costs.
3 Benefits of Micro Fulfillment
Ultimately, the key factor in affordable micro-fulfillment is proximity to a critical mass of customers. However you pursue micro-fulfillment, here’s what you can expect to gain:
Faster deliveries
According to the National Retail Federation, 42% of retailers say their top priority is faster fulfillment of online orders. Locating a fulfillment hub near to customers allows you to accelerate leads times for those orders. More compact than traditional warehouses, MFCs also lend themselves to faster throughput from workers. And with many warehouses already chock-full, micro-fulfillment warehouses can be the fastest way to ship at scale.
More flexible
Build, repurpose, or rent? Each business has a different cost structure and customer base, and the flexibility of micro-fulfillment offers a solution for most circumstances. Renting space for a season allows you to handle the holiday rush or a new product launch without falling behind. Converting existing space is also a low-cost way to beef up your distribution for either the near or far-term.
Lower costs
It’s important to find a space that enables fulfillment to a wide customer base, or you won’t get sufficient value from an MFC. Though cheaper than traditional warehouses, estimates to build a fully automated MFC sits around $1 million. If you have access to existing space you can retool, costs will obviously be a fraction of that. If you rent, compact MFCs incur less overhead, allowing cheaper rental leases and fewer fees. Most providers allow you to mix and match services to fit your budget, as well as offer discounts on shipping rates to help ensure your fulfillment is cost-effective.
If you’d like help finding MFC fulfillment partners, just ask our shipping experts at no charge.
How to Use Micro Fulfillment with Easyship
Easyship is an all-in-one shipping platform that integrates with all leading warehouse management software (WMS) for seamless multi-channel fulfillment. Incoming orders create a shipment at your fulfillment center and in Easyship. This means you’ll be able to manage and monitor all shipping activity in the Easyship dashboard during fulfillment, regardless of the origin fulfillment location.
Easyship also includes inventory management software. Inventory levels update in real-time based on courier delivery data, allowing you to maintain accurate counts, avoid out of stock headaches, and navigate returns with ease.
To get started, just sync your web store with Easyship. After the two-click integration, all things shipping and fulfillment are harmonized with your customer experience and inventory. It’s like fulfillment on autopilot.
Anyone can use Easyship free for 50 shipments every month. Just create your free Easyship account for instant access to our discounted courier rates, shipping automation, and conversion-optimizing cart upgrades.
