Micro-Fulfilment: Increasing Responsive Fulfilment

Increasingly, customers expect more than fast, free shipping; they want convenience as well. Customers want to be able to make purchases in stores, purchase online and pick up at stores and have online purchases delivered straight to their door with a seamless, unified experience across digital and physical stores. A survey by the National Retail Foundation found that 75% of consumers surveyed expected speedy, free delivery, even on orders under $50[1].

While automation is making fulfillment centers more efficient, the demand for free shipping and short order-to-delivery cycles from centrally located hubs can raise transportation costs and erode margins. To meet these expectations, companies must consider micro-fulfilment strategies that reduce the distance between consumers and enable more responsive and profitable fulfillment of online orders. That means redesigning flow paths for a consistent, convenient brand experience while positioning some products closer to their best consumers, which often means placing them in urban areas.

The Macro-trends Driving Micro-fulfilment

Companies are enabling micro-fulfillment capabilities to satisfy customer orders closer to demand in response to a shift toward e-Commerce, dramatic changes in consumer buying behavior, a dynamic real estate market and shifting labor costs and availability. Micro-fulfillment is not so much a specific type of warehouse or distribution center, but a new way to think about a forward network node in the context of your brand, network and real estate strategy. It is informed by a set of key questions, such as: What are customers expecting? What are the product attributes? What does your inventory look like? What are your service requirements and expectations? What are seasonal demand patterns? And how can you strategically build your network to address these characteristics?

Changing Consumer Behaviour and Shifting Labour Populations

In the age of immediate gratification, customers want to be able to buy what they need, exactly when they need it, delivered to where they want it and expect that the inventory will be readily available in the supply chain when they order it.

Over the past few decades, more people have moved into city centres than have moved out to the suburbs and beyond. A study by the University of Michigan Center for Sustainable Systems, predicts that by 2050, 90% of the U.S. population will live in urban areas. The Pew Research Center finds that population growth in rural counties has lagged, growing 3% since 2010, while population growth rose 13% in urban areas and 16% in suburban areas[2]. As a result, labour markets in major distribution hubs—often in rural areas—are largely tapped out, with unemployment at less than 4% in some places.

Micro-fulfilment addresses both these trends. It brings goods closer to dense customer populations and makes fast, free delivery more economical. At the same time, micro-fulfilment centres can take advantage of larger, more diverse labour pools found in urban and suburban areas. With a smaller physical footprint, it’s easier to staff a micro-fulfilment center with 25 employees than to find a few hundred employees in a competitive distribution hub region.

¹ https://nrf.com/media-center/press-releases/nrf-study-says-more-online-shoppers-want-free-shipping
² https://www.pewsocialtrends.org/2018/05/22/demographic-and-economic-trends-in-urban-suburban-and-rural-communities/

Published/Updated 1/11/21