28 January 2022 Discover how Micro Fulfillment Centers work and why they are seen as an important trend for the future of retail. The logistics sector, particularly retail, has undergone enormous upheavals. With digitalization, high market competitiveness, and the growth of omnichannel, it is no longer possible to survive solely with traditional physical stores. It is necessary to innovate to meet the needs of a customer who demands flexibility in purchases, personalized service, and agility in deliveries. The major market players have understood this for some time and have innovated year after year to offer their consumers an unparalleled shopping experience. They have not spared investments in logistics infrastructure, diversifying formats to cope with the complexity of the current market. One of the solutions adopted by giants like Amazon and Walmart has been the creation of Micro Fulfillment Centers (MFC), which have proven extremely effective in the race for same-day delivery and in overcoming last-mile challenges. With the new model adopted, these companies are able to make faster deliveries with lower shipping costs, highly appreciated items by the customer at the time of purchase. And that is why Micro Fulfillment Centers are spreading in large urban centers, transforming the way logistics works in cities. For experts, this is an important trend in retail logistics that helps companies become profitable and scalable. What is a Micro Fulfillment Center (MFC)? The Micro Fulfillment Center is a small warehouse located in urban areas, closer to the end consumer. The approach seeks to combine the delivery speed of physical stores with the efficiency of large automated warehouses. When implementing MFCs, companies use automation and robotics to address the main cost challenge associated with picking. By automating picking, they can significantly improve efficiency and accuracy while minimizing the labor costs involved. Since Micro Fulfillment Centers use vertical and compact storage structures, they do not require a vast area to operate and can be installed, for example, in the back of a store, utilizing excess space and creating an operational advantage. They can also operate in separate locations, such as garages, disused stores, or small warehouses located in residential neighborhoods. And it is precisely the fact that they do not require large areas that facilitates the installation of MFCs in urban spaces, unlike traditional distribution centers, which are generally located in industrial areas. In this way, retailers reduce the average distance between the MFC and the customer, allowing for in-store pickup and fast home delivery. Why has the Micro Fulfillment Center proven to be the right strategy for the current scenario? As we highlighted earlier, the changes triggered by digitalization have transformed the consumer market. Many people have stopped visiting physical stores, preferring to buy from online stores. Others visit physical stores, handle the product, and complete the purchase online. The fact is that today’s customer desires greater flexibility and convenience. They expect the purchasing process to be quick, simple, and preferably free of shipping costs. In addition to these challenges related to meeting customer demands, retailers also face issues related to lack of space (few options in the industrial real estate sector), labor shortages, and the need to accelerate their internal processes. To address all these points, it was necessary to streamline the logistics structure. And that is when the Micro Fulfillment Center presented itself as a viable solution to tackle this new scenario, offering interesting advantages, such as: – Drastic reduction in last-mile delivery costs, as they are physically closer to the consumer; – Significantly lower initial investment (*it is possible to build more MFCs at the cost of a large automated distribution center); – Rapid implementation; – Flexibility for managers to make targeted and strategic decisions on automated e-commerce service. Moreover, Micro Fulfillment Centers make e-commerce accessible to a wider range of retailers, reducing the main cost barriers related to labor, transportation, and property acquisition/rental (*smaller spaces are cheaper). It is worth noting that the more retailers can reduce last-mile costs and improve customer service, the more competitive they will become. The future of micro-fulfillment Currently, only retail giants are able to offer same-day delivery options, and the vast majority of smaller companies simply cannot compete. However, with the introduction of Micro Fulfillment Centers (MFC), the situation is set to change rapidly, democratizing the landscape and enabling everyone to offer the same level of efficiency and flexibility to their customers. It is also important to highlight that MFCs are developing alongside other strategies aimed at optimizing logistics and qualifying service, such as dark stores, D2C, Ship From Store (SFS), among others. Automation systems have also evolved, so the trend is that retailers will be able to bring more and more efficiency to their operations, reducing costs and increasing convenience for their buyers. Experts believe that many Micro Fulfillment Centers will be integrated into existing stores, reducing the need for standalone MFCs. In the United States, this has already been tested in some supermarkets, most of which started during the pandemic. Given the success achieved, other sectors, such as fashion, consumer goods, and health, are already considering implementing the model. As the years go by, we will see more and more MFCs scattered across major centers, and those who will benefit the most will be consumers, who will be able to shop comfortably from home and receive the product in a matter of minutes or hours. How will Micro Fulfillment Centers change retail logistics? Deagor WMS per ecommerce può aiutarti!