For retailers trying to attract and retain customers in an increasingly crowded environment, order fulfillment and delivery is now a key differentiator. Just a few years ago, two-day shipping was a nice customer perk. Now, it’s table stakes in many sectors.
According to Maergo’s “The State of Shipping Report 2022: Why Faster Shipping Matters,” most online customers (62%) expect their orders’ delivery window to be three days or fewer. Even more telling: 56% of abandoned carts can be attributed to delivery concerns.
While retail giants such as Amazon and Walmart can meet these shrinking delivery windows with the help of extensive investments in shipping infrastructure, smaller competitors must get a little more creative.
Many of these smaller companies have turned to micro-fulfillment to solve some of their biggest delivery challenges. Micro fulfillment provides a much more cost-effective way to achieve blazing-fast delivery times by using space in existing retail locations or small-footprint, last-mile distribution centers. Because these options use less space, businesses can avoid the huge real estate costs associated with traditional warehouses.
These micro fulfillment centers (MFCs) also use automation—either manual (like robotic pickers) or digital (robust warehouse management software)—to improve efficiency and speed.
Here’s how micro fulfillment can solve last mile delivery challenges, and how to make the most of a micro fulfillment operation.
THE PARCEL DELIVERY PROBLEM
The Pitney Bowes Parcel Shipping Index from 2021 revealed that global parcel volume hit more than 131 billion in 2020—that’s 4,160 parcels shipped every second! It also predicted that shipping volume could reach as high as 303 billion by 2026. In today’s challenged supply chain environment, that big an increase could cause a lot more strain if shippers and retailers don’t optimize their operations now.
The biggest challenge to overcome? Visibility.
Shippers and retailers both often struggle to pinpoint a delivery’s location along its journey to the consumer. They also have trouble spotting issues and potential exceptions (delivery delays) to proactively prevent them from affecting customers.
This challenge comes into sharp focus if you’re shipping from a couple of centralized warehouses. This fulfillment model places your inventory farther from your end customers—warehouses need lots of space, and that space is usually not in the center of your delivery radius.
With farther to travel, each order must go through a series of stops, and even vehicle and facility changes along the route (depending on the distance to the customer). Longer distances also introduce many more opportunities for errors to crop up. If weather, traffic or even a flat tire delay a delivery vehicle, you may miss the delivery window and lose that customer. Zendesk’s CX Trends 2022 report showed that 61% of customers will switch to a competitor after just one bad customer service experience.
MFCs can help solve these challenges on a variety of fronts.
IMPROVE SPEED AND INVENTORY MANAGEMENT WITH MICRO FULFILLMENT
Visibility doesn’t just apply to tracking an order from warehouse to customer. It’s also an important consideration in an MFC, providing valuable sales volume and inventory data over time to allow more informed business decisions.
For example, having better control of order data can show demand trends to help keep faster-selling items in stock. This also helps with the workflow in the fulfillment center, as these higher-demand items can get priority placement so workers can grab them quickly.
Better visibility makes it easier to keep in-store shelves stocked, too—and replenishing stock from an MFC is faster than waiting for it to come from a central warehouse.
But the benefits of micro fulfillment don’t end with visibility. Because of the automation usually included in this model, picking and packing takes much less time and frees up your workforce to focus on other customer service tasks.
And with their smaller footprint (often fitting in the back of an existing retail location), MFCs keep inventory close to end customers. This significantly cuts down on delivery times, and means orders can often arrive in hours, rather than days.
BETTER SUPPLY CHAIN FLEXIBILITY, SCALABILITY AND COSTS
CB Insights reports that micro fulfillment can reduce costs associated with an order by 75%, compared to manual picking in a traditional warehouse. That adds up to huge savings over a year’s worth of orders and is due to several unique aspects of this model.
First, keeping in mind that the compact nature of micro fulfillment requires much less investment in real estate—often filling otherwise wasted space in retail stores that already exist—this tiny footprint also makes scaling up as you grow (or meeting seasonal demand) much easier and cheaper. But it doesn’t leave you with a lot of unused space when volumes drop again.
That small footprint also comes in handy for speeding up last mile delivery in urban areas. Instead of placing one huge distribution center on the outskirts of a city, a retailer can operate out of several MFCs placed strategically close to where customers live. This cuts transit time and overhead costs for each delivery.
Micro fulfillment helps keep items in stock on store shelves, too. Instead of waiting for a big delivery from a centralized warehouse, inventory can come from a nearby micro fulfillment location.
HOW TO GET THE MOST OUT OF MICRO FULFILLMENT
As with any other warehouse management process, the success of micro fulfillment depends on organization and efficiency. Follow these tips to take full advantage of everything a micro fulfillment model has to offer:
- Optimize your inventory. This is especially crucial when you’re working in a small space. Keep your most popular, fastest-selling items in the most convenient locations to make picking more efficient.
- Take advantage of automation. This doesn’t mean you have to invest in an expensive robotic picker system—digital automation in the form of a robust warehouse/order management platform can make manual picking just as quick as mechanical picking.
- Choose the right WMS. Speaking of warehouse management platforms, the best software with the most bells and whistles won’t be cost effective if it doesn’t integrate well with your existing processes/scanners/tech environment. Make sure the one you choose is compatible with the way you work.
- Choose the right location. Micro fulfillment’s biggest benefits are its ability to work in a small space and its improved speed of delivery. But those benefits evaporate if you don’t place your fulfillment centers in the right places. Whether using open space in retail locations or adding standalone tiny warehouses, be strategic in placing them near the highest concentration of customers.
Parcel delivery plays a critical role in ensuring a positive experience for customers. With rising costs and less forgiving consumers, it’s crucial to find ways to get products in your buyers’ hands in the fastest, most efficient way possible.
Micro fulfillment, with its cost and productivity benefits, can be the answer to your biggest delivery challenges.
Bill Catania is the CEO and founder of OneRail, which is headquartered in Orlando, Florida, and combines “a fast, intelligent platform, a scalable national footprint of couriers and a skilled Exceptions Assist team” to take “the friction out of delivery to make sure our customers are informed and happy.”
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