Micro-Fulfillment Centers: Ultimate Guide

Micro-fulfillment centers (MFCs) are changing the way ecommerce businesses deliver products to customers. By using small warehouses in busy city areas, companies can get items to people faster and more efficiently. 

This guide will explain what micro fulfillment centers are, the benefits they offer, and the challenges they face. Whether your a fast growing online shop or an established nationwide retail store, find out how these hyper-local fulfillment centers can make shipping quicker and easier.

What is Micro-fulfillment?

Micro-fulfillment is a strategy where small warehouse facilities, usually no larger than 10,000 square feet, are placed in busy city areas close to customers. The goal is to improve delivery times by keeping products near where people live and shop, so they can be delivered quickly.

These small warehouses, called micro fulfillment centers, can only store enough products for about one to two days. This means they need to be restocked frequently to ensure they always have enough inventory to meet customer demand. By keeping products close to consumers, companies can fulfill orders faster and more efficiently.

What is the difference between a micro-fulfillment center and a warehouse?

While traditional warehouses are much larger and are usually found in out-of-town industrial areas, a micro-fulfillment center is much smaller and located in urban areas close to customers. Micro-fulfillment centers store products for only a short time and reduce shipping cost, but need frequent restocking. 

In contrast, warehouses hold large amounts of inventory for longer periods. Using micro fulfillment centers makes quick, local delivery achievable, while warehouses store massive amounts of inventory with comparatively slow shipping speeds.

Case Study: Walgreens Roll Out Automated Micro-fulfillment Centers Nationwide

Walgreens has been busy improving its services by opening automated micro-fulfillment centers. By the start of 2023, Walgreens had opened its ninth automated center to help fill prescriptions and reduce the workload for pharmacists. These centers use robots to fill prescriptions, which:

• Take care of routine tasks
• Remove extra inventory from the pharmacy

These automated facilities now support around 3,000 stores, as shared by CEO Roz Brewer during a 2023 Q1 earnings call. Walgreens began this project in 2021 with the goal of opening 11 micro-fulfillment centers by the end of 2022. This effort is part of the company's plan to:

• Optimize its fulfillment operations
• Make the process more efficient
• Help pharmacists focus more on customer service

Pros and Cons

Most micro fulfillment centers have many advantages, but there are also some drawbacks to consider. Let's explore the pros and cons of using these small, urban warehouses.

Micro-fulfillment Center Pros

Accelerated Order Fulfillment

Micro fulfilment centers leverage automation to speed up order processing, ensuring that orders are dispatched swiftly. This efficient order fulfillment process not only enhances operational efficiency but also meets consumer demand for faster delivery times.

Faster Delivery Times

Proximity to end consumers is one of the key benefits of micro fulfillment centers. By being closer to customers, businesses can reduce delivery durations and costs, offering fast and affordable shipping. This competitive advantage is crucial in the modern eCommerce landscape, where consumers prioritize quick delivery.

Increases Customer Satisfaction

Many micro fulfillment centers improve customer satisfaction through faster deliveries and convenient return options. Additionally, local pickup options allow customers to collect their orders at their convenience, further enhancing the customer experience.

Cost-effective Expansion

An autoamted micro fulfillment center cost less than larger facilities to set up and operate. This cost-effectiveness enables businesses to scale operations without significant financial investment, making it easier to expand into new markets or increase capacity in existing ones.

Increased Sales

Offering fast and affordable shipping through micro fulfillment centers can remove barriers to purchase, driving higher conversion rates and boosting revenue. This not only supports business growth but also aligns with the strategic goal of increasing sales and customer retention.

Micro-fulfillment Center Cons

Requires Constant Inventory Replenishment

Micro fulfillment centers function with limited storage capacity, this necessitates frequent inventory reorders. This requirement increases the cost and logistical complexity of regular transportation, potentially impacting the overall efficiency of the supply chain.

Relies on Unpredictable Consumer Demands

Micro fulfillment centers must manage rapid changes in consumer demand with limited storage. This challenge can lead to an inability to meet sudden surges in orders, potentially resulting in lost sales and dissatisfied customers.

Increased Risk of Stockouts

Limited inventory and fluctuating demand can result in frequent stockouts. These stockouts disrupt the supply chain and can disappoint customers, negatively impacting customer satisfaction and loyalty.

Depends on Customer Locations

The effectiveness of micro fulfillment centers is highly dependent on their proximity to main markets. Businesses must constantly reassess their locations if there are shifts in customer profiles or market changes, which can be a complex and ongoing process.

Not Viable for All SKU Types

Automated systems in micro fulfillment centers may not handle large or heavy items efficiently, leading to wear and tear on machines and limited storage capacity for such products. This limitation means that not all products are suitable for micro fulfillment.

Key Considerations for Retailers

Writing in Forbes, Micro-fulfillment expert Brittain Ladd suggests that retailers ask the following key questions to determine the viability and strategic fit of micro fulfillment centers:

• Where is the best place to forward and deploy inventory across the United States?
• Should we offer customers same-day delivery?
• What products should we fulfill from micro-fulfillment centers?
• What is our long-term strategy?
• Should we fulfill some of the products we sell ourselves, or should we outsource all fulfillment?
• Should we only sell direct to customers, or should we also partner with retailers?

These questions help retailers assess their supply chain operations and determine the best approach for utilizing micro fulfillment centers effectively.

Find the Cheapest Last Mile Delivery Rates with Easyship

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We also offer a range of easy-to-use shipping tools, to help streamline your shipping experience and delight your buyers. Popular features include:

• Shipping Rate Calculator: You can use our shipping rate calculator to compare shipping rates from different carriers
• Comparison Tool: With our courier comparison tool, you can compare the different shipping services offered by each courier, allowing you to choose your cheapest way to ship based on other factors, not just the cost
• Insurance: To help keep your packages safe in transit, Easyship offers you insurance up to $10000
• Tracking: From custom-branded tracking emails to automatic message alerts, Easyship helps you maintain package visibility with your buyers throughout the delivery process

Summary

Micro fulfillment centers represent a transformative approach to warehousing and order fulfillment, offering numerous benefits such as accelerated order processing, faster delivery times, and enhanced customer service. However, they also come with challenges, including the need for constant inventory replenishment and managing unpredictable consumer demands.

For retailers considering this strategy, it’s crucial to evaluate their supply chain needs, customer locations, and long-term goals. By leveraging solutions like Easyship, businesses can optimize their last-mile delivery, reduce shipping costs, and enhance their overall operational efficiency.

Embrace micro fulfillment to stay competitive, improve customer satisfaction, and drive business growth in today’s fast-paced e-commerce environment.

FAQs

Does Easyship provide micro-fulfillment?

Easyship does not directly provide micro fulfillment centers but offers services that complement micro warehousing. By integrating with over 250 couriers worldwide, Easyship helps businesses manage inventory storage, reduce shipping costs, and improve operational efficiency. 

Using Easyship's tools, businesses can streamline their entire fulfillment process, ensuring faster shipping and higher customer satisfaction. This is particularly beneficial for e-commerce businesses utilizing micro fulfillment strategies to enhance their fulfillment operations.

What is an example of a micro-fulfillment center?

An example of a micro-fulfillment center is a small-scale storage facility located in an urban area, designed to handle online orders quickly. For instance, some grocery chains use micro fulfillment warehouses inside their existing stores to pick and pack orders efficiently. 

These centers use automated systems to manage inventory and ensure rapid order fulfillment, enabling faster shipping to local customers. Unlike Nike's huge distribution centers, these facilities are much smaller and focus on delivering items quickly within a limited area.

How big is a micro-fulfillment center?

Micro-fulfillment centers are typically no larger than 10,000 square feet. These smaller fulfillment locations are strategically placed in urban areas close to customers to reduce shipping times and costs. 

Despite their limited size, these centers function efficiently by using advanced inventory management systems and automation to keep the inventory storage process streamlined. This setup enables faster shipping and better handling of customer returns, improving the overall customer experience.

What are the 4 types of fulfillment?

1. In-House Fulfillment: Businesses handle their own fulfillment operations, managing everything from inventory storage to shipping within their existing warehouse space. This method is common for smaller businesses or those with unique fulfillment needs.
2. Third-Party Logistics (3PL): Companies outsource their fulfillment processes to third-party providers who manage the entire process. This includes inventory management, order picking, packing, and shipping, often from larger fulfillment centers.
3. Dropshipping: Businesses partner with suppliers who handle inventory and shipping. When an order is placed, the supplier ships the product directly to the customer, eliminating the need for the retailer to manage inventory or fulfillment locations.
4. Hybrid Fulfillment: This method combines elements of in-house fulfillment, 3PL, and dropshipping. Businesses may handle certain products in-house while outsourcing others, depending on cost and transit times. This approach offers flexibility and can improve operational efficiency.

Using micro fulfillment centers, businesses can complement these strategies by ensuring fast and efficient local deliveries, enhancing customer satisfaction. By placing fulfillment locations closer to customers, businesses can offer multiple delivery options and improve their supply chain operations.