What is a micro fulfillment center and how can they be used to fulfill orders faster? (2024)

When you think of a modern fulfillment center, you probably conjure up images of those vast, Amazon-esque warehouses dotted along the nation’s freeways, serving a neverending fleet of trucks from their multiple loading bays. However, not all fulfillment centers need to be the size of a small country. Sometimes, a smaller fulfillment center can provide a much more efficient way to fulfill orders — enter: micro fulfillment centers.

In this article, we’ll introduce the concept of the micro fulfillment center and explain how they can help you ship your orders faster and more efficiently, giving your retail business a competitive edge.

What is a micro fulfillment center?

A micro fulfillment center (MFC) is a small storage and distribution facility utilized by online sellers to store inventory for expedited fulfillment in close proximity to its customers. This strategic placement helps those sellers minimize transit times and fulfillment costs.

Comparing MFCs with traditional fulfillment centers

Unlike traditional warehouse-style fulfillment centers, MFCs are not designed to store large volumes of stock for an extended time. Instead, the priority is to move items through the fulfillment process as quickly as possible. The main differences between the two fulfillment models are primarily in their scale, location and operational focus. Let’s compare the two systems using these three criteria:

1. Scale:

Traditional Warehouse Fulfillment Centers: These large-scale facilities are designed to store significant amounts of inventory for longer durations. Inventory might be held in multiple locations in these warehouses to better manage deep storage, stock replenishment and fulfillment to other warehouse locations, including MFCs and individual customers.

Micro Fulfillment Centers: As the name suggests, MFCs are much more compact and optimized for smaller-scale operations. They are designed to efficiently handle a high volume of orders within a smaller geographic footprint. These warehouses are designed for throughput not storage.

2. Location:

Traditional Warehouse Fulfillment Center: These larger fulfillment centers can be located in areas with lower real estate costs and are therefore typically situated away from densely populated urban areas. It’s also common to find these warehouses close to major transport infrastructure such as freeways, seaports and airports.

Micro Fulfillment Centers: Due to their small size, MFCs can be more strategically and more cost effectively located closer to more densely populated areas and end consumers. This close proximity to customers reduces the online seller’s final mile transportation costs and delivery times.

3. Operational Focus:

Traditional Warehouse Fulfillment Centers: These larger fulfillment centers focus on bulk storage, handling large shipments and managing inventory for extended periods, making them more suitable for slower-moving goods.

Micro Fulfillment Centers: MFCs prioritize speed and efficiency in order processing and fulfillment. They are optimized for quick turnaround times, handling smaller quantities of goods and fulfilling orders rapidly.

How did micro fulfillment develop?

Micro Fulfillment Centers emerged in response to the needs of the rapidly evolving ecommerce industry and associated consumer demand for faster, more efficient shipping.

As online shopping became more popular, traditional warehouse fulfillment centers struggled to meet consumer demand. With next-day and even same-day fulfillment becoming the norm, it became increasingly difficult for retailers to deliver on their promises from more remote locations that were not necessarily set up for shipping individual items.

The emergence of omnichannel retail, creating multiple ways for consumers to purchase and receive goods (home delivery, click-and-collect, delivery lockers, etc.), puts additional strain on retailers to optimize their fulfillment services.

What are the advantages of micro fulfillment centers?

Micro fulfillment centers offer several advantages for online retailers looking to optimize their order fulfillment processes. Key benefits include:

1. Efficient Order Fulfillment: By strategically locating MFCs closer to consumers, online sellers minimize the distance and time needed for order processing and delivery.
2. Improved Customer Experience: MFCs empower online sellers to meet or exceed customer expectations for convenience, speed and reliability in ecommerce transactions.
3. Cost-Effective Last-Mile Delivery: MFCs positioned near customer locations allow online retailers to reduce last-mile delivery costs significantly.
4. Green Options: Close proximity to customers, enables online sellers to explore more environmentally friendly delivery options, including electric vehicles and even eBikes.
5. Streamlined Inventory Management: MFCs are tailored to manage smaller inventory quantities efficiently, enabling online sellers to maintain optimal stock levels based on customer demand patterns. Real-time inventory visibility and order management systems further enhance efficiency by minimizing the risks of overstocking or stockouts.
6. Flexible Staffing: By locating MFCs close to large centers of population, it may be easier to recruit a more flexible workforce, including part-time workers, to help manage peak trading periods.

How to implement micro fulfillment in different industries

There are multiple routes to implementing a micro-fulfillment strategy. Some businesses will be more ready for micro-fulfillment than others. For example, retailers with physical stores may already have a ready-built network of fulfillment centers at their disposal. Others will harness MFCs to offer a local service without the high costs of operating a traditional retail store. Here are some examples of businesses that have seen considerable success with MFCs.

Groceries

Supermarkets are a great example of businesses that have utilized existing store space as MFCs to fulfill orders without investing in additional warehouse space. But this doesn’t mean there is not considerable investment in this strategy. Grocery sellers have had to invest in extra staff and technologies to manage the picking and packing process, adapt store space to facilitate click-and-collect orders and acquire a fleet of vehicles to deliver the orders.

The success of online grocery deliveries has seen the emergence of “dark stores.” These supermarkets are used exclusively for fulfilling online orders and are not open to the public.

Smaller convenience stores are also joining the party by offering rapid grocery delivery by partnering with companies traditionally associated with fast-food and takeaway delivery, like Uber and Just Eat.

Fashion

The fashion industry is another business that has benefited from a pre-built network of micro-fulfillment centers. Click and collect is a big part of that process and a fantastic opportunity for high-street fashion brands keen to utilize existing real estate. The ability to order online and collect in-store allows shoppers to guarantee the correct size garments are in stock before visiting a retailer. – saving any unnecessary journeys.

The retailer also benefits from additional footfall, enabling them to make added-value and impulse purchases. The in-store collection has also simplified the returns process, allowing retailers to make more efficient decisions about what happens to returned inventory.

Fast Moving Consumer Goods

MFCs have enabled retail businesses to offer ridiculously fast (often same-day) delivery of specific products to large metropolitan areas. Organizations like Amazon have the considerable advantage of compelling data to help them identify what products need to go to MCFs to meet customer expectations. This gives them a significant commercial advantage over less agile sellers.

Home improvement and DIY stores

Retailers specializing in home improvement and Do-It-Yourself (DIY) products can leverage MFCs to streamline the fulfillment of bulky items, tools and construction materials that may be difficult to store in traditional retail settings. MFCs enable faster order processing for online shoppers and tradespeople looking to complete home projects quickly or guarantee deliveries to coincide with project developments.

B2B and wholesale

Companies supplying technology, stationary, toiletries, cleaning products, or wholesale goods to business customers can benefit from locating MFCs close to significant centers of commerce, including financial districts, business parks and industrial zones. This will dramatically reduce order time and offer sellers a significant commercial advantage.

How to get started with micro fulfillment

Investing in micro fulfillment is a significant strategic decision for any business looking to enhance its ecommerce operations. Before considering such a strategy, it’s essential retailers understand the following steps:

Review existing fulfillment operations

Online sellers should thoroughly evaluate their existing fulfillment processes before investing in micro fulfillment. This process will highlight pain points, including high labor costs, slow order processing times, shipping errors and limited opportunities to scale. Understanding these challenges is crucial when determining whether an MFC strategy would address these issues effectively and bring tangible benefits to the business.

Set goals and objectives

When you understand your pain points, setting clear goals and objectives becomes easier. Typical objectives will include improving order accuracy, reducing delivery times, increasing throughput, or enhancing overall operational efficiency. Once set, these objectives will act as guiding principles throughout your implementation process.

Evaluate feasibility

You’ll need to take a long, hard look at your business before taking the next step. Understanding the alignment between your business’s needs and the benefits of MFCs is essential in making an informed decision. Online sellers managing high-volume orders of small-to-medium-sized items, perishable goods, or fast-moving consumer goods may benefit from adopting an MFC strategy.

Financial planning

Just because MFCs are smaller than traditional warehouse buildings doesn’t mean they are a low-cost solution. This will be particularly true when setting up MFCs in busy metropolitan areas. Online sellers must estimate the initial investment costs for technology, infrastructure and automation systems, alongside additional, ongoing operational expenses, including staffing, maintenance and software subscriptions, to ensure the strategy is a sustainable and profitable venture.

Technology and logistics partners

When you add additional fulfillment centers to your network, you’re adding extra layers of complexity to your business. This makes it even more important to know exactly where your products are and how many items you have in stock.

There are several advanced automation solutions tailored to MFCs. These include software for order management, inventory tracking and efficient picking and packing technology. Online sellers should prioritize compatibility and real-time data synchronization between their ecommerce storefronts, online marketplaces and MFC facilities.

Design, testing and implementation

By collaborating with technology providers, online sellers can design a customized MFC layout that optimizes available space and workflow efficiency. Implementing the necessary hardware, software and automation systems requires careful planning and coordination. A phased approach to implementation, starting with dedicated testing periods and iterative improvements, will ensure a smooth transition to full-scale operations.

What’s the future of micro fulfillment?

There’s no putting the genie back in the bottle. Consumers don’t just enjoy expedited delivery; they expect it. If you cannot deliver your products on those terms, they’ll find someone else to buy them from. But there is so much more happening in the world of MFCs. As the sector evolves, we can expect to see the following trends emerging:

1. Expansion across verticals: While currently prominent in grocery and retail sectors, MFCs are already expanding into other industries such as pharmaceuticals, electronics and more.
2. Advanced automation: And you thought Amazon was joking when they started talking about delivery by drone. The future of MFCs will see increased adoption of advanced automation and robotics technologies. This includes more sophisticated picking robots, autonomous vehicles for intra-facility transport and AI-powered inventory management systems.
3. Green initiatives: Many online sellers are looking to MFCs to implement more environmentally friendly initiatives. This includes leveraging green technologies for energy efficiency, implementing reusable packaging solutions, optimizing delivery routes to minimize carbon emissions and reducing waste through efficient perishables management.
4. Increased omnichannel integration: The integration with brick-and-mortar stores will become more prevalent, allowing for click-and-collect services, in-store pickups of online orders and rapid replenishment of store shelves from nearby MFCs.
5. Wider adoption by Small and Medium-Sized Businesses (SMBs): As MFC technologies mature and become more accessible, smaller businesses will increasingly adopt micro fulfillment solutions. Cloud-based platforms and modular MFC designs will lower barriers to entry, enabling SMBs to compete effectively in this evolving ecommerce space.

How Linnworks can help launch MFCs

Linnworks provides online sellers with a robust solution that seamlessly integrates across their entire fulfillment network, including MFCs. This enables retailers to optimize their order management, inventory control and shipping processes. It also gives online sellers real-time visibility into inventory levels across multiple sales channels, ensuring accurate stock allocation for traditional fulfillment and MFC operations.

Book a demo with one of our ecommerce fulfillment experts to learn more and see our software in action.