Micro-fulfilment Solutions: Maximise Efficiency and Speed

15/12/2023

Micro-fulfilment Solutions: Maximise Efficiency and Speed

Micro-fulfilment is one of the key aggregators in facilitating same-day and next-day deliveries. Ecommerce micro-fulfilment solutions hold great potential for improving order fulfilment. Market estimates show the industry rapidly growing.

As of 2022, the market valuation stands at $3.53 billion. Estimates show an expected CAGR of 41.53%. It is expected to reach a $113.84 billion valuation by 2032.

Micro fulfilment market size 2022 to 2032

This distribution strategy can significantly reduce the time and cost of order fulfilment. Micro-fulfilment solutions benefit the company as well as the customers. 

In this article, we will try to understand the components of micro-fulfilment solutions in eCommerce. We will also look at how this strategy works and how you can improve it.

What is Micro-fulfilment?

Meaning of micro-fulfilment in ecommerce

Micro-fulfilment is a strategy for ecommerce order fulfilment. It involves using strategically placed warehouses for order fulfilment. These are called micro-warehouses or micro-fulfilment centres. This strategy is most commonly used for last-mile delivery in eCommerce. It is a decentralised version of the traditional fulfilment model.

This strategy uses micro-fulfilment centres placed close to customer locations for order fulfilment. The company does not ship orders from a central warehouse. Instead, it supplies inventory to micro warehouses. Then they use this micro warehouse to process, pack, and ship orders.

This practice reduces the distance between the fulfilment centre and the customer. It also reduces the cost and duration of last-mile delivery. Micro-fulfilment enables express shipping options such as self-fulfilment, same-day delivery, and next-day delivery.

What is Micro Warehousing?

Micro warehousing is a logistics distribution strategy to enable micro-fulfilment. In this distribution strategy, the company supplies inventory to micro-fulfilment centres. You do not use large central storage facilities for order fulfilment. 

The large warehouses act as supply centres for micro warehouses. This distribution strategy is named after these small storage units. It benefits from the cost difference per unit between freight shipping and small parcel shipping. 

This distribution strategy helps better manage storage and transportation. It helps reduce the cost of last-mile delivery. Micro warehousing also grants more flexibility with inventory distribution. You can freely move your inventory between different target markets based on demand.

What are Ecommerce Micro-fulfilment Centres?

A micro-fulfilment centre (MFC) is a small storage facility. A micro-fulfilment centre is typically smaller than traditional warehouses. While the average warehouse is larger than 10,000 square metres. The size of a micro warehouse ranges from 500 square metres to 5,000 square metres.

Traditional warehouse vs. micro-fulfilment centre size comparison

MFCs can be independent or shared storage facilities. They can also be part of a retail outlet. The purpose of using a micro-fulfilment centre is to reduce the distance between storage and the customer. Hence, micro warehouses are situated close to urban areas.

Traditional Warehouse Micro-fulfilment Centre
Larger than 10,000 sq. mt. Smaller than 5,000 sq. mt.
Located in industrial areas Located in urban areas
Stores large volumes of different SKUs Stores limited volumes of different SKUs
Receives inventory from a supplier or manufacturer Receives inventory from a central warehouse
Supplies inventory for retail outlets, micro warehouses, and order fulfilment Supplies inventory for order fulfilment and self fulfilment
Does not require frequent restocking Requires frequent restocking
Storage time is long Storage time is short
Stores all types of products Only stores products relevant to the location
One warehouse can supply to many cities Each micro-fulfilment centre only supplies to a city

A micro-fulfilment centre only serves a specific region. Its services usually cover a city. The micro-warehouse stores a select few SKUs. The product mix usually depends on customer demand in a city.

Micro-fulfilment centres for eCommerce facilitate fast shipping. Companies can deliver products on the same day or within two days. Ecommerce micro-fulfilment solutions can also facilitate self-fulfilment. Customers can order online and pick up the products from the micro warehouse.

These warehouses store limited inventory in a small space. This allows for faster order processing, picking, packaging, and shipping. The delivery time of the orders is also short.

But, micro-fulfilment centres have to operate in a limited space. They cannot store large volumes of inventory. Hence, companies need to frequently stock micro-fulfilment centres for eCommerce.

How Micro-fulfilment is Different from Traditional Warehousing?

Micro-fulfilment is starkly different from traditional warehousing in various aspects. While both of these are logistics distribution strategies. Their operations and resources are very different. 

The biggest difference between micro-fulfilment and traditional warehousing is the size of the storage facilities. Micro-fulfilment uses small storage facilities for order fulfilment. Traditional warehousing uses large storage spaces for storage. It can serve several purposes. 

A traditional warehouse can supply inventory to several locations. These can be retail outlets, distribution centres, or micro-warehouses. They are also used for order fulfilment. A micro-fulfilment solution only caters to eCommerce order fulfilment.

Distribution with Micro-fulfilment Solution Distribution with Traditional Warehousing
It is a decentralised distribution strategy It is a centralised distribution strategy
Uses small storage units Uses large storage units
Fast & simple fulfilment process Long & complex fulfilment process
Distribution is limited to a city DIstribution covers several regions
Manages a few SKUs in small quantity Manages several SKUs in huge volumes
Shipping directly to customer Shipping to fulfilment centres, retail outlets, & customers
Uses small fleet shipping for fulfilment Uses different shipping operations for fulfilment
Optimised for fast delivery Optimised for inventory management & distribution
Fulfilment time is less than 48 hours Fulfilment time can be three days or longer.
Only supports eCommerce order fulfilment Supports supply chain & logistics distribution

Micro-fulfilment and traditional warehousing also use different strategies for supply management, inventory management, order processing, and shipping.

In traditional warehousing, you use a centralised storage location. This location receives inventory from the supplier or the manufacturer. The central warehouse typically receives inventory in large volumes. All the SKUs are stored in a large warehouse.

Distribution With Traditional Warehousing

Traditional warehousing needs several stages for order fulfilment. You need freight shipping to supply inventory to fulfilment centres. Then you have to separate products for individual orders. After that, you will deliver each product from the fulfilment centre. 

You will need to use small parcel shipping at this stage. Or you can use cross-docking to transfer products from freight to courier vehicles.

Traditional vs cross docking warehouse

In eCommerce micro-fulfilment solutions, you use a small storage unit. Here you need to choose locations close to your customers. This unit receives inventory from a central warehouse. You will use road freight for this stage. The micro-fulfilment centre will only receive products that are in demand.

The storage and stock remain limited in a micro-fulfilment centre. Hence you can only store products that can sell in a short time. These micro-warehouses also need frequent restocking.

But, order fulfilment is faster with eCommerce micro-fulfilment solutions. You can directly use courier services to ship the order. Hence, micro-fulfilment is cost-effective for order fulfilment.

Why is Micro-fulfilment Popular in Ecommerce?

Ecommerce micro-fulfilment solutions answer a key consumer demand. Ecommerce consumers want fast and free delivery. The speed and cost of shipping can lead to conversion or cart abandonment.

Statistics showing reasons of people who abandonded shopping cart

Shipping-related issues make up three of the top five causes of cart abandonment which ultimately boils down to costly and slow shipping. These factors can result in a poor customer experience. You may even lose a customer to your competitors.

On the other hand, fast delivery can help you gain more customers. 65% of customers are even willing to pay more for faster delivery. Free shipping also has a significant influence on shopping decisions. 

But, customers also expect free shipping to be fast. 62% of customers expect free shipping to arrive in less than three days.

Important factors people consider while shopping on brand_retailers website

Collectively, free and fast delivery have the highest influence on purchase decisions. In this regard, micro-fulfilment benefits eCommerce brands and their customers. 

Micro-fulfilment solutions in eCommerce help speed up the delivery process. It is also more cost effective than traditional fulfilment. Let’s understand how it works.

How ecommerce micro-fulfilment works

You need an accurate demand forecast for each region to define the right product mix for their respective micro-fulfilment centre. You also need to use an effective inventory management system. This will ensure that you do not overstock or understock inventory.

Here is how PACK & SEND’s eCommerce micro-fulfilment solutions leverage its widespread logistics network and technology for same-day delivery.

1. PACK & SEND integrates your shopping carts and marketplaces with the PACK & SEND Live shipping platform.

2. PACK & SEND receives the SKUs at one or more service centres. This movement is fed into PACK & SEND’s Inventory Management System.

3. The service centre updates the inventory management system when they receive the SKUs.

4. Your customer orders products online. This triggers order processing on PACK & SEND Live Shipping.

5. The shipping platform generates fulfilment orders for the service centre. The delegation is based on inventory availability and customer location.

6. The local micro-fulfilment centre picks and packs the order. They also initiate shipping for same-day delivery.

7. Your customer receives the order.

8. The inventory management system is updated at the micro-fulfilment centre.

9. You can track the inventory levels for different SKUs. You can also track inbound, on-hand, and outbound inventory throughout the PACK & SEND network.

What are the Benefits of Micro-fulfilment?

Micro-fulfilment solutions can benefit a company in several ways. It helps reduce costs and speed up deliveries. This can have a positive impact on sales and customer satisfaction. Let’s understand how micro-fulfilment benefits eCommerce companies.

Micro-fulfilment can Speed up the Delivery Process

Ecommerce micro-fulfilment solutions are compact in every aspect. The storage space is small. The inventory is limited. And the delivery distance is short. As everything is close, all processes are fast. 

The limited quantity allows for better organisation. The small storage space enables faster picking. The short distance allows faster delivery. In most cases, eCommerce micro-fulfilment solutions can deliver products within 24 hours.

Order Processing is Faster at a Micro-fulfilment Centre

Micro-fulfilment centres have to manage fewer SKUs. This means there are fewer options to browse through for picking. Additionally, fewer products also allow for better organisation. Warehouse management also needs to navigate less space. 

So, their picking process also requires less movement. So the order processing time is significantly less than a fulfilment centre. An efficiently run eCommerce micro-fulfilment centre can handle 4,000-5,000 orders a week.

Micro-fulfilment is Cost-Effective

Ecommere micro-fulfilment solutions reduce the distance between you and the customer. The shipping crosses fewer zones. This reduces the cost of last-mile delivery. In traditional fulfilment, last-mile delivery makes up 53% of shipping expenses.

Traditional fulfilment requires longer travel. It may even require multiple transport cycles. For instance, a freight picks several orders for fulfilment. Then it supplies orders to small vehicles through cross-docking. These vehicles then serve as carriers for last-mile deliveries.

On the other hand, fulfilment companies only need one cycle to deliver products in micro-fulfilment. A courier company can pick up the parcel from a micro-fulfilment centre and deliver it directly to the customer. The parcel travels less distance in a smaller vehicle. Micro-fulfilment benefits the company by reducing this cost by 75%.

Micro-fulfilment Solutions can Boost Ecommerce Sales

Customers want faster and cheaper delivery. Micro-fulfilment centres for eCommerce complement these demands. This can help you resolve some of the biggest cart-abandonment issues.

Factors that have biggest impact on online purchase

Additionally, these factors have a significant impact on purchase decisions. This can give you a competitive advantage in the market. You can edge out the competition by offering better deals.

18% of eCommerce customers will not buy from brands if they have to pay for shipping.  65% of shoppers would even pay more for faster shipping. Micro warehousing can help you boost sales and improve margins.

Ecommerce Micro-fulfilment Solutions Lead to Customer Satisfaction

Efficient order fulfilment has a huge impact on customer satisfaction. With micro-fulfilment, eCommerce customers get their orders faster. Micro-warehousing also helps reduce the cost of fulfilment. So the company can offer cheaper and even free shipping.

This makes the customer more likely to purchase from a brand. Aside from fulfilment, micro-fulfilment centres in eCommerce can speed up returns and replacements. Owing to the short distance, companies can send replacement products within a day.

The micro-fulfilment centres can also receive returned products faster. Hence, they can process compensations faster. This leads to a positive brand experience. Furthermore, micro-fulfilment centres can also facilitate self-fulfilment and store pick-up.

How to Improve Micro-fulfilment in Ecommerce?

Tips to improve micro-fulfilment in ecommerce

Micro warehousing can prove beneficial in many different ways. But, the process has room for improvement. Here are a few ways to optimise micro-fulfilment solutions for eCommerce.

Use Demand Forecasting to Stock Micro-fulfilment Centres

Stocking micro-fulfilment centres with the right products is critical. A micro warehouse can only hold limited inventory. So you need to stock the right products. You need to predict customer demand in different regions. This will help you find the right product mix for each micro-fulfilment centre.

Getting the wrong products will result in overstocking. The overstocked products will get in the way of in-demand products. They will block the flow of the supply chain through the micro-fulfilment centre.

You also need to estimate the right quantity for each SKU. This is necessary to prevent overstocking and understocking. If the in-demand products overstay a trend, it can lead to overstocking. On the other hand, having less quantity can lead to stock-outs. 

Demand forecasting can help you stock the right products in the right quantity. You can prevent wastage. It will also help you maintain optimal inventory levels at the micro-fulfilment centres.

Improve Inventory Management for Speed and Efficiency

Inventory management for micro-fulfilment centres requires precision. This strategy manages little inventory in a small space. You need accurate visibility of the inventory at all stages. You need to know the incoming, on-hand, and outbound inventory.

Visibility also helps you manage inventory replenishment. It can help you prevent overstocking and understocking. This is all the more necessary if you receive inventory from multiple sources. Inventory management also involves optimising warehouse layout. Ecommerce micro-fulfilment centres operate in limited space. So you need to make the most of the space. 

This involves arranging a layout to store maximum inventory in the limited space. It also involves organising the SKUs to allow faster picking. You need to pick an inventory management system that yields flexibility, efficiency, and speed. This will help you make the most from your eCommerce micro-fulfilment solutions.

Leverage Automation in Micro-fulfilment Centres

Automation can significantly improve eCommerce micro-fulfilment. It can help you speed up micro-fulfilment. It can also help you reduce labour costs. Automation can cut down the cost of order fulfilment by 75%.

You can automate several aspects of micro-fulfilment solutions in eCommerce. You can automate inventory management, order processing, picking, packaging, and shipping. Automation can make inventory management more efficient. It gives you visibility on inventory at all stages. Furthermore, you can automate procurement based on inventory and demand forecasting.

You can use robotics to automatically organise inventory in the micro-fulfilment centre. The same technology can pick the products for order processing. You can use automation to assign a courier to ship the order. This reduces the margin of error. With automation, you can pull information from the POS and use it for order fulfilment.

Scale Up with Micro-fulfilment Services

Micro-fulfilment benefits eCommerce in several ways. But, it also requires upfront investment in logistics resources. The investment requirements rise as you expand to more markets. You will need a micro-fulfilment centre in each location. As the demand rises in that location. You will need to supply more inventory.

Hiring a micro-fulfilment company can help you cater to several markets without investing in logistics resources. You can avail the vast network of micro-warehouses. But, you would only pay for the resources you use. 

This gives you the flexibility to operate at different scales in different markets. It can also make it easy for you to scale the operations quickly. Furthermore, eCommerce micro-fulfilment solutions can relieve you from several aspects of order fulfilment.

A micro-fulfilment company, like PACK & SEND, can handle storage, inventory management, picking, packaging, and delivery. With this streamlined flow of logistics, you can offer same-day & next-day deliveries to your customers.

Frequently Asked Questions (FAQs)

Is micro-fulfilment cost-effective?

Micro-fulfilment is a cost-effective strategy for eCommerce order fulfilment. This strategy reduces the distance between customers and storage. This reduces the cost of last-mile delivery. As the courier travels less, it costs less to ship.

Can micro-fulfilment speed up the delivery process?

Micro-fulfilment speeds up the delivery process for order fulfilment. Micro-fulfilment centres operate close to the customer’s location. They also manage limited quantities in a small space. So the order processing is faster in a micro-warehouse. As the micro-fulfilment centre is closer to the customer’s location, the last-mile delivery is faster. Ecommerce micro-fulfilment centres can facilitate same-day & next-day deliveries.

Is micro-fulfilment popular in eCommerce?

Micro-fulfilment is popular in eCommerce as it allows fast & cost-effective delivery. This order fulfilment strategy uses storage units close to the customers. This allows eCommerce brands to provide same-day and next-day delivery. 

These are attractive options for eCommerce customers. Furthermore, micro-fulfilment also allows customers to choose self-fulfilment. Micro-fulfilment benefits the company and customers. These reasons make micro-fulfilment a great order fulfilment strategy for eCommerce.

Image sources: Precedence Research, CB Insights, High Jump, ResearchGate, X Delivery, Consultancy.com.au, Dotcom Survey

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