What is Micro Fulfilment Technology?

1/12/2024

What is Micro Fulfilment Technology?

Micro fulfilment has great potential for improving several aspects of eCommerce order fulfilment. The market for micro fulfilment stood at $3.53 billion in 2022. It is expected to grow at a CAGR of 41.54% to reach $113.84 billion by 2032.

The exponential growth of micro fulfilment solutions is not exempt from challenges. These include predicting demand, inventory replenishment, labour shortages, and so on. Fortunately, eCommerce businesses can use micro fulfilment technology to tackle the challenges. 

Technologies such as artificial intelligence, robotics, autonomous drones, etc. can help you achieve micro fulfilment automation. These technologies can help you improve efficiency and reduce costs. According to CB Insights, micro fulfilment centre automation can help you reduce the cost of fulfilment by up to 75% compared to traditional methods.

In this article, we will discuss how fulfilment technology affects the various stages of the process. We will also discuss the various technologies you can employ to automate your micro fulfilment centres. 

But first, let’s take a look at the various aspects of eCommerce micro fulfilment. This will help us better understand how micro fulfilment technology can optimise the processes.

What is Micro Fulfilment?

Micro fulfilment is a logistics distribution strategy for ecommerce order fulfilment. In this strategy, you place the inventory close to your target market. Micro fulfilment strategy does not use large central warehouses for order fulfilment. Instead, it uses small micro-fulfilment centres to process and deliver orders.

These centres are placed close to the customer’s location. They are typically located in urban areas. You supply relevant inventory to the micro-fulfilment centre. Then you use this location to process orders in that region. You also use this centre as a point of origin for last-mile delivery.

Micro fulfilment benefits eCommerce businesses in several ways. It reduces the distance between the customer and the inventory. As a result, order fulfilment becomes faster and more cost-effective. Micro fulfilment solutions in eCommerce help facilitate same-day and next-day shipping. It can also facilitate self-fulfilment for customers.

You can further streamline the process with micro fulfilment technology. This involves using software integration, artificial intelligence (AI), and robotics to speed up the process. Micro fulfilment automation further speeds up order processing. It allows the brand to use limited space and inventory to serve more customers in a region.

Components of Ecommerce Micro Fulfilment

But, before we can talk about high-tech micro fulfilment solutions, we need to understand the components of the strategy. This ecommerce order fulfilment strategy has three important components:

1. Inventory Supply

2. Logistics and Distribution

3. Micro Fulfilment Centre

4. Last Mile Delivery

Let’s understand how each of these components functions in eCommerce micro fulfilment. Then we will see how different technologies can help with micro fulfilment automation.

1. Inventory Supply

The first stage of the micro fulfilment strategy revolves around receiving inventory. You need to supply relevant inventory to the micro fulfilment centres in different regions. The supplied inventory depends on the in-demand products in the region.

The effectiveness of micro-fulfilment solutions depends on identifying the right inventory for a target market. You can conduct market research on each target market to find frequently ordered products. This data can also be derived by analysing the purchase behaviours of your existing customers. You can also conduct competitor analysis to derive this information.

You also need to consider the purchase drivers for different products. Customers do not mind waiting for certain products. While they would need certain items as fast as possible. Furthermore, you should also consider what your competitors are offering. You can gain a competitive advantage in a market by offering faster delivery for certain products.

At this stage, AI is the most useful micro fulfilment technology. It can help you analyse large data sets. You can use AI to identify the right SKUs for different micro fulfilment centres for eCommerce.

2. Logistics and Distribution

In eCommerce micro fulfilment, you need logistics and distribution to manage inventory supply. You need to get the right inventory to the right micro-fulfilment centre. Furthermore, you need to maintain a continuous supply schedule. 

Micro fulfilment centres can carry limited inventory. This inventory gets exhausted rather quickly. So you need to ensure that these small fulfilment centres never run out of stock. You need to align your supply chain keeping inventory exhaustion in mind.

A micro fulfilment centre can receive inventory from several different sources. You can use a central warehouse as the primary storage unit. This warehouse acts as the distribution centre. It stocks inventory in bulk. You sort the inventory for different micro fulfilment centres at this warehouse. Then using road freight, you can supply the relevant inventory to different micro fulfilment centres.

At this stage, you can use AI and automation for logistics and inventory supply schedules. You can link up logistics and inventory management software to achieve micro fulfilment automation. AI tools can also help you with planning routes, dispatch schedules, and shipment tracking.

3. Micro Fulfilment Centre

A micro-fulfilment centre (MFC) lies at the heart of this strategy. You will receive the inventory at the MFC from a central warehouse. You need to count and catalogue the received inventory for storage. After that, the micro fulfilment centre is responsible for inventory management, order processing, picking, packing, and shipping. 

The goal of the micro fulfilment solution is to deliver the products as fast as possible after the customer places the order. You need to keep this objective in mind for planning every aspect of the micro fulfilment centre.

At this stage, you can employ a variety of micro fulfilment technologies to optimise the process. These include software integrations, AI, and robotics. The strategy for micro fulfilment centre automation depends on the type of unit you are using.

Types of Micro Fulfilment Centres

Micro fulfilment centres can be divided into three categories. These are based on the location and fulfilment options.

1. Standalone MFCs

A standalone MFC is a multi-functional micro-fulfilment centre. It is a small storage unit located in an urban area. These MFC can provide several fulfilment options to the customer. You can use these for eCommerce order fulfilment. You can also facilitate these with self-fulfilment options such as curb-side pick-up or locker pick-up. 

2. Integrated MFCs

An integrated MFC is a micro fulfilment centre that is part of a retail outlet. You can use the storage spaces of a retail unit for eCommerce micro fulfilment. The operations of both facilities are integrated with one another. You use the same inventory for restocking the retail store and for order fulfilment. 

These micro fulfilment centres for eCommerce can offer a variety of options to customers. You can process and ship orders for delivery. You can also offer self-fulfilment options such as in-store pick-up. 

Retail experiences have a huge impact on purchase decisions and customer experience. 58% of customers desire to buy online & pick up in-store fulfilment options. An integrated micro fulfilment centre can help you address such customer preferences.

3. Dark Stores

A dark store is a distribution centre that also functions as a micro-fulfilment centre. These storage units are located close to urban locations. But they are typically situated on the outskirts of a city or in industrial areas. A dark store is larger than a stand-alone store and carries more inventory.

This storage unit can supply inventory to retail outlets and standalone MFCs. It can also serve as a micro-fulfilment centre. However, it does not provide self-fulfilment options to the customers. These types of storage units can either distribute inventory or ship orders to customers.

The applications of micro fulfilment technology can greatly vary depending on the type of MFC. You can turn a standalone MFC into a completely automated eCommerce fulfilment centre. However, an integrated MFC would need a certain level of manual intervention. You also need to consider the final stage of micro fulfilment solutions in eCommerce to identify the right technologies. This brings us to last-mile delivery.

4. Last Mile Delivery

This is the last stage of the eCommerce micro fulfilment strategy. The orders are processed, picked, and packed at the MFC. Then you dispatch the packages for last-mile delivery. Micro fulfilment benefits eCommerce companies by reducing the distance of last-mile delivery. This allows for faster and cheaper order fulfilment.

The micro fulfilment technologies you adopt at this stage depend on your logistics strategy. Ecommerce brands can use a fleet of vehicles for this stage. Or they can use courier services. The fulfilment process is different for these strategies.

If you are using your own vehicle fleet, you will need to employ a vast array of automation and AI technologies. These can help you with dispatch management, route planning, vehicle tracking, performance analysis, and so on.

On the other hand, the application of micro fulfilment technology changes for local couriers or 3PL. Here, the MFC is only responsible for dispatching and monitoring the shipment. So you can employ micro fulfilment technology for label generation, packaging, dispatch communication, delivery tracking, and fulfilment communication.

Technologies for Ecommerce Micro Fulfilment 

You need to employ a combination of different micro fulfilment technologies to achieve automation. These technologies should be considered when you plan your MFCs. Some aspects of micro fulfilment centre automation depend on the layout, equipment, product size, and so on.

You also need to consider how your automated eCommerce fulfilment centre will receive inventory and dispatch orders. If you are using an integrated MFC, you also need to consider how the automation will work with the retail outlet or self-fulfilment options. Based on these factors you can define a process that strikes a balance between manual processes and micro fulfilment automation.

Here is how different technologies can benefit your micro fulfilment centres:

Artificial Intelligence

AI is one of the important technologies for micro fulfilment strategy. It helps address several key challenges such as demand forecasting, inventory management, logistics planning, and so on. 

Artificial intelligence can also play a key role in collecting, integrating, and analysing data from different sources. Let’s see how this micro fulfilment technology can help you at different stages:

Demand Forecasting

You can use artificial intelligence tools to analyse different target markets. AI tools can analyse data from different sources to help you understand customer behaviours and forecast demands. Furthermore, you can segment the product demand based on the customer’s location. This will help you identify the SKUs for different micro fulfilment centres.

For instance, Amazon uses AI to predict the demand for various products based on historical sales data, customer behaviour, market trends, and more. It helps Amazon make accurate predictions for inventory planning. This system also helped the eCommerce giant cope with sudden demand surges during the Covid-19 pandemic.

Inventory Management

Using AI capabilities you can optimise inventory management at the micro fulfilment centre. By combining data from demand forecasting and inventory records, AI can offer incredible insights. You can predict when you are likely to run out of stock. It can also estimate supply lead time for inventory replenishment. Based on these, AI can help you define an inventory replenishment schedule.

Take the example of how Walmart uses AI for inventory management. The retail giant uses AI to maintain optimal stock levels for millions of SKUs.

Customer Communication

You can create unique and personalised customer communication using AI. Ecommerce order fulfilment requires customer communication at several stages. You would need to inform the customer about order details, delivery schedule, self-fulfilment locations, etc. These communications are intertwined with micro fulfilment processes.

You can use AI tools to create highly personalised text and voice messages for your customers. These tools would collect information from various sources. These include CRM, order fulfilment software, and past conversations. 

The AI can share information and even interact with the customer to resolve their queries. Furthermore, you can create a unique tone to reflect your brand values. A Dutch eCommerce brand named Bol is using AI to automate several aspects of customer service including order fulfilment. 

Robotics

You can automate micro fulfilment centres using robots in different capacities. You can use robots to aid warehouse and inventory management. You can also use this micro fulfilment technology to completely automate several processes. These include inventory receiving, organising, storage, retrieval, and packing. 

Autonomous mobile robots are already employed for micro fulfilment automation. These are used at several fulfilment facilities around the world. ABI Research, a global technology intelligence firm, estimates that autonomous robots were responsible for 423,000 shipments in 2022.

Such robots are rapidly populating warehouses and eCommerce micro-fulfilment centres. The market for warehouse robotics stood at a $6.5 billion valuation in 2022 and is estimated to reach $15 billion by 2032.

However, the scope of use varies greatly. Some micro fulfilment solutions only use robots for specific tasks. The other tasks are carried out by humans. 

For instance, the IKEA fulfilment centre in Zagreb, Croatia uses robots to retrieve products. The products are then handed to a human worker. The robot can find and pick the products in just 15 seconds. The robot-focused arrangement also allows the fulfilment centre to store 60% more volume compared to manual organising. 

You can also use robots to assist customers with self-fulfilment options. Walgreens Boots Alliance, an American retail pharmacy chain, is using robots to fulfil customer prescriptions at their fulfilment centres. According to Walgreens’ President, this micro fulfilment technology will help them reduce the working capital by $1.1 billion by 2025.

The robots at Walgreens can process 300 orders in an hour. It would take a human an entire day to reach the same capacity. You can also use robots at various stages of the fulfilment process to reduce costs and improve efficiency. 

The robots can operate ceaselessly. They can also help you store inventory more efficiently. Consequently, you will be able to store more SKUs and process more orders through micro fulfilment automation. 

Automated Micro Fulfilment Centre

An automated micro fulfilment centre is designed to handle the entire fulfilment process by itself. While AI and robots are an upgrade to existing systems. You cannot achieve complete micro fulfilment centre automation with these tools. 

You will need to redesign the infrastructure of the eCommerce micro fulfilment centre for complete automation. It would also affect several preceding and succeeding order fulfilment processes. 

Creating an automated micro fulfilment centre is a matter of redesigning the infrastructure. You will be creating an assembly line that can operate autonomously for eCommerce micro fulfilment solutions. Such an endeavour requires significant resources and planning.

However, once operational it can surpass partly automated systems. The infrastructure would be a combination of different micro fulfilment technologies. You will need to integrate various software with AI and robotics. These would include point-of-sales, order management, inventory management, logistics management, and so on.

Then you need to define the transition of processes from humans to robots. This transition would occur in two stages. First, when the micro fulfilment centre receives the inventory. Second, when the fulfilment centre hands over shipments to courier services for delivery. All the processes in-between would be done through micro-fulfilment centre automation.

An estimate by Interact Analysis shows the exponential rise of automated micro fulfilment centres. The research predicts the installation of more than 7,300 MFCs by 2030. This makes automated micro fulfilment centres one of the fastest-growing sectors in the logistics industry. 

Woolworth, an Australian retail chain, launched its automated micro fulfilment centre in Sydney. The company saw incredible improvements in several order fulfilment metrics. These include pick-up rate, order processing rate, fulfilment rate, etc. 

During the initial tests itself, the automated micro fulfilment centre processed 10 orders in 4 minutes. On the other hand, manual order processing would take 30 minutes. Micro fulfilment automation can significantly improve efficiency and reduce costs. As the MFCs operate in small spaces, such improvements are all the more necessary.

Fulfilment with Drones

Delivery drones can help you automate the final stage of eCommerce micro fulfilment. The market for delivery drones is growing rapidly around the world. The market valuation for this fulfilment technology is estimated to reach $13.54 billion by 2026.

In Australia, the Civil Aviation Safety Authority (CASA) has already granted permission to two drone delivery services. These drones are allowed to operate within a 10 km radius to deliver certain goods. These include food, drinks, hardware, pharmaceuticals, and recreational supplies. Whereas medical supplies and equipment can be delivered up to a radius of 60 km.

These drones can significantly speed up the last-mile delivery for eCommerce micro fulfilment. The drone delivery service Wing has already completed more than 300,000 deliveries in Australia. These drones can travel up to the speed of 100 km/hr and complete deliveries within a few minutes. 

Use Micro Fulfilment Technology for Faster Fulfilment

Micro fulfilment technology can help you speed up the overall eCommerce order fulfilment process. You can process and deliver orders faster. Micro fulfilment automation helps you generate better output from resources. It helps you serve more customers in a target market.

The PACK & SEND Micro Fulfilment Solutions combines high-end technology with a widespread logistics network. This facilitates eCommerce companies with fast and cost-effective order fulfilment. You can also use our network of micro fulfilment centres to provide self-fulfilment options to your customers.

FAQs

What is an automated fulfilment centre?

An automated fulfilment centre is a storage and distribution facility that uses technology to automate the order fulfilment process. This facility employs several fulfilment centre technologies such as software integrations, robotics, and artificial intelligence for automated order fulfilment. 

An automated fulfilment centre can receive orders from the customer, pick the relevant products from inventory, print shipping labels, package the products for shipping, and dispatch the shipment through logistics. 

How to automate the fulfilment process?

You can automate the fulfilment process by employing different technologies such as cross-software integrations and artificial intelligence. These tools can transmit information and instructions between different software. You can connect point-of-sales with inventory management. Similarly, you can integrate order processing with logistics management. 

Furthermore, you can use robots to automate physical tasks in the fulfilment centre. These include picking and packing products for shipping. Finally, you can use autonomous drones for last-mile delivery. These technologies can help you automate the entire fulfilment process.

What can you automate in a warehouse?

You can automate several aspects of warehouse management. You can use AI to help you plan warehouse layout. AI can also help you with inventory management using demand forecasting. You can also use robots to automate physical processes such as stocking, inventory organisation, picking, and packing. 

How AI will help automate the micro fulfilment centre?

Artificial intelligence is an incredibly useful micro fulfilment technology. It can help streamline, optimise and automate several aspects of a micro fulfilment centre. These include warehousing, inventory management, order processing, picking and packing, and logistics management. You can also integrate AI with warehouse robots for physical tasks. This will help you achieve complete micro fulfilment centre automation.

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