Even before pandemic-related shutdowns of stores and restaurants pushed consumers in droves to e-commerce options, the concept of microfulfillment centers (MFCs) had been attracting interest among retailers.
During a presentation at ProMatDX 2021—the industry association MHI’s online tradeshow—Mario D’Cruz, senior director of strategic planning for Honeywell Intelligrated, highlighted six industry trends that were driving adoption of MFCs.
According to D’Cruz, microfulfillment centers typically are located either in the back of a store or in a nearby small standalone facility. They are designed to fulfill high-velocity stock keeping units (SKUs) in urban areas.
D’Cruz highlighted six factors that microfulfillment addresses:
- Customer demand for faster delivery. According to D’Cruz, research shows that 56 percent of 18- to 34-year-olds expect same-day delivery of online orders. Microfulfillment centers place more inventory closer to the customer allowing for faster delivery.
- Increasing urbanization. Currently, 54% of the global population lives in urban areas, D’Cruz said. That figure is expected to rise to 60% by 2050. Microfulfillment will allow retailers to better serve this urban population.
- Lack of warehouse space in urban areas. Real estate is at a premium in cities, and vacancy rates for industrial real estate continue to remain at historic lows. With retailers having difficulty finding space for more traditional distribution centers close to population centers, microfulfillment provides a viable alternative.
- SKU proliferation. Retail has seen the number product varieties skyrocket as consumers find more choices available online. The high-density storage and fulfillment automation found in microfulfillment centers will help retailers hold more goods closer to the point of demand.
- Labor challenges. Distribution centers face high employee turnover, a shortage of qualified staff, and a rising minimum wage. In response to these challenges, many companies are interested in the type of automated fulfillment often seen in microfulfillment centers.
- In-store fulfillment challenges. Manually picking online orders from store shelves is time-consuming and unprofitable. According to D’Cruz, grocery stores lose anywhere from $5 to $15 for every online grocery order that they have to pick manually. Additionally, having pickers with carts in the store aisles negatively impacts the customer experience for in-store shoppers. Having a more automated solution in the back of the store or at “bolt-on” facility provides a more efficient fufillment option.
This presentation will be available on-demand to registered ProMatDX attendees starting April 19. To register, click here.
