Last mile delivery refers to the final stretch of time and space an order travels from a warehouse, transportation hub, retail location, or fulfillment center to its final destination. Last mile delivery accounts for around 28% of the total product transportation costs - which makes it easy to see how businesses spent over $86B on last-mile delivery in 2017.
One of the first companies than come to mind with last mile delivery is Instacart, who recently announced plans to provide 30 minutes or less grocery delivery. Gorillas is doing it in 10 minutes. As the competition for speed and efficiency is heating up, retailers are scrambling to figure out how to scale it without breaking the bank.
Not only can micro fulfillment centers get items to your customers faster, they can help you save money while doing it. In fact, micro-fulfillment solutions reduce costs associated with an order by 75% when compared with manual picking of the order. Let's take a look at what a micro fulfillment center is, how to use them, and who is using them effectively.
What is a Micro Fulfillment Center?
Also called “dark stores”, micro fulfillment centers are smaller-sized order fulfillment centers – usually taking up between 3,000 sq ft and 25,000 sq ft. Here, orders are typically filled and then sent to pick-up stations, retail stores, or delivered to the customer directly.
Customers can also go to these centers after placing their orders online to pick up their items or choose to have the micro fulfillment center to take care of the last-mile delivery. Compared to distribution centers and retail stores, these are usually small and designed solely for the purpose of fulfilling customer orders.
Unlike stores and outlets, micro fulfillment centers do not actually sell anything. They are designed as pickup stations, return stations, and locations for fittings. These largely cater to curbside pickups, so buyers don’t even have to come down from their vehicles.
All customers have to do is notify the pickup station attendants or associates when they’re on their way, check-in at the designated points, park in a waiting area, and the delivery associate will come to deliver the buyer’s items to the car trunk, after verification.
Micro fulfillment centers aren’t as common as pickup stations or stores yet because retail brands are still testing the concept, but they’re growing in popularity. For instance, Nordstrom and Walmart are trying out these delivery solutions to see if they’re worth the additional investment.
Retail brands that are testing out MFC technology are doing so with the aim of providing a more seamless shipping experience for the buyer and generating more profits for their businesses.
The average MFC typically needs two elements:
- A software solution that processes incoming orders and inventory
- A physical space with robots that pack and send the requested orders to store associates who then package them for delivery
Some, but not all, micro fulfillment companies also offer last-mile delivery, getting their packages to their doors.
Why Start a Micro Fulfillment Center
The ultimate advantage that micro fulfillment centers give smaller retail brands is the leverage of using their existing storefronts to improve their order fulfillment efficiency – this means little or no additional costs. For example, some grocery shops are cordoning off small, unused space in their stores or premises and setting up micro fulfillment services there.
Done correctly, the retailer may be able to offer same-day deliveries to customers who are open to curbside deliveries. And the retailer can do all these without needing the investment that comes with building their own distribution center.
A micro fulfillment center is the healthy middle ground for the brick and mortar retailer that’s looking to transition to an omnichannel retail strategy by offering their products online. So if you’re a smaller retail brand, you can transform your retail stores into micro fulfillment centers without the heavy investment required to construct and set up major distribution centers.
Retailers without adequate space can go into strategic partnerships with other brick-and-mortar retailers who have space but probably lack a significant online presence. An example of this is Texas-based H-E-B going into a micro fulfillment partnership with AutoStore. With this arrangement, H-E-B can use AutoStore locations for curbside pickups and deliveries to customers who purchased their items from the H-E-B website or through their app.
Another strategy involves retailers looking for independent micro fulfillment companies in their vicinity and approaching them for a partnership.
This is easier in some states where some companies are setting up shop as independent micro fulfillment service providers. These companies typically have the infrastructure, software, equipment, and manpower.
All the retailer has to do is contact them, pay for their centers, install their micro fulfillment solution, and let the MFC deal with customer deliveries or pickups. This eliminates all sorts of bureaucratic bottlenecks such as filing for a permit on a property that the retailer already owns or is currently leasing.
This is a cheaper alternative for brick and mortar retails brands as well as eCommerce retailers looking to incorporate micro fulfillment centers into their omnichannel retail strategy.
MFC Spotlight: FreshDirect
The online grocer has enjoyed a 100 percent growth in customer base in the last year, with the bulk of its services required in the suburbs. The company attributes its growth to its 2-hour on-demand delivery service.
Shoppers who buy groceries from their online store can typically expect to take delivery of their groceries from their micro fulfillment center within 2 hours. The company is seeking to expand its services and grow its customer base now that the demand for groceries online is at an all-time high.