Is the Future of Fulfillment Big or Small? It Depends on What You’re Selling
As an e-commerce retailer, how can you get more efficient when it comes to fulfilling online orders? There are a thousand different things that can go wrong and delay your delivery.
The last mile of logistics is famously responsible for a sizeable chunk of total logistics costs — about 30% on average. In an effort to improve efficiency in this stage of fulfillment, large retailers like Target and Walmart swapped out the huge, remote warehouse for smaller, centrally located fulfillment centers.
Walmart and the like may have started the trend, but now it's not just large retailers that are using this tactic of small fulfillment centers closer to customers. This strategy, known as micro-fulfillment, is garnering more and more attention in the world of e-commerce.
Retailers are increasingly choosing to store small amounts of inventory in small spaces nearer customers. So what’s driving this trend?
Using a larger number of smaller warehouses for online purchases moves the product closer to the end user, cutting down on delivery time and making the last mile more agile than ever. That means less chance for transportation problems and the option for same-day and two-day delivery.
What is microfulfillment?
Microfulfillment places the fulfillment location in a residential area where a large number of your customers live — typically a densely populated urban area.
Micro-fulfillment centers rely heavily on inventory management systems, order management systems, and various other automated technologies to carefully maintain enough inventory. These systems are particularly important in micro fulfillment centers; since space is limited, having just the right amount and type of stock on hand is crucial.
Microfulfillment can be tricky, yet it has numerous traits that set it apart from traditional warehousing:
- The small size of the fulfillment center (typically less than 10,000 square feet) gives you the option to store inventory in highly populated areas
- Proximity to end customers means that you can offer super-fast shipping to customers
- Not using a huge warehouse far from customers means you may be able to save money on transportation
The small size also means that these centers can only carry around 24-48 hours' worth of inventory, meaning you will need to restock constantly. This may negate the money you save in moving closer to customers.
Traditional fulfillment center traits:
- The larger size of a traditional warehouse (anywhere from 300,000 to 3.6 million square feet) gives you the option to store much more inventory, not to mention larger items, for a much longer time.
- Since they have more staff and likely store tons of different types of products, traditional warehouses can usually offer more specialized care for your inventory
What type of fulfillment will work best for your e-commerce business?
Simply put, micro-fulfillment is attractive because it lets you get the product to the customer quickly after they order. If you need to differentiate your product to customers, then micro-fulfillment may be worth looking into: quick turnaround for picking and packing plus lightning-fast delivery can be a huge asset.
However, this type of fulfillment is not the best option for everyone. The key to figuring out if micro-fulfillment is suitable for you is to analyze your product.
Use the below list of 3 key determining factors to determine if micro-fulfillment will work for your product, or if you might be better off choosing a different route for your e-commerce fulfillment.
The relatively small size of a micro-fulfillment center(typically less than 10,000 square feet) means that this model might not work well for larger items. Machinery used for picking and packing receives more wear and tear from handling large objects, and larger product size means you won’t be able to store many items in such a small space.
Large products, such as furniture and bulky electronics, are usually much better suited to storage at large fulfillment centers/warehouses. This type of warehouse has staff, tools, and packing techniques that are better suited to handle those types of items.
Order volume and product variation
If you sell a large number of products with relatively little variation or option for customization, micro-fulfillment may be the perfect choice for you. Fewer stock-keeping units (SKUs) to deal with means that you won’t have to worry as much about which products you need to be stocking and in what amount.
The more variety present in your offerings, the harder it is to be able to predict what consumers will want, and what you should be stocking in the fulfillment center. Sellers with a variety of options will want to think twice before using a micro-fulfillment strategy.
Product type/consumption type
Apart from considering if you can use micro fulfillment for your delivery, you may want to consider if you in fact should.
Yes, customers desire either same-day or 2-day shipping for a wide variety of products. However, the demand for same-day may not be high enough to warrant the regular restocking that using a micro fulfillment center requires
When it comes to consumable products, foodstuff, hygiene, or cleaning supplies, the combination of small size and high turnover rate of inventory makes for a good candidate for this type of fulfillment. Products like these have expiration dates, and customers need to repurchase such items regularly.
CBIP finds the fulfillment options that work for you
With consumer desires to offer lightning-fast shipping rising across industries, figuring out where to warehouse your product is more crucial than ever.
If your business is looking to optimize fulfillment, you need to work with a logistics partner that can analyze your needs and point you in the right direction. As your fourth-party logistics provider and logistics consultant, we at CBIP will work to find you the type of providers that suit your fulfillment needs — at a price point that works for you.
We also integrate all of your IT systems throughout your supply chain with our online interface. From order management to fulfillment, we provide smooth and effective logistics to meet your unique business needs.
Ready to leave last-mile stress behind and optimize your fulfillment? Contact us today to get a complimentary assessment from one of our industry specialists.