Micro-Fulfillment is currently a hot topic in the warehousing industry. The concept of a fully automated mini-warehouse is extremely appealing for many reasons.
Companies like Fabric recently raised $200 million, which is now valued at over $1 billion. These types of companies offer a full Micro-Fulfillment system with an army of robots to increase product density and shipping velocity. This permits companies to maximize a small warehouse space allowing them to be closer to customers, which in turn allows for faster shipping times. The term Dark Store has also become more popular in describing many of these types of fulfillment centers.
It all sounds good on paper but this solution isn’t the perfect fit for all businesses. There are many reasons why Micro-Fulfillment Centers are best for larger companies.
In this article, we’re going to explore Micro-Fulfillment Centers and what they are, how they work, pros and cons, and what form of Micro-Fulfillment is right for your company.
Amazon has shaken the industry when they set the standard of 2-day shipping. In addition, the 2-day shipping time has increased the demand for online shopping, forcing companies like grocery stores and retail stores to divert some of their traditional operational assets to online order fulfillment.
To streamline this, the concept of Micro-Fulfillment Centers, or MFCs, was created.
MFCs are high density small warehouses that range from roughly 5,000 to 15,000 square feet. Their compact size allows them to be easily built within urban areas. This concept makes online order fulfillment faster and more efficient than ever before.
Grocery stores and third-party logistics companies are two perfect examples of companies that are already embracing the concept of MFCs. Walmart, Instacart and FreshDirect have all recently partnered with Fabric to start the development of their first MFCs.
There are two types of MFCs: Standard MFCs and Hybrid MFCs. Let’s dive into each of these.
Standard MFCs, also known as Dark Stores, are generally located within communities or densely populated areas. These are normally off-limits to customers but can allow for pickup if necessary.
Benefits of a Standard MFC:
Dark Stores are starting to gain traction in the USA and there are currently about 100 nationwide. Other countries such as China have fully embraced the concept and currently have upwards of 2,000 stores.
We have identified some essential factors that all companies must consider before launching their first Dark Store. These are:
Companies that sell goods like apparel and have a retail storefront and an online store might benefit in a Hybrid MFC. It allows you to still maintain a storefront while optimizing the back end for online order fulfillment. This gives you the power to meet the needs of two types of buyers.
As you have most likely seen, the pandemic has dramatically increased online orders in the past few years.
Before the pandemic 2.7%-3.4% of sales for grocery stores were online. By October of 2020 they were up to an astounding 10.2%. For 2022 it is projected that this will continue to increase to about 12.5%. By 2025 it is expected that grocery online shopping will make up about 21.5% of all grocery sales.
Grocery stores are a prime example of this as they typically have a high density of customers located around them, making this business model perfect for them. But they aren’t the only business type that can benefit from MFCs.
Convenience stores, general merchandise, drug stores, and department stores all typically meet the requirements of an MFC.
According to inc magazine, on February 3rd 2022, only about .04% of companies make over 100 million in revenue. The companies mentioned in this article that have partnered with Fabric - the darling of the MFC movement in the USA - Walmart, Instacart and FreshDirect are among those companies that make over 100 million in revenue annually.
In 2021, all 3 of these companies’ revenue exceeded this 100 million dollar revenue mark. Walmart’s revenue was 559.15 billion in 2021. Instacart had a revenue of 1.5 billion, and Fresh Direct had over 750 million in revenue.
The mega-corporations of the world, less than 1% of businesses, are able to afford this fully automated warehousing solution.
MFC technology, with full automation, is the bleeding edge when it comes to new warehousing technology, and yet we don’t have all the details. This has been a hot topic for some time now, but there is still little information on what costs are associated with running an MFC.
Little has been discussed about the increased maintenance and repair costs of having a fully automated system. From time to time, robots will break down, which poses increased costs for repair. Due to the complexities of the systems, expert technicians need to be readily available to get systems up and running as fast as possible.
All of this opens up the question: How can smaller businesses affordably compete with fully automated systems that mega-corporations are developing?
The topic of MFCs has always been around the idea of being fully automated. The cost to implement and maintain such a facility, for the time being, is not sustainable due to several added costs in robotics and sophisticated systems.
But to achieve the benefits of an MFC while not going completely automated is still possible. Think of automating the information rather than automating the machinery itself. Equip human pickers and packers with a system that is fast and easy to use, and at a fraction of the cost.
Hoj Innovations has studied and implemented optimal warehousing design for over 50 years, and MFCs have always been at the top of their mind for many reasons.
In response, they have developed a faster and more efficient method using a system called WarehouseOS™ (WOS) to empower pickers without the need for a fully automated system.
The benefits you can expect from this system are the following:
WarehouseOS™ was designed specifically with a warehouse worker in mind to increase picking efficiency and to optimize warehouse space to its fullest.
A complete analysis of the entire shipping process is taken into account. By analyzing everything from inventory velocity, pallet spacing, optimal picking routes, docking space, a high-density storage system is then designed for those specific needs.
Specific picking areas are constructed, with high-velocity products in front and low-velocity products placed further back. This simple concept eliminates pickers from having to zig zag their way through a warehouse in search of the next item to pick. Rather, all the items they need to pick will be strategically placed around them.
So what is WarehouseOS™(WOS)? It’s a picking and packing software that is deployed on iPads. Because it’s fully cloud-based, its functionality is completely mobile, giving pickers flexibility to utilize its power anywhere and anytime.
100% faster productivity, 400+ picks per hour, <30 minute training time, and the ability to cut cost-per-package shipped in half are just some of the benefits that companies have seen when implementing WOS to their warehouse.
Check out this short video to learn about the key features of WOS.
Many multi-million dollar companies are already using WOS such as Cotopaxi, Minky Couture, Vuori, and Blender Bottle just to name a few.
Check out “5 Reasons Why You Should Switch to a Cloud-Based Inventory Software”.
If you are still debating if a semi-autonomous MFC is right for you, ask yourself these questions:
If you answered yes to any of the above questions, highly consider moving to a cloud-based WMS such as WarehouseOS™ to get the efficiencies you need.
Dramatic increase in e-commerce sales in the last few years is accelerating demand for smaller and more efficient warehousing. Because fully automated AI-powered systems are expensive upfront, semi-autonomous logistics operations with systems like WarehouseOS™ have become increasingly attractive. It’s highly affordable for small businesses yet powerful enough for large distribution centers.
Contact us today and speak to one of our logistics specialists for a free no pressure demo.
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