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Category: Capital Markets Tags: Distribution, Effect on Retail, Grocers, Micro-Fulfillment

How Micro-Fulfillment Centers Are Improving Distribution Efficiency

The coronavirus pandemic (COVID-19) accelerated changes in consumer buying behavior and drove more companies to embrace a strategy that streamlines their supply chains for faster fulfillment. With e-commerce on the rise, micro-fulfillment centers (or MFCs), are quickly becoming a viable option for retailers looking to increase distribution efficiency while reducing logistics costs. Currently, the micro-fulfillment market is expected to have a cumulative opportunity worth $36B in the next 10 years by 2030, with an installed base of ~6600 MFCs driven by online grocery and rapid delivery.


What Is a Micro-Fulfillment Center?

A micro-fulfillment center is a smaller warehouse located within a retail store, or in close proximity to it. They are made up of two key parts including, physical infrastructure and software systems that process online orders. Unlike traditional fulfillment centers, which are often located in city outskirts or remote areas, MFCs are designed to be quickly deployed anywhere, specifically where space is limited or prohibitively expensive. In addition to their small size, artificial intelligence software can be used to help optimize the placement of different goods and their movement throughout the center.


Benefits of Micro-Fulfillment Centers

As e-commerce continues to grow, logistic centers located outside of urban areas are faced with considerable challenges due to size. Micro-fulfillment centers can solve this issue with occupation space limited to 50,000 square feet, and since they are strategically located within densely populated urban areas, they are closer to places where demand is high.


Micro-Fulfillment Centers can increase retail efficiency with these key factors:


-Localized Data – companies can have a better understanding of the overall inventory of orders and where stock is limited or required.

-Automation – shipping and packing order fulfillments are accelerated leading to a decrease in delivery timelines.

-Last-mile delivery – rapid delivery can save costly expenditures


Why Invest in Micro-Fulfillment Centers?

Retailers have already taken a proactive approach to build MFCs. The ability to quickly fulfill orders completely changes the way consumers shop and how retail stores manage their inventory. It provides the agility to keep up with online demand and can rapidly be set up in just a few months.


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