The past two years have put major pressure on the global supply chain. As a result, retailers, grocery stores and other businesses are finding ways to adapt to disruptions without sacrificing fulfilment speed or quality.

Micro-fulfilment centres (MFCs) have emerged as one popular strategy for businesses managing ongoing supply chain challenges. These are small and often automated centres, sometimes located within a larger warehouse or store, that serve e-commerce customers and fulfil local pickup orders.

These centres can provide a valuable fulfilment strategy for businesses that have struggled with rising volume and purchase frequency. The benefits they offer may even help the industry reinvent itself post-pandemic.

Changing Market Conditions Drive Micro-Fulfillment Center Adoption

The rapid rise in MFCs is primarily driven by changes in retail markets worldwide — including levels of record consumer demand, rising expectations and ongoing supply chain issues.

Customers are spending more, and they want the items they purchase faster than ever. According to one study from American consulting firm Invesp, most surveyed consumers between the ages of 18 and 36 expect same-day delivery. Many of these people also reported they were more likely to purchase items if this option was offered at checkout. This is possible with some retailers but challenging with existing fulfilment methods.

At the same time, new market research suggests that the delivery experience is extremely important to consumers. Options like free delivery, loyalty programs, expedited shipping and additional delivery options can influence customers’ purchasing decisions. More and better choices will encourage most people to consider purchases they may not have otherwise.

Although these options improve the customer experience and encourage loyalty, they can be expensive to implement — especially as average delivery times increase and supply chain disruptions become more common. Businesses are looking to invest in existing delivery and fulfilment strategies while also innovating in an attempt to minimize friction and provide customers with the fastest, cheapest delivery possible.

Micro-fulfilment centres help meet this need. These centres move fulfilment closer to consumers and provide faster last-mile delivery, greater control over operations, and options like in-store pickup or same-day delivery.

Three Major Models for MFCs

Various models of MFC exist. Each one provides a certain combination of benefits and access that help retailers manage rising sales volumes and demand.

One of the most popular is the hub-and-spoke model. Retailers use MFCs as a hub that serves multiple retail locations, providing stores with additional fulfilment capacity. A hub MFC may also improve a business’s reverse logistics, deliver directly to consumers or offer pickup options.

Other companies are installing MFCs directly in retail locations. This in-store model allows retailers to take advantage of store locations and inventory to accelerate fulfilment while providing a range of options to online and in-store customers. However, this requires a great deal of retail space, which often means adjusting layout or remodelling to free up the 10,000 or more square feet of space needed by the new MFC.

These centres may enable faster deliveries in the area they’re based. In Paris, French retailer Carrefour partnered with U.S.-based ride-hailing app owner Uber Technologies to offer a 15-minute grocery delivery service. The service relies on nine “dark stores,” fulfilment centres closed to the public, where workers prepare orders for delivery. App gig workers handle the delivery.

What MFC Adoption May Mean for the Future of Fulfillment

In addition to making higher order volumes more manageable, MFCs also support areas with growing population density. It may not be possible or practical to service the region with fewer, more centralized fulfilment centres.

MFCs may also make supply chain and fulfilment operations more sustainable. Data from Accenture suggests that the implementation of MFCs could reduce last-mile carbon emissions by as much as 17%-26% by 2025.

Sustainability is increasingly important to customers, particularly millennials and Gen Z shoppers. Brands are pivoting toward more eco-friendly and transparent practices as the demand for sustainable goods and brands grows.

MFCs help move fulfilment centres closer to customers, reducing the overall environmental impact of last-mile delivery. As the growth in last-mile delivery demand requires businesses to invest more in delivery vehicles, finding strategies to reduce greenhouse gas emissions may become a top priority for eco-minded brands.

Micro-fulfilment centres can help make a business’s supply chain more efficient and eco-friendly, providing retailers with cost reductions while also helping make their fulfilment operations greener. As brands become more focused on environmentally friendly policies and products, MFC adoption may become a key strategy in making last-mile delivery as green as possible.

Growing Micro-Fulfillment Center Use Could Help Ease Supply Chain Woes

The supply chain and fulfilment challenges that businesses face right now are likely to remain a problem well into the future. Whether part of a hub-and-spoke or in-store model, micro-fulfilment centres can help companies manage these challenges.

By moving fulfilment operations closer to consumers, businesses can accelerate delivery times and offer high-demand services like same-day delivery and in-store pickup. This leads to improved client satisfaction and a better bottom line.