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As a company’s e-commerce volume grows, a common first step is to pick orders from store shelves. Though a reasonable short-term solution, store picking can interfere with the in-store shopping experience, and it’s often less efficient than traditional warehouse order picking because it requires different employee skill sets.
Increasingly, companies are deploying micro-fulfillment centers (MFCs) to handle their growing e-commerce orders and enable curbside pick-up. These small-footprint, highly automated facilities enable fast, local pick-up or delivery. By 2025, 10% of click-and-collect orders will be fulfilled by MFCs, according to supply-chain research firm Gartner Inc.
In addition to faster fulfillment and lower transportation costs, MFCs make it possible to hyper-localize product offerings. And when you factor in labor challenges, minimum wage increases, and the need for physical distancing of workers, these smaller nodes can often justify sophisticated automation that helps increase efficiency and cut labor costs.
But before pursuing a micro-fulfillment strategy, companies need to take a look at the bigger picture and consider these four areas:
Site selection. Where does it make sense to enable MFCs? Can you repurpose backroom space or underperforming stores? Would existing loading docks be adequate? Would that require rezoning? Are these facilities in close proximity to truck routes?
Inventory. How can you ensure inventory is properly placed within the network? Will you share inventory across channels or keep it separate? How will you deal with orders that require inventory from more than one location? Split shipments can add considerable cost to an order. What changes will need to be made to upstream distribution centers to facilitate timely and adequate product availability and flow? How will that impact order profiles? How frequently will you need to replenish your MFCs?
Software. Are your systems robust enough to handle micro-fulfillment requirements? Can you track all inventory across the network and match it to real-time demand? What happens when exceptions occur? Can your systems re-sequence orders? Can they handle communication with the customer about these changes? How customized is your current software?
Perishable goods. What percentage of your SKUs require cold, frozen or ambient temperature storage? Most automated solutions are not well suited to handling fresh goods. Do you have the space for a hybrid approach, with dry goods picked via automation and fresh items picked manually? Are you equipped to maintain appropriate temperatures for orders as they are picked, consolidated and stored for pickup?
Micro-fulfillment is becoming a popular solution to increase distribution speed, agility and competitiveness in response to rapid e-commerce growth over the past year. To yield true value, executives would be wise to invest the time and money required to survey their networks and identify holistic strategies and solutions.
Andrew Breckenridge is executive vice president of sales at Fortna Inc.
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