January 6, 2024

Blog/ How to implement micro-fulfilment: a guide for SMEs

Bex Young

How to Implement Micro Fulfilment for Small Businesses

Just a couple of years ago, waiting a week for your  delivery was the norm. But now, you can have your delivery on your doorstep in just 10 minutes. How did we make this quantum leap in delivery speed? Well, here’s where it gets interesting. 

Times are changing rapidly. With the rise of eCommerce, the challenge of balancing convenience with profitability, all while staying sustainable, has taken centre stage.

Traditionally, brands operated by picking and packing online orders in large warehouses in distant suburbs, far from their customer base. More and more forward-looking retailers stock their products closer to customers for quicker access.

So, what’s the secret behind this transformative shift? It all comes down to the strategic integration of Micro fulfilment Centers (MFCs) into their delivery supply chain. 

A brilliant example would be the dynamic duo of Uber Eats and Gopuff. Uber Eats, already renowned for its extensive on-demand food delivery offerings, is stepping into online grocery delivery by teaming up with Gopuff. This partnership leverages Gopuff’s hyperlocal network of micro fulfilment centres to fulfil a wide range of products in no time. It’s a game-changer, setting a new standard for quick and convenient delivery.

So, if you’re a small business owner, you might be wondering how you can tap into the power of micro fulfilment to offer fast deliveries and cater to the changing demands of your customers. Here’s a roadmap to help you get started. 

What is Micro Fulfilment?

Micro fulfilment is a strategic order fulfilment approach used by businesses and eCommerce sellers. It involves the establishment of Micro fulfilment Centres (MFCs). These small warehouses or storage facilities, not usually bigger than 10,000 square feet, are strategically located within urban areas. So that you can significantly reduce the time required for processing orders and delivering them to customers.

MFCs can either be situated in purpose-built spaces or dedicated areas. Alternatively, they can be integrated into a retail store’s existing facilities, where automated systems can be installed without expanding the current space.

Businesses use micro fulfilment procedures to achieve the following objectives:

  • Expedite product deliveries.
  • Enable additional online delivery options.
  • Shorten delivery time frame compared to larger warehouses situated outside the city limits.
  • Reduce eCommerce fulfilment expenses by centralising inventory and reducing last-mile transit times.

Top 10 Reasons Why Small Businesses Should Implement Micro fulfilment Strategies 

The “Amazon Effect” has altered customer expectations, making them seek faster and more reliable order fulfilment. With speed at retail moves currently, order fulfilment can pose significant challenges, especially for small businesses. 

So, to challenge the extensive logistics networks established by retail giants, small and medium-sized businesses (SMEs) are adopting micro fulfilment. For smaller retailers, micro fulfilment is a way to compete with larger retailers on shipping times. It does this by keeping inventory and order fulfilment as close to the customer as possible.

As a result, the traditional centralised warehousing model is undergoing a profound transformation, leading to a surge in demand for micro fulfilment solutions. 

In 2022, the global micro fulfilment market was valued at USD 3.53 billion. It’s anticipated to reach approximately USD 113.84 billion by 2032. This impressive growth is projected to occur at a steady Compound Annual Growth Rate (CAGR) of 41.53% during the forecast period from 2023 to 2032.

Here are the main reasons why numerous small businesses have embraced MCFs as a crucial part of their fulfilment process.

1. Competing with Giants

Small businesses often find it challenging to compete with retail giants in terms of delivery speed and convenience. Micro fulfilment allows them to level the playing field by offering quick, efficient, and on-demand delivery services that meet customer expectations.

2. Cost-Efficiency

Operating large warehouses can be costly, especially for small businesses with limited resources. Micro fulfilment centres are a more cost-effective solution, as they require less space, lower overhead, and can be tailored to the specific needs of a small business.

3. Proximity to Customers

The key advantage of micro fulfilment is its proximity to customers. Small businesses can position these centres near their customer base, reducing delivery times and enhancing the overall customer experience.

4. Agility and Adaptability

Small businesses often need to pivot quickly in response to market changes. Micro fulfilment centres offer the flexibility and scalability to adapt to evolving demands, ensuring small businesses remain agile and competitive.

5. Enhanced Inventory Management

Small businesses can struggle with managing inventory efficiently. Micro fulfilment helps optimise stock control, reducing the risk of overstocking or running out of popular products.

6. Meeting Local Demand

Micro fulfilment centres are ideal for catering to local customer demands. Small businesses can ensure they have the right products available for their community, making it easier to build a loyal customer base.

7. Customer Loyalty

By providing fast and reliable delivery services, small businesses can foster customer loyalty. Micro fulfilment helps them compete not just on product quality but also on the speed and convenience of delivery.

8. Sustainable Delivery 

As eco-friendliness becomes a priority for consumers, businesses are compelled to explore greener practices. Micro fulfilment contributes to sustainable delivery operations by reducing the carbon footprint associated with long-distance transportation. Introducing electric vehicles for last-mile delivery from MFCs is another way brands can reduce their environmental footprint.

9. Future Growth

Small businesses with ambitions for growth can use micro fulfilment to expand their reach without the high costs associated with larger warehouses. It’s a strategic step towards expanding market share.

10. Enhanced Analytics

MFCs generate valuable data on customer behaviour and preferences within a specific area. Brands can leverage this data to make data-driven decisions, personalise marketing efforts, and enhance product offerings. This leads to better-tailored inventory, faster order pickups, and cost savings from reduced unused inventory.

5 Key Considerations Before Implementing Micro Fulfilment for Small Businesses

Micro fulfilment is a promising strategy for businesses aiming to enhance their order fulfilment processes. However, before diving into the world of micro fulfilment, there are five key considerations to keep in mind:

1. Make Sure to Have Efficient Inventory Management in Place

When adopting micro fulfilment for small businesses, consider its impacts on your inventory. You have to strike the right balance for inventory between MFCs, stores, and central DCs.

Increasing inventory in MFCs adds costs and requires vigilant inventory management. Ensuring that MFCs can be swiftly restocked to prevent shortages and that inventory is distributed efficiently is essential.

This can also affect your distribution centres (DCs), which may need to restock MFCs and stores more often. Changes in order patterns at these DCs can influence operations and expenses. Therefore, confirm if those DCs can prioritise orders for restocking micro fulfilment nodes. 

To achieve this, you must establish a strategy for monitoring inventory levels at your MFCs and promptly restocking low inventory when necessary.

2. Choose the Right Location

The art of saving costs and ensuring smooth shipping operations hinges on where you plant your micro fulfilment centres. To get it right, you’ve got to know where your customers are across the country and position your MFCs accordingly.

To construct an effective micro fulfilment network, some companies are repurposing former retail spaces into MFCs. While this approach can be successful, it’s imperative to ensure that you can identify sites with access to ample loading bays in close proximity to major highways to meet your transportation and delivery requirements efficiently.

3. Have the Right Micro Fulfilment Team

To make micro fulfilment work for your small business, you need the right team. 

If your strategy involves handling high order volumes and rapid deliveries, ensure you have an efficient team that can manage these demands seamlessly. Consider automation options like automated picking and order storage to keep up with demand while controlling labour costs.

For businesses offering home delivery through e-commerce, setting up a last-mile delivery team at each MFC is essential. This involves hiring delivery drivers, managing vehicles, or partnering with delivery providers for smooth last-mile delivery.

Moreover, train your team to be adaptable and ready to embrace new technologies and strategies. A skilled and flexible team is key to success, as it allows you to meet the unique demands of micro fulfilment while ensuring customer satisfaction remains a top priority.

4. Adopt the Right Micro fulfilment Software

Choosing the most suitable micro fulfilment solution depends on several crucial considerations. 

First and foremost, your chosen software should seamlessly integrate with your existing eCommerce order management platform, inventory system, and vendor risk management software. This integration forms the bedrock of seamless operations. 

Moreover, the software should facilitate real-time data accessibility to multiple users across various locations, a pivotal aspect for maintaining accurate stock levels at your MFCs and swiftly adapting to unexpected inventory fluctuations. 

Lastly, opt for software that promotes agility, allowing your team to adapt rapidly to changing circumstances and uphold streamlined operations. 

5. Collaborate with 3PLs for Micro Fulfilment Success

When it comes to micro fulfilment, partnering with 3PLs can make life easier. Micro-fulfillment can be a big commitment, and not all companies have the time, resources, or know-how to tackle it alone.

That’s where 3PLs come in. They’re experts in supply chain management. When you team up with them, you can trust them to handle your micro fulfilment needs. It’s a streamlined way to get things done, even if your company isn’t set up to manage micro-fulfillment on your own.

Is Micro Fulfilment the Right Approach for Your Business

Micro fulfilment is appealing because it gets the product to the customer rapidly once they order. If you want to stand out with fast order processing and lightning-quick delivery, micro fulfilment is worth considering.

But, it’s essential to remember that micro fulfilment doesn’t fit every business. The crucial factor in determining its suitability for you is examining your product.

For instance, MFC locations are strategically selected to be close to vital “demand hubs,” ensuring swift home delivery or short trips for customers using BOPIS or store pick-up.

However, finding the right balance can be a challenge for retailers. If a micro fulfilment facility ends up too far from an area, shipping costs might rise, and sometimes customers may face longer delivery times, which is not the goal.

Consider the following three essential factors to decide if micro fulfilment aligns with your product or if an alternative fulfilment approach is a better fit:

1. Order Volume

If your daily order volume exceeds 500, you might find your current in-store fulfilment struggling to keep up. Hiring more staff and expanding your space for efficient order processing may not be a cost-effective solution. This is where a micro-fulfillment system becomes your answer, allowing you to scale your fulfilment operations more efficiently.

Also, MFCs could be your ideal solution if you have an extensive product catalogue with minimal variations or customization options. Having fewer SKUs simplifies the stocking process, reducing the guesswork about what to keep in your fulfilment centre and how much of it.

Conversely, when your product range offers various choices, predicting consumer preferences and deciding what to stock becomes more complex. If that’s the case for your business, too, a micro fulfilment strategy might not be the best fit.

2. Product Size

When it comes to micro-fulfillment, the size matters, and it’s typically smaller, often less than 10,000 square feet. This compact design might not be the best choice for handling larger items.

More oversized products, like furniture or bulky electronics, tend to wear down the machinery used for picking and packing. Additionally, their size means you can’t store many in a limited space. For these substantial items, large fulfilment centres or warehouses are the go-to options. These facilities have the right staff, tools, and packing methods to handle larger products effectively.

3. Inventory Turnover

The high inventory turnover products such as perishable items, align perfectly with the capabilities of micro fulfilment. It not only ensures the freshness and quality of your products but also streamlines the restocking process, making it a profitable and customer-centric solution for your business.

Green Micro Fulfilment Hubs and Sustainable Last-Mile Logistics by Zedify

In the heart of bustling city centres, Zedify’s local hubs are leading the charge with their urban micro fulfilment centres. They’re not just hubs; they’re strategic assets for efficient, low-volume inventory deliveries. Whether your focus is on regular flyers, magazines, or newspaper distributions, our core principle remains simple: proximity to your customers.

Yet, what truly sets us apart is our unwavering commitment to transforming the supply chain into a greener and more sustainable force. We use cargo bikes for multi-drop deliveries, avoiding city traffic and ensuring efficient, eco-friendly last-mile logistics.

Curious about cargo bike deliveries for your business? Contact us at partnerships@zedify.co.uk or visit our website for more details on what we offer.