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Just ten years ago, e-commerce accounted for barely 5% of total retail purchases. Over the last several years, that number has grown steadily, reaching 16% as of 2019. But in 2020 alone, that number jumped an astonishing 44% — with e-commerce now representing 21.3% of all retail sales. 

This creates an enormous challenge for supply chains, in part because today’s consumers expect faster and faster delivery. Where two-day delivery was once the gold standard, now shoppers expect deliveries within hours. This has driven companies to move their fulfillment operations closer to the consumer.

Enter the Micro-Fulfillment Center.

Unlike traditional fulfillment hubs, which are often in remote areas or on a city’s outskirts, micro-fulfillment centers are right where the consumers are. As the name implies, they’re smaller than their traditional counterparts — typically taking up between 3,000 and 10,000 square feet of space. This means they can be easily situated in smaller urban areas. 

The goal of micro-fulfillment is simple; to speed up the delivery of goods to consumers. Given their location, these centers can significantly cut down on last-mile delivery times and enhance overall efficiencies. Moreover, micro-fulfillment centers often cost less to start up and can be operational faster given their reduced size.  

A typical micro-fulfillment center consists of two primary components: software management systems that process online orders, and the physical infrastructure, which might consist of robots and other automated assets that pick out items from storage aisles and shuttle them to packing staff.

The micro-fulfillment approach seeks to combine the speed of localized, in-store pick-ups with the efficiency of large, automated warehouses. These efficiencies have proven beneficial to larger retail names as much as smaller sellers, with major outlets like Walmart, Meijer, and even Amazon experimenting with the model in the last few years.

Is Micro-Fulfillment Right For You?

To ensure that a micro-fulfillment strategy is profitable, a company needs to work through all its potential effects on business. While the process can create a competitive advantage by offering speed and convenience that a competitor might not provide, you’ll still need to consider the overall impact on profit margins. 

For instance, real estate is expensive. Does it make more sense to purchase or to lease? Will you need space temporarily or long-term? Will you need to scale up during peak seasons? The good news is, micro-fulfillment centers operate on a much smaller footprint than traditional distribution centers. This opens a variety of non-conventional space options that might not otherwise be available for warehousing purposes.

Factors such as real estate costs, traffic, labor cost, population density, and more all contribute to whether or not micro-fulfillment solutions make sense for your company. The goal is to find the right balance between cost and convenience.

Micro-fulfillment centers are rapidly becoming an integral part of the supply chain. With the right approach, they can help you meet changing expectations and enhance the customer experience. If you’d like help exploring your business’s fulfillment options, contact our highly experienced team today. At Gorgo Group, we have a comprehensive portfolio of solutions to meet clients’ needs of all sizes.