Microfulfillment - definition and overview

What does microfulfillment involve?

warehouse functions

Classical fulfillment: a typical warehouse with conventional functionalities, but in an urban environment and in a much smaller design (far below an area of 2000m²).

Stationary fulfillment: Stationary stores are integrated into the fulfillment of, for example, online stores or marketplaces, where orders are placed and passed on to the stores for customer-oriented fulfillment.

Nanofulfillment: Also called ultra-fast delivery; used primarily for food as well as medicines. In this type, providers own and control the entire process and supply chain. This can include real estate, software and a courier fleet, so from warehousing and (further) processing to the actual delivery.

Challenges in Microfulfillment

Data and processes must be transferred at each location to optimize distributed total inventory

Capital commitment is high and must be optimized accordingly

A large number of connections are required such as all locations and various transport and courier service providers

Ideally, local courier services are integrated, as large CEP service providers do not offer point-to-point logistics

For brick-and-mortar stores, the ERP or merchandise management systems must be integrated at the Point of Sale

Similarly, intralogistics processes must be optimized in retail stores, as a retail space tends to be designed for customers to linger longer, while warehouse spaces are designed for short dwell times and quick turnarounds

From both of the previously mentioned points follows the optimization of routes and inventory management, namely real-time inventory management.

In nanofulfillment, there is also the optimization of routes, transport and predictability of orders, which is achieved by means of software, some of which already exists or must be newly developed on a case-by-case basis.

Advantages of microfulfillment

Building large logistics centers are very complex, costly projects that take a long time to implement. Microfulfillment sites, on the other hand, can be launched more quickly and flexibly.

For brick-and-mortar stores, the space productivity of the microfulfillment area is higher than that of the sales area. Accordingly, it is worthwhile to divide store space and partially repurpose it into warehouse space.

Space in the city is becoming more attractive and affordable, as space for large centers in the countryside is also becoming increasingly scarce and expensive.

Technologies - hardware as well as software - for automating microfulfillment were not available just a few years ago, but are now and continue to be developed.

Microfulfillment describes the decentralized and also customer-oriented execution of processes such as warehousing via picking, packing and outgoing goods to shipping in much smaller premises than at usual fulfillment centers, distribution centers. On the one hand, microfulfillment enables faster delivery to customers and, on the other, is a solution approach to the challenges of the last mile, which is by far the most expensive part of the delivery route. The often highly compact approaches to microfulfillment processes, aim to simplify integration in city centers or existing retail spaces. The increase in microfulfillment solutions has coincided with the growth of e-commerce, grocery and meal delivery providers, as well as customer expectations regarding the delivery time of ordered inventory.

Distinction between fulfillment and microfulfillment

Customer proximity and decentralization are relative but nevertheless important criteria for defining microfulfillment. However, there is no clear demarcation as to the size of the floor space required to speak of microfullfillment. Roughly speaking, it can be said that the corresponding premises can range from around 50m² to over 1000m², and that from 2000m² to 3000m² it is simply a matter of conventional, smaller fulfillment centers that have been around for a long time and now fall under the umbrella of the term microfullfillment. Infrastructural differences between individual regions and countries also lead to a different view of what can already be called microfulfillment. While in Europe microfulfillment usually takes place on an area of between 100-600m² and a corresponding turnover of up to five million, in the USA distribution centers and retail stores of up to 3000m² and a turnover of 30 million are still referred to as microfulfillment centers. However, the term can be more clearly classified by the different requirements for software and intralogistic processes compared to classic warehouses and corresponding fulfillment.

Where and in which industries is microfulfillment used?

Due to the criterion of customer proximity, microfulfillment solutions are always found where people or many people live, i.e. primarily in urban areas, irrespective of sectors and product groups. In addition, both in urban and rural areas, inventories that need to be delivered to the customer as quickly as possible, such as food, freshly prepared meals and pharmaceutical products, i.e. medicines, are predestined for microfulfillment.

What does microfulfillment involve?

First and foremost, you need suitable premises that serve as warehouses or perform warehouse functions. The inventories of these warehouses must then be integrated into a higher-level system (ERP, WWS, OMS) in order to fulfill online orders accordingly. Likewise, shipping must be organized accordingly with classic CEP service providers or local transport companies/courier service providers. The automation of certain process steps and workflows must also be solved differently than in a classic large fulfillment center. Three types of microfullfilment can be derived from these different process challenges:

Classical fulfillment: a typical warehouse with conventional functionalities, but in an urban environment and in a much smaller design (far below an area of 2000m²).
Stationary fulfillment: Stationary stores are integrated into the fulfillment of, for example, online stores or marketplaces, where orders are placed and passed on to the stores for customer-oriented fulfillment.
Nanofulfillment: Also called ultra-fast delivery; used primarily for food as well as medicines. In this type, providers own and control the entire process and supply chain. This can include real estate, software and a courier fleet, so from warehousing and (further) processing to the actual delivery.

Challenges in Microfulfillment

Depending on the type, different challenges arise in the implementation, which must be overcome. These include:

Data and processes must be transferred at each location to optimize distributed total inventory
Capital commitment is high and must be optimized accordingly
A large number of connections are required such as all locations and various transport and courier service providers
Ideally, local courier services are integrated, as large CEP service providers do not offer point-to-point logistics
For brick-and-mortar stores, the ERP or merchandise management systems must be integrated at the Point of Sale
Similarly, intralogistics processes must be optimized in retail stores, as a retail space tends to be designed for customers to linger longer, while warehouse spaces are designed for short dwell times and quick turnarounds
From both of the previously mentioned points follows the optimization of routes and inventory management, namely real-time inventory management.
In nanofulfillment, there is also the optimization of routes, transport and predictability of orders, which is achieved by means of software, some of which already exists or must be newly developed on a case-by-case basis.

Interesting to know: If a parcel is shipped within a city by a classic CEP service provider, it is not transported directly from the shipper to the orderer. Instead, it is first driven to a large distribution center (usually outside the city) and then (usually the next day or the day after) back into the city to the delivery address. Small, local courier services, on the other hand, transport inventory directly from the shipper to the customer, point-to-point.

Ecological aspects of microfulfillment

Microfulfillment makes delivery routes shorter, which means less CO2 is emitted during transport. It also tends to result in fewer delivery vehicles on the road, which relieves the burden on inner-city infrastructure in particular. By integrating local transport and courier services, the most direct and shortest route from the shipper to the delivery address is made possible in urban areas.

Advantages of microfulfillment

Beyond the benefits to end consumers such as shorter delivery time and the environmental benefits of reducing CO2 emissions and easing the burden on local infrastructures, there are also tangible benefits for companies to establish a microfulfillment strategy:

Building large logistics centers are very complex, costly projects that take a long time to implement. Microfulfillment sites, on the other hand, can be launched more quickly and flexibly.
For brick-and-mortar stores, the space productivity of the microfulfillment area is higher than that of the sales area. Accordingly, it is worthwhile to divide store space and partially repurpose it into warehouse space.
Space in the city is becoming more attractive and affordable, as space for large centers in the countryside is also becoming increasingly scarce and expensive.
Technologies – hardware as well as software – for automating microfulfillment were not available just a few years ago, but are now and continue to be developed.

Summary

In contrast to large distribution centers, microfulfillment solutions offer greater customer proximity, shorter delivery routes and delivery times. In particular, industries and product groups with fast-moving items are suitable for microfulfillment. The forms of this range from very small warehouses to stationary retail stores to companies that own and control the entire process chain. An exact definition of the term is not possible, but there are several criteria that narrow it down. These include customer proximity, decentralization and a much smaller footprint. In addition, the software and hardware solutions for microfulfillment are also very specific and differ significantly from the requirements for classic fulfillment centers. Microfulfillment not only encompasses corporate and business aspects, but also has ecological and infrastructural effects on social coexistence.

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