As with any major rethink of a supply chain strategy, adopting a micro-fulfillment model will require proper planning and analysis. Recent survey research shows that only a very few supply chain managers (about 14 percent) are even aware of the option, so it's by reading papers like this one that you and your peers will become familiar with the concept and what it can do for you.
Beyond that, however you can create a quick checklist that might help kickstart building a micro-fulfillment network for your e-commerce business. Ask yourself these questions:
- Are last-mile delivery costs eating into our profit margin?
- Do they represent more than half of delivery costs?
- Is your e-commerce business expanding?
- Are the majority of your customers in dense urban areas?
- Are you looking at needing more fulfillment centre space in the near future?
- Could your retail stores accommodate a micro-fulfillment area inside their walls?
If you answered "Yes" to more than a couple of these questions, it's time to seriously crunch the numbers.
We're not here to tell you how to make it work, but we certainly can help you maximize the usage of your dock doors when you do go down the hyperlocal route. C3 Solutions will be your scheduling partner. Our solution will have your back and let you do the hard work of making sure orders get out the door efficiently and cost-effectively.
Solving the Future
If real estate weren't so costly; if Amazon wasn't raising the stakes in the home delivery game; if e-commerce weren't making retail more challenging; and if delivery were cheaper, we wouldn’t be having this discussion. Traditional, 20th century retail logistics networks were designed with large DCs located at the fringes of urban centres and close to freight transportation infrastructure because it was a model that worked. When you had large LTL shipments or truckloads going to stores both close by and far-flung on a weekly basis or so, this made perfect sense. There was a reasonable balance between inbound and outbound loads, timing was important but not crucial, and demand was predictable.
That world is long gone. E-commerce has disrupted it, and logisticians are striving to reinvent distribution to keep up with omnichannel retail. This is the future, and it cannot be ignored. The trends that are making hyperlocal fulfillment a viable, attractive last-mile distribution strategy are, as we have seen, eroding margins, making stores sometimes obsolete and bringing the old hub-and-spoke logistics model into question.
The factors that have contributed to the decline of the traditional model and the rise of micro-fulfillment are showing no signs of abating. As we have seen, population centres are becoming denser, online shopping is entrenched, and customers' expectations continue to rise. The pressure to deliver faster and in more places is intensifying. As long as e-commerce continues to be the driving and dominating force in retail and our current demographic trends persist there will be a place for micro-fulfillment.
What remains to be seen is the best way to manage it for sustainable success. It adds considerable complexity to fulfillment operations, leaving operations managers and C-suite planners alike searching for the most efficient ways to make the switch. But these planners are fortunate in many ways.
The rapid development of sophisticated storage and retrieval automation technology, together with our growing abilities to process and make use of vast amounts of data captured through supply chain activities has created a moment where hyperlocal fulfillment is a workable solution to the last mile problem.
14 "Quick poll: What readers are saying about micro-fulfillment", APQC, Supply Chain Management Review.com, May 7, 2018.