Microfulfillment describes the decentralized and customer-oriented execution of processes such as warehousing, picking, packaging, outbound goods and shipping in much smaller spaces than in conventional fulfillment centers, distribution centers and warehouses. Microfulfillment enables faster delivery to customers on the one hand and, on the other, is an approach to solving the challenges of the last mile, which is by far the most expensive part of the delivery route. The often highly compact solutions for microfulfillment processes aim to simplify integration into city centers or existing retail space. The increase in microfulfillment solutions goes hand in hand with the increase in e-commerce, the number of food and meal delivery providers, and customer expectations regarding the delivery time of ordered inventory.

Differentiation between fulfillment and microfulfillment

Customer proximity and decentralization are relative but important criteria for defining microfulfillment. However, there is no clear demarcation as to the size of the area from which one speaks of microfulfillment. Roughly speaking, the corresponding premises can range from around 50m² to over 1000m², and that from 2000m² to 3000m² they are simply conventional, smaller fulfillment centers that have been around for a long time. Infrastructural differences between individual regions and countries also lead to a different perspective on what can already be considered micro-fulfillment. While in Europe, micro-fulfillment usually takes place in an area between 100-600m² and a corresponding turnover of up to five million, in the USA, distribution centers and retail stores up to 3000m² and a turnover of 30 million are also referred to as micro-fulfillment centers. However, the term can be more clearly defined by the different requirements for software and intralogistics processes compared to classic warehouses and corresponding fulfillment.

Where and in which industries is micro-fulfillment used?

Due to the criterion of customer proximity, micro-fulfillment solutions can be found wherever people or large numbers of people live, especially in urban areas, regardless of industry and product group. In addition, both in urban and rural areas, inventories that need to be delivered to the customer as quickly as possible, such as groceries, freshly prepared food, and pharmaceutical products, are particularly suitable for micro-fulfillment.

What is included in microfulfillment?

First and foremost, you need suitable premises that can be used as warehouses or can take over warehouse functions. The inventories in these warehouses must then be integrated into a higher-level system (ERP, WWS, OMS) in order to be able 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 procedures must also be solved differently than in a classic large fulfillment center. From these different process challenges, three types of micro-fulfillment can be derived:
  • Classic fulfillment: A typical warehouse with conventional functionalities, but in an urban environment and in a significantly smaller design (well under an area of 2000m²).
  • Stationary fulfillment: brick-and-mortar stores are integrated into the fulfillment of, for example, online shops or marketplaces, where orders are placed and forwarded to the stores for fulfillment close to the customer.
  • Nano-fulfillment: also known as ultra-fast delivery; used primarily for food and medication. With this type, the providers own and control the entire process and supply chain. This can include real estate, software and a courier fleet, i.e. from warehousing and (further) processing to the actual delivery.

Challenges in microfulfillment

Depending on the type, there are different challenges to be overcome in implementation. These include:
  • Data and processes must be transferred at each location in order to optimize the distributed total inventory.
  • The 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, since large CEP service providers do not offer point-to-point logistics
  • For brick-and-mortar stores, the ERP or inventory management systems must be integrated at the point of sale
  • Likewise, the intralogistics processes in stores must be optimized, since a store area tends to be designed so that customers spend more time there, while storage areas are designed for short stays and fast processes
  • The optimization of routes and inventory management follows from the two points mentioned above, with the keyword being real-time inventory
  • Nano-fulfillment adds route optimization, transport and order predictability, which is achieved using software that already exists in some cases or has to be developed from scratch for specific cases.
Interesting fact: If a package is sent within a city using a traditional CEP service provider, it is not transported directly from the sender to the recipient. Instead, it is first transported to a large distribution center (usually outside the city) and then (usually the next day or the day after) back to the delivery address in the city. Small, local courier services, on the other hand, transport inventory directly from the sender to the orderer, point-to-point.

Environmental aspects of microfulfillment

Microfulfillment shortens delivery routes, which means that less CO2 is emitted during transport. As a result, there are also fewer delivery vehicles on the road, which particularly relieves the burden on inner-city infrastructure. The integration of local transport and courier services enables the most direct and shortest route from the sender to the delivery address in urban areas.

Advantages of microfulfillment

In addition to the advantages for end consumers, such as shorter delivery times and the ecological benefits of reducing CO2 emissions and relieving the burden on local infrastructure, there are also concrete advantages for companies to establish a micro-fulfillment strategy:
  • Building large logistics centers is a very complex and costly project that takes a long time to implement. Micro-fulfillment locations, on the other hand, can be started up more quickly and flexibly.
  • For brick-and-mortar stores, the sales productivity of the micro-fulfillment area is higher than that of the sales area. Accordingly, it makes sense to divide up retail space and partially convert it into storage space.
  • Space in the city is becoming more attractive and affordable as space for large centers in the countryside is becoming increasingly scarce and expensive.
  • The technologies – hardware and software – for the automation of micro-fulfillment were not available a few years ago, but are now available and continue to be developed.

Summary

In contrast to large distribution centers, micro-fulfillment solutions offer greater customer proximity, shorter delivery routes and shorter delivery times. In particular, industries and product groups with fast-moving items are suitable for micro-fulfillment. The forms of microfulfillment range from very small warehouses to brick-and-mortar stores to companies that own and control the entire process chain. It is not possible to provide a precise definition of the term, but there are various criteria that help to narrow it down considerably. These include customer proximity, decentralization and a much smaller area. In addition, the software and hardware solutions for micro-fulfillment are very specific and differ significantly from the requirements of traditional fulfillment centers. Micro-fulfillment not only encompasses business and economic aspects, but also has ecological and infrastructural effects on social coexistence.