Peter Jones, Managing Director and Founder, Prological Consulting
There’s a lot of buzz around micro-fulfilment at the moment, with many organisations exploring it as a solution to increase speed to market and raise the bar with regards to last-mile delivery. But what exactly is micro-fulfilment it and is it right for your operation?
Micro-fulfilment is a retail strategy that combines a local warehouse network with large-scale automation. The warehouses are much smaller than the usual centralised distribution centres (DCs) and are strategically placed closer to the consumer to meet increasing customer demand for faster delivery for online orders.
In principle, micro-fulfilment is a strategy used to speed up delivery to goods by bringing the product much closer to the consumer.
Spearheaded by automation provider Knapp, micro-fulfilment has been driving efficiencies in the grocery supply chain for some time and has continued to gain traction in the US and UK.
In late 2020, Woolworths was the first retailer to deploy Takeoff Technologies micro-automation technology in Australia. The tech was installed at Woolworths’ Carrum Downs Supermarket in Melbourne after record growth across the retailer’s online delivery and click and collect offerings.
The grocery retailer claims micro-fulfilment tech helps it dispatch five times the online order volume of a standard Woolworths store, with CEO Brad Banducci stating: “The micro-fulfilment technology in this eStore is a potential game-changer. It will help us deliver unparalleled speed and accuracy in the online picking process while keeping us close to our customers for faster and more flexible deliveries to the home.”
Why is micro-fulfilment so well suited to grocery retail?
The grocery supply chain is one of the fastest-moving supply chains in the world, it involves large orders of perishable goods alongside rising demands from consumers for quicker more convenient options for delivery and online orders.
This coupled with high order volumes and small ticket items lends itself well to a micro-fulfilment environment where localised delivery or pick-up works alongside the efficiency of large-automated warehouse.
The automated technology of micro-fulfilment strategies increases the speed at which orders are picked, and the location of the micro-fulfilment centre accelerates the delivery capabilities and, in most cases, enables same-day or next day delivery.
With Woolworths claiming 500% increase in volume and speed at its Carrum Downs micro-fulfilment centre and a number of grocery retailers in Australia and New Zealand investing in micro-fulfilment capabilities, it’s clear this new strategy is lifting the game for online grocery retailers. But does it make sense for all retailers?
Does it add up for your operation?
There aren’t many retailers who operate to the same volume as grocery retailers, and as a result micro-fulfilment isn’t always the right approach. In most cases, a store’s volume does not make sense for a large-scale automated solution.
While we’re seeing many retailers enhance their store network to add e-fulfilment capabilities, there’s a lot of work that can be done before something as large-scale and cost prohibitive as micro-fulfilment capabilities are considered.
Micro-fulfilment usually relates to utilising a large-scale piece of automated equipment to drive efficiencies in speed to market and customer satisfaction, but many retailers don’t need to go this far to enhance and improve their last-mile capabilities.
Being able to offer e-fulfilment capabilities in your retail store network is firstly about getting your processes right and there is a number of ways you can enhance efficiencies without investing in large-scale automation.
One of the most fundamental things you need to get right is inventory control. The inventory needs to be 100% accurate to be able to communicate with your customers what is available, when it is available and where it is available.
You also need to ensure that your goods are merchandising online well, with accurate information about colour, size alongside an easy to use and straight forward transaction process.
Once all of this has been worked out, you need to develop the internal processes to ensure that the goods can be packaged up and sent to the dock and then delivered through the appropriate delivery processes.
Retailers also want to consider whether they transform their entire retail network to include e-fulfilment capabilities or if it only makes sense to do these in metro areas to better service the last mile.
With retail supply chain, getting the processes right should come before any large-scale investment in micro-fulfilment. As we often find with our clients, there are some great benefits to be realised by developing, enhancing, and improving the assets and people you already have before having to invest in a completely new strategy.