Amazon’s shift from two-day delivery shipping to same-day delivery in 2019 reset consumers’ expectations for even quicker last-mile delivery. In 2020, the COVID-19 pandemic has highlighted increased delivery demand that has come from double-digit growth in e-commerce and also the need for technology investments to increase output and handle swings in demand more efficiently.
The result of these trends has become what is known as micro-fulfillment, that is, mini distribution centers in the back of retail stores or in nearby urban fulfillment centers and dark stores to serve the needs of local markets.
While such retailers as Target, Walmart, Best Buy, and Home Depot are using ship from store and in-store pickup options to fill online orders, it is coming at a price. For example, despite a 141% in e-commerce growth during its first quarter of this year, Target noted that digital fulfillment and supply chain costs were one of the top three drivers that pressured the company’s margins for the quarter.
Technology is playing a leading role in driving down these costs. For example, through its recent investment in Deliv, Target plans to lower its fulfillment and last-mile delivery costs via sort centers closer to customers.
Online grocery and delivery provider, Fresh Direct, with assistance from Fabric, plans to move from next-day deliveries to same-day deliveries by opening a micro-fulfillment center at one of its Washington, D.C.-area distribution facilities. According to Fabric, the facility will be able to process up to 1,000 orders per day.
Formerly known as CommonSense Robotics, Fabric utilizes robotics, artificial intelligence (AI), and other technologies to speed fulfillment practices. In late 2019, it introduced a platform model that allows its customers to build micro-fulfillment centers on their own property that use the company’s AI and robotics-based technology.
Also utilizing robotic technology, Dematic has worked with a number of customers to expand micro-fulfillment capabilities as well. Dematic is rumored to be working with Amazon to provide micro-fulfillment capabilities to its physical grocery stores. According to publication, Progressive Grocer, Dematic is working with a number of other grocers as well including Ahold Delhaize USA and Wakefern Food Corp.
According to a Dematic white paper, software that powers any micro-fulfillment solution should provide seamless integration with other inventory management, warehouse management software (WMS) and enterprise resource planning (ERP) systems to ensure that all stores, distribution centers, and corporate offices are networked on the same platform.
Furthermore, Dematic’s white paper stresses a major benefit to micro-fulfillment capabilities: data. Retailers are able to reclaim ownership of consumer shopping data, which can be leveraged to create personalized shopping experiences for consumers.
Data, as we all know, is the key to success for today’s businesses, and as more supply chain automation is implemented, the more data becomes available to businesses to analyze and incorporate into strategies, new products, and improve existing products.
Various surveys support the growth of automation. According to ARC research, the global warehouse automation market represents over $10 billion in annual spending. The research firm’s survey further found that 60% of respondents expect to invest in conveyors and sortation over the next three years. In addition, 49% of respondents expected to invest in shuttle system-robot hybrid solutions that utilize such solutions as Fabric and Dematic.
Meanwhile, in a survey from Honeywell Intelligrated, two thirds of e-commerce companies were willing to invest more in automation due to increasing consumer expectations and social distancing work processes.
The pandemic has increased a trend that was already in a growth spurt. Micro-fulfillment strategies will play a critical role in lowering fulfillment costs, improving last-mile delivery times, and providing data to retailers to analyze to improve strategies and maintain customer relationships.
Chase Flashman is Co-founder and CEO of ShipSights, a developer of industry-leading supply chain data analytics software & producer of enterprise-level consulting solutions.
This article originally appeared in the September/October, 2020 issue of PARCEL.