Retailers Like the Idea of Micro Fulfillment Centers but Need Help Conceptualizing the Ideal Solution

Micro fulfillment centers (MFC) are still a mystery to many retailers, with most asking, “when and why would they make sense for me?”

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The micro fulfillment automation market is one of the fastest growing – largely driven by explosive, sustained growth in grocery e-commerce credited to the pandemic. But micro fulfillment centers (MFC) are still a mystery to many retailers, with most asking, “when and why would they make sense for me?”

The Appeal of MFCs

Many retailers need to expand e-commerce fulfillment capacity but don’t have financial resources to open new warehouses or distribution centers (DC). What they do have, in many cases, is underutilized space in their stores.

The recent reduction in foot traffic now seems permanent, and ongoing SKU rationalization efforts are driving shrinkage in certain categories. This is enabling retailers to consolidate front-of-store aisles and checkout lanes so they can convert part of the facility to an MFC, maximizing existing real estate and logistics operations to quickly increase fulfillment capabilities.

In fact, one of the key benefits of MFCs is their modularity and scalability. They can be easily designed for different footprints, which is valuable considering how varied store and DC sizes are today. And deployments often take weeks to complete versus the years normally required to bring more traditional DCs or bot-based automated facilities online.

Plus, MFCs’ last-mile proximity to customers makes them ideal mechanisms for meeting direct-to-door shipping and delivery demands. At the same time, inbound MFC deliveries can be managed the same way as store deliveries, with goods unloaded from the same trucks at the same time. Workers just need to know if they should move pallets and packages to store or MFC shelves.

Delivering the Right MFC Model

MFCs, though wildly popular, are still maturing. There is no single best design yet. Then again, maybe there never will be given how tailored each MFC must be to a retailer’s physical space, order volume, labor resources, and automation capabilities. That’s even more reason why technology providers and integrators must collaborate when asked to consult on an MFC build. There are several technologies inside a typical MFC, and each solution iterations will have inherent advantages and disadvantages.

There are basic shuttle-based systems that use 1D shuttles to retrieve items from a fixed infrastructure resembling a honeycomb of sorts. However, the potential downside of having each item or SKU in a fixed or designated location is you need to devote space for maximum velocity. While multiple quantities of some items may appear in each order, some may only be picked every tenth order– think Cheerios versus sardines.

That may drive some to consider ultra-high-density storage, in which robots or shuttles move about a single structure – sometimes referred to as a hive – and retrieve the items from totes. On one hand, this requires some “digging,” albeit in an automated and rapid fashion. On the other, it allows for deployment in very tight spaces, which makes the MFC concept viable for retailers that want to make the best use of limited, or perhaps underutilized, square footage.

A third potential approach involves mobile automated storage and retrieval systems, often referred to as AS/RS. This MFC design allows direct access to all storage locations (i.e., less “digging”) and is almost entirely vertical in most cases. Again, a great option for retailers with very small footprints.

There are other flavors of MFC technology emerging, and we continue to learn alongside the rapid pace of pilots and proof of concept deployments. Every day we hear of customers trialing these solutions, compelled by the current money-losing approach to in-store picking and difficulty finding labor – despite higher wage offerings. While there is a lot of automation involved in these solutions, they also leverage more commonly deployed fulfillment technology tools, including mobile computers, scanners, labeling supplies and, in some cases, radio frequency identification (RFID). This helps reduce upfront expenses. It also creates opportunities for many software developers and other solution providers.

As much as hardware is critical to a successful MFC implementation, it’s the software and overall MFC integration with existing workflows that can make or break success.

Characterizing the Costs of Investing Versus Inaction

At the end of the day, each retailer must determine if the return on investment makes sense. Expect them to lean heavily on technology providers and integrators to advise on the potential risks versus rewards. Fortunately, the imbalance between e-commerce spikes and labor shortages is making ROI calculations easier. Retailers must also move away from third-party fulfillment models. So, a hub and spoke solution may make the most sense, with a retailer deploying one MFC in an area where it can fulfill orders for three nearby stores.

Fulfillment has always been a challenge for retailers. But going into next year, this will likely be an area where we’ll see tremendous investment – hopefully resulting in better experiences for consumers.

You can learn more about the e-commerce fulfillment solutions currently available to retailers here.


Mark Delaney is currently a retail industry consultant at Zebra Technologies. In this role, he works with retailers’ c-level leaders to determine which strategic technology solutions can best address their current challenges. He keeps a strong pulse on industry trends and frequently solicits retailers’ feedback on the technology investments that Zebra is making to help inform and advance the company’s innovation with a customer-first mindset. Mark was previously responsible for Zebra’s mobile computing retail strategy.