How micro-fulfillment centers can enhance warehouse efficiency and reduce carbon emissions

Amazon has spent billions of dollars expanding its shipping infrastructure, at one time operating 175+ fulfillment centers across the world. In contrast, Walmart has largely used its 5000+ U.S. stores to deliver online orders faster. How can other leading but smaller retailers compete against these giants?

Introducing the small-but-mighty MFC.

How micro-fulfillment centers work

Customers want their ecommerce orders to arrive quickly, sometimes even the same day. But retailers need to make this happen not just fast, but also cost effectively. While ecommerce goes beyond traditional in-store retail by enabling online purchases – and bringing products to the customer at home – micro-fulfillment centers (MFCs) go a step further: making the process faster and more efficient by putting smaller fulfillment centers stocked with in-demand products even closer to the consumer. Either located in larger warehouses, smaller dedicated distribution spaces or retail stores, MFCs get an optimized selection of products to customers faster and cheaper than large centralized – and more distant – warehouses.

MFC benefits at-a-glance

1. Accelerated fulfillment, more throughput – Capable of fulfilling both ecommerce and in-store orders, MFCs deployed intelligently enable retailers to fulfill thousands of orders in short time periods. 
2. More SKUs, less space – The compact design of MFCs allows retailers to hold more product volume per-square-foot than traditional warehouses and stores. 
3. Better data, better decisions – Online purchase data can be collected and used to inform decisions about which SKUs to make available to achieve the best ROI in specific geographies/markets.
    

How MFCs shrink fulfillment’s carbon footprint

A carbon footprint is the total amount of greenhouse gas, including carbon dioxide and methane, generated by a given entity. MFCs reduce greenhouse gas emissions by significantly shortening the distance numerous vehicles take to get shipments to customers. Transportation is the biggest contributor of pollution, accounting for more than a quarter of greenhouse gas emissions in the U.S. According to the Environmental Protection Agency, in 2020 the primary sources of greenhouse gas emissions in the country were:

• Transportation (27%) – Over 90% of transportation – cars, trucks, ships, trains and planes – burn fossil fuel like gasoline and diesel 
• Electricity production (25%) – Approximately 60% of electricity comes from burning fossil fuels, mostly coal and natural gas
• Industry (24%) – Industry burning fossil fuels for energy – and certain chemical reactions necessary to produce goods from raw materials – produce greenhouse gas emissions 
• Commercial and residential (13%) – Fossil fuels burned for heat, the use of products that contain greenhouse gasses, and the handling of waste all produce carbon emissions
• Agriculture (11%) – Livestock such as cows, agricultural soils and rice production emit carbon
• Land use and forestry (13%) – Land areas absorb CO2 or generate greenhouse gas emissions; since 1990, managed forests and other lands have actually absorbed more CO2 from the atmosphere than they have emitted

Reducing overcapacity: Amazon’s fulfillment challenge 

How much inventory a retailer has matters, but too much isn’t a good thing. After the pandemic ecommerce surge and supply chain backups abated, customers were happy because sale discounting returned. But many big retailers were stuck with inventory – and warehouse space – that they didn’t need. A case in point is Amazon. In the rush to expand ecommerce capacity, Amazon ended up with too much warehouse space and excess merchandise. The company has ended up subleasing space and is taking an MFC approach to make the most of the space it keeps. Indeed, more important than sheer volume is how fast warehouses can get the right merchandise to customers. The bottom line: Strategically located MFCs can get products to customers in three days or less, sometimes even the same day. 

Questions to ask before setting up MFCs

• Location. Where should we put MFCs to optimize product selection, price and delivery speed?
• Product. What product selection should we offer in order to maximize sales, efficiency and ROI?
• Demand. How can we meet specific geographic demand? Notably, only MFCs that run on a leading-edge fulfillment orchestration platform ensure that customer demand is met at a low operating cost and picking and delivery speeds are optimized. 
• Delivery. Can we provide same-day delivery cost-effectively? Or is it not worthwhile?
• Fulfillment. Should we operate a dedicated MFC or outsource to a 3PL? Notably, too many logistics companies actually run manual operations that are hamstrung by labor constraints and the slower speed at which humans are able to execute fulfillment. Automated fulfillment is a competitive necessity.
  

Pick, pack, ship – faster

How can you optimize your warehouse fulfillment? An estimated 7,300 automated MFCs will be installed by 2030 and could prove to be the fastest-growing logistics segment. One thing is clear: The time to take your next step is today, so you’re ready for tomorrow’s biggest challenge.