Supply Chains Move Closer to Customers with Micro Distribution Centers

March 1

Consumers now expect faster deliveries when they order online products compared with just a few years ago. The solution to speed up last-mile delivery has been micro distribution centers, which are much smaller and more economically efficient than a typical warehouse. Here are more details on how these convenient centers use automation equipment to pick, pack and deliver packages to end consumers.

Small Automated Storage Facilities

At the core of this transformation is the use of small micro distribution centers with automated storage facilities. This more concentrated infrastructure in local areas cut the costs of delivering merchandise for both the manufacturer and the consumer. The concept of micro-fulfillment has been pioneered by Amazon, which has expanded to over 175 fulfillment centers around the world. Meanwhile, Walmart's strategy is to use its existing 5,000 stores to speed up customer deliveries on a local level.

The model of placing smaller stores in multiple locations within a big city has further been refined by Apple with its minimal retail footprint, yet close connection with target followers. It's a particularly useful model during the pandemic in which social distancing must be part of the equation to stay in business. Prior to the pandemic, only 3 to 4 percent of grocery sales were attributed to online orders. Since then, however, the percentage has practically doubled.

How Micro Distribution Creates Retail Efficiency

  • Real-time inventory - Combining micro distribution with smart technology is helping small centers analyze product sales and adjust marketing strategies at a faster pace. Tracking inventory status in real-time takes pressure off retailers and their suppliers to ensure storage efficiency and timely order fulfillment.
  • Faster order fulfillment - Walmart uses an automation system called Alphabot, which can move ten times more products than a human in a warehouse. The company emphasizes stocking its most popular items, such as packaged foods, at fulfillment centers. America's largest grocer is further partnering with startup Alert Innovation to build in-house micro-fulfillment centers at its large stores.
  • Last-mile savings - As delivery speeds increase and supply chains cut costs, micro-fulfillment centers will be part of bigger objectives for companies to achieve greater sustainability. This point is very important to investors who like to see constant improvements in cutting wasteful spending. Manufacturers will be in a better position to improve product quality and customer satisfaction at a faster pace due to accelerated distribution cycles.
  • Multiple small centers cut costs - Various global retailers are now experimenting with the Amazon model of distribution. Nordstrom is partnering with robotics company Tompkins to implement parcel-sorting technology. It will help cut costs on staffing while improving productivity. Smaller stores don't require nearly as much energy costs as warehouses and can be placed in areas where certain products are in high demand.
  • Better customer experiences - One thing that remains consistent through marketing and distribution evolution has been the goal of improving the customer experience. Speeding up the order processing and delivery phases have been crucial areas for retailers to drive efficiency and optimization.

Projecting the Evolution of Micro-Fulfillment

Micro-fulfillment centers need smart technology such as autonomous last-mile delivery machines to gain an edge over competitors. Some retailers have taken the extra step to install interactive virtual technology in stores, which can lead to faster comprehension of product capabilities. The most likely distribution model to expand for retailers will involve hubs that rent space to multiple retailers that work with last-mile partners.

Conclusion

Online retailers have helped pave the way toward a more efficient shipping infrastructure. The emerging model of micro distribution centers or pick-up centers has gained a successful track record of speeding up the delivery process of ordering online. Now that same-day and next-day delivery has become the norm, retailers taking advantage of this more integrated distribution model will be able to remain competitive in the market.

Johannes Beekman

About the author

Our CEO has more than 25 years of experience in manufacturing in the high-tech industry. Johannes has worked for 25 years in the semiconductor industry, where he worked for Philips, Infineon, and Sematech in various management positions in process development, engineering, operations, and sales and marketing. While working for Philips, he was an engineering manager in 2 wafer fab startups. And while at Sematech, he managed various international technical symposia. He has built 3 successful digital marketing companies in the past 8 years. His focus is marketing integration, marketing technology, SEO, and inbound and outbound marketing. And he has developed a content creation system that uses the AIDA model to develop content for every stage of the sales funnel. Johannes has experience working with companies in manufacturing, the high-tech industry, process industry, IT, healthcare, and legal industry, and he has published on several trade-focused websites.


Tags

automated storage facilities, last mile delivery, micro-fulfillment stores, real-time inventory, retail efficiency


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