Many changes will occur as an e-commerce business grows. Brands can expect to celebrate victories, face challenges, and go through various growing pains. Learning how to manage increased demand can be classified as all of the above.
Increasing demand leads to the need to improve performance, which then comes with its own set of challenges. The e-commerce business needs to consider how it adapts and evolves over its lifetime, and may reassess factors such as warehouses and fulfillment centers.
During this process, you can also consider whether moving to a micro fulfillment center is beneficial to your business. This post will help you investigate these potential benefits and whether you need to use microwave housing.
Micro Fulfillment Center Definition
A micro fulfillment center (or MFC) is a small warehousing facility used by e-commerce businesses to store inventory close to ending consumers to reduce costs and shipping times. These fulfillment centers are often highly automated and help improve operational efficiency.
Difference Between Fulfillment Centers and Traditional Warehousing
Aside from their function, micro fulfillment centers and traditional, large-scale warehouses are vastly different in size. As a result, each has its own set of advantages for businesses.
- Micro fulfillment centers
Micro fulfillment centers are smaller than 10,000 square feet and operate on a smaller scale. They are usually housed in an existing store or warehouse to avoid disrupting normal operations. Because of their smaller capacity, they can only carry about 24-48 hours’ worth of inventory and must be restocked regularly. These fulfillment centers are not designed for long-term storage, but rather to have products ready to pick, pack, and ship as soon as orders arrive.
- Larger fulfillment centers
Larger fulfillment centers are typically in the 300,000-square-foot range, but they can be much larger depending on the size of the operation. Amazon and Nike, for example, both have significant fulfillment centers in Tennessee. Amazon’s fulfillment center is approximately 3.6 million square feet in size, while Nike’s distribution center is approximately 2.8 million square feet in size.
Larger fulfillment centers have the space to store massive amounts of inventory, which can last for several months and may not need to be replenished as frequently.
Disadvantages of Micro-warehousing and Micro-fulfillment Centers
Micro warehousing can reduce fulfillment costs while increasing delivery times. This option should be seriously considered by many businesses looking to optimize their operational processes. However, it’s also important to consider some of the challenges you’ll face if you use micro fulfillment centers.
- Constant inventory replenishment is required.
Because micro fulfillment centers cannot store large amounts of inventory at once, replenishment can be difficult. They can only hold inventory for about 24-48 hours of operations, so you must be proactive with inventory reorders. When using a micro fulfillment center, you must have an automated system in place to handle inventory reorders.
Having said that, you must still consider the high cost of regularly transporting goods from one location to another.
- It is dependent on erratic consumer demand.
Consumer demand is constantly changing and is often affected by unprecedented circumstances. The market changes caused by COVID19 are sufficient to prove that businesses cannot always predict how consumer demand will change. Therefore, microwave housings have limited storage capacity, which can make it difficult to quickly adapt to these unpredictable changes in demand.
As an example, an influencer posted about your organic soap, which can lead to a surge in demand overnight. The limited inventory of micro fulfillment centers may not be sufficient to process all orders from different parts of the country.
- Stockouts are more likely to happen.
Because of their limited capacity, micro fulfillment centers may not always be able to maintain optimal inventory levels at all times. Unpredictable changes in consumer demand can frequently result in stockouts, throwing your entire supply chain for a loop while leaving you with many disappointed customers.
- It is dependent on the location of the customer.
One of the most significant advantages of micro warehousing is the ability to store inventory closer to your main markets.
However, because this system is so reliant on customer locations, changes in the market and existing customer profiles can harm your operations and necessitate constant reassessment.
- It does not apply to all SKU types.
To improve operational efficiency, many micro fulfillment centers are highly automated. While this is unquestionably a good thing, it also implies that micro warehousing isn’t always appropriate for all types of products, such as larger items.
When handling heavy items such as furniture and large appliances, the machine may show significant wear. Needless to say, large SKUs occupy space, so you need to stock fewer items to match the storage capacity of your microfulfilllment center.
Is Micro-Warehousing the Way of the Future for Ecommerce?
As a result of the fulfillment experience provided by large retailers such as Amazon, consumers have come to expect fast and free shipping, putting pressure on smaller businesses to meet these expectations as well.
That is why outsourced fulfillment and micro warehousing have grown in popularity in recent years. These solutions aid in meeting the fulfillment requirements of increasing e-commerce businesses.
Micro warehousing brings inventory closer to end-users, reducing transit times and allowing businesses to offer faster delivery. The main limitation is storage capacity, as micro fulfillment centers can only store inventory for about two days. Micro fulfillment centers may be unable to meet the high-volume fulfillment requirements of expanding e-commerce operations.
Micro fulfillment centers, on the other hand, maybe ideal for optimizing the fulfillment processes of smaller businesses, particularly those with limited resources and smaller fulfillment needs.
Outsourcing fulfillment to a 3PL is an innovative way for larger businesses and scaling e-commerce operations to optimize the delivery experience without the massive investments required with larger fulfillment centers and the capacity constraints of micro fulfillment centers. Businesses can outsource order fulfillment processes such as picking, packing, and delivery to experts and scale their delivery experiences to rival retail giants such as Amazon.
Furthermore, 3PLs can store large amounts of inventory across a large network of fulfillment centers to reduce delivery times while avoiding capacity constraints.
Advantages of Micro-Warehousing and Micro-Fulfillment Centers
While micro warehousing has its drawbacks, depending on the brand’s goals, the benefits may outweigh the drawbacks.
- Order fulfillment will be accelerated.
As previously stated, the majority of micro fulfillment centers are highly automated. Picking lists, for example, are automatically generated to optimize the process, and the process itself is frequently carried out by machines, where applicable. This significantly accelerates order fulfillment, ensuring that orders are shipped out the door as soon as they are received.
- It will result in improved delivery times.
Because micro fulfillment centers are located close to end-users, orders are delivered quickly because they have to travel for shorter distances. Furthermore, because packages must cross fewer shipping zones, shipping costs are lower, allowing businesses to provide their customers with fast and affordable delivery experiences.
- It will provide improved customer service.
By using a micro fulfillment center, businesses can improve their customer experience thanks to faster delivery. In addition, if the fulfillment location is closer to the customer, returns, refunds and exchanges can be completed more quickly, improving customer satisfaction.
Many micro fulfillment centers serve as dark stores, allowing customers to pick up their orders without having to wait for shipping. As a result, businesses can enhance the customer experience even further by providing multiple deliveries and pickup options.
- Enjoy a cost-effective expansion.
Large fulfillment centers are costly to build and operate (consider Amazon and Nike’s massive distribution centers). Smaller businesses do not have the budget or resources to support such a large-scale storage facility. Businesses that use micro warehousing can provide faster fulfillment experiences while investing less. While there may be some capacity constraints, using micro fulfillment centers allows brands to scale their operations more easily.
- It will result in higher sales.
By providing fast and affordable shipping through a micro fulfillment center, you remove two of the most common barriers to consumers purchasing products: slow shipping speeds and high shipping costs.
More sales are generated as more people convert. Increased sales result in increased revenue, which can then be used to help you scale your business.
Micro fulfillment centers enable faster fulfillment without requiring significant financial investments. This could be ideal for small-scale businesses that aren’t looking to significantly expand their operations.
Smaller capacities, on the other hand, may not be viable for scaling e-commerce businesses that are experiencing increased fulfillment demands. And, because massive fulfillment centers like Amazon’s aren’t a financially viable solution, there’s a need to consider other options.
Let’s dig into some of the best alternative microwave housing solutions.
- Logistics centers
Businesses may choose to collaborate with logistics centers, which are essentially warehouses that also offer some additional logistics services in addition to storage space. Some logistics centers even have multiple locations in their network, allowing you to distribute your inventory across multiple regions.
These are excellent alternatives to micro fulfillment centers as they can hold more inventory to meet growing fulfillment needs. However, keep in mind that some fulfillment centers only monitor the transfer of goods between different distribution centers and maybe somewhat restricted. Before deciding on a partner, it is important to carefully assess the level of service that the fulfillment center can offer.
- Distribution centers
Ecommerce companies can also store and ship products from distribution centers. These are specialized warehouses that serve as a central location for strategically storing finished goods while also providing value-added services such as order fulfillment. They’re a little more robust than logistics centers, going beyond storage and assisting e-commerce businesses with supply chain optimization.
In addition, distribution centers provide inbound and outbound logistics services, handling the entire process of receiving inventory and delivering orders to end-users. Distribution centers, which are typically operated by 3PLs, can even provide dedicated support, infrastructure, and technology to assist e-commerce businesses in saving time and money on logistics.