Omnichannel fulfillment complexities are permeating every sector of the retail landscape. To meet escalating customer service demands, retail leaders are looking for ways to augment regional distribution center (DC) hubs with a rapidly emerging micro-fulfillment center (MFC) strategy — one that utilizes highly automated, high-density, small-footprint automation systems that can be installed in stand-alone facilities or in (or near) existing stores. In this hypercompetitive market, retail leaders who are already adopting MFC strategies are gaining a first-mover advantage. Honeywell Intelligrated is combining robust automation equipment, robotics and advanced execution software to help retailers deploy micro-fulfillment strategies all across the retail spectrum.
From grocers to major e-commerce players and traditional big-box stores, retailers are faced with unprecedented omnichannel fulfillment complexities. Not only do customers want faster order fulfillment and delivery, but they’re also opting to buy online and pick up in store (aka BOPIS or “click-and-collect”) — often within a few hours. For both pure-play e-tailers and brick-and-mortar leaders, adopting an MFC approach is helping companies to accelerate deliveries and shorten the distance between fulfillment centers and their customers. As a pioneer in MFC technologies, Honeywell Intelligrated is helping leading retailers deploy these robust, flexible solutions to improve fulfillment logistics and meet escalating consumer demands.
Weathering a perfect retail storm
As more consumers purchase through preferred online channels, it’s estimated that worldwide e-commerce sales will double between 2018 and 2023. Combined with escalating labor challenges, the scarcity of real estate and the need to digitize fulfillment and supply chain logistics, e-commerce pressures have created a perfect storm of market conditions for micro-fulfillment strategies to emerge.
- Faster delivery — 56% of online consumers between the ages of 18–34 expect same-day delivery. Traditional fulfillment strategies alone will struggle to keep pace.
- Urbanization — 54% of the world’s population currently live in urban areas — a demographic expected to grow to 68% by 2050. Moving MFCs in closer proximity to these high-population centers significantly improves last-mile (or last-hour) delivery. Brick-and-mortar retailers can leverage their existing stores for a geographically dispersed distribution network.
- Space constraints — Industrial and logistics real estate vacancy rates remain near historic lows in 2020, making it more difficult and/or cost-prohibitive to invest in traditional DC footprints. Retailers need options to create effective stand-alone or in-store fulfillment strategies.
- SKU proliferation — The seemingly limitless expansion of product varieties and diverse inventories (aka SKU proliferation) magnifies fulfillment complexities. Dense storage and fulfillment automation has proven very effective in addressing these complexities, even for grocers entering the e-commerce arena.
- Labor challenges — Nearly one-third of distribution and fulfillment (D&F) operations experience turnover rates between 25 and 100%. As fulfillment speeds and complexities approach the limits of human capabilities, relying on manual labor alone is not a viable long-term strategy.
- Efficiently fulfilling BOPIS service levels has proved problematic and unprofitable for both grocers and big-box retailers alike. Food retailers incur a loss of $5–$15 on every manually picked online grocery order, while store aisles filled with click-and-collect order pickers create unpleasant shopping experiences.