by Dez Blanchfield, Chief Data Scientist at Sociaall Inc.
As eCommerce and ‘store to door’ delivery looks set to continue well beyond the end of the pandemic, many retailers are struggling to turn a profit from online sales. The challenges of 2020 didn’t just fast-track eCommerce uptake, they also accelerated advances in technology, pushed businesses to revaluate traditional models and forced many to rethink relationships between retailers, disruptive start-ups and automation; setting the scene for a radical shake up of fulfilment strategies in 2022.
What’s driving this new approach?
Micro-fulfilment is really about moving out of large singular distribution centres (DCs) to more local, smaller, convenient hubs. Traditionally, customers often have (depending on the size of brand and industry) one or two large, remote DCs which they would look to fulfil orders from for an entire country or region.
By expediting the fulfilment process, micro-fulfilment gives brands the opportunity to get goods to their customers more quickly; it also provides them with an additional, convenient click and collect point for consumers. It’s about taking the overall supply chain and making it more distributed, in an ongoing effort to meet customer expectations that will continue to shift and evolve well beyond the end of the pandemic.
What does micro-fulfilment mean for traditional stores?
As a result of many of the restrictions imposed by the pandemic, a lot of retailers are now looking to fulfil eCommerce orders from stores, to the point that it’s become so successful we may soon reach a point where you’re almost pushing customers or footfall into the stores as parcel collection points, rather than the traditional function of stores.
Many retailers who’ve got large numbers of physical stores now probably don’t feel that they need to keep so many and will look to reduce their high-street presence; keeping those stores that do remain (certainly in terms of fashion retail) more like showrooms, holding less costly inventory on site.
Customers will still be able to look, feel and touch products, but actually in terms of fulfilling orders that may well come from another point. This is where micro-fulfilment centres really come into their own. For example: a customer may say; yes, I like this product.
This is exactly what I want. I’ll be here shopping in the city centre for a while. Can you get it ready for me to collect within the next hour and a half, or simply deliver it to my home. Now there’s no way you could do that from a remote DC to a city centre location, but you can do it from a micro-fulfilment centre.
Three tips for making the right micro-fulfilment decision
There are three key considerations for retailers considering a potential micro-fulfilment strategy. The first is to consider what is the purpose of your micro-fulfilment centre: are you looking at it in terms of fulfilling direct consumer orders, or maybe you are looking at it in terms of a click and collect location or a hub and spoke model delivering out to stores?
Secondly, how many SKUs you decide to offer will largely determine where you locate, and finally, what type of technology will you need in the centre itself to make it function smoothly. Maybe it will require more automation or maybe it will require a specific, leaner warehouse management solution.
Micro-fulfilment centres will enable brands to deliver faster and more efficiently on brand-customer promises, but make sure you don’t sacrifice due diligence at the strategic planning stage for speed of operational roll-out.
An exciting period of supply chain innovation is here
Looking ahead to the immediate future, there are still many challenges ahead, however, we can finally begin to feel positive of the longer-term outlook for the retail market and business conditions in general.
The last two years showed us all (retailers, business leaders and consumers alike) what could be achieved with an agile, proactive, ‘can do’ mentality. Providing this approach to problem solving stays with us post-pandemic, it should herald an exciting period of supply chain innovation, as advances such as micro-fulfilment become commonplace.