Micro-fulfillment Strategy to allow lower final-mile costs.

Amazon, Walmart, Walgreens and grocery third-parties like Instacart are investing in micro-fulfillment centers to speed up delivery times, curb final-mile costs and get products closer to consumers. The investment comes as e-commerce sales are expected to reach about 35% of total sales by 2023, according to Edge Retail Insight, a subsidiary of Ascential.

The marketing research firm predicts the in-store share of sales will decline to 62.4% by 2025. This year in-store sales will account for roughly 70% of the total global sales.

Supply chain insiders say micro-fulfillment centers are an essential part of next-day and same-day delivery. Retailers use their physical assets as intermediary fulfillment centers with dark stores and transform some retail stores and clubs into automated warehouses.

Ascential reports that retailers are also likely to reallocate store space to accommodate more online orders. The report said up to one-third of retail space could be transformed into fulfillment centers.

Walmart announced earlier this year plans to build micro-fulfillment centers equipped with automation. Tom Ward, senior vice president of last-mile technology and operations at Walmart, said the retailer is building about a dozen micro-fulfillment centers (MFC) at store locations, including Store 100 on Walton Boulevard in Bentonville. The capital outlay is part of Walmart’s $14 billion expenditures planned for this year.

Ward said the highly automated MFC would allow more orders to be picked at a faster speed. He said the micro-fulfillment center is a compact, modular warehouse built within, or added to, a store location. In addition to fresh and frozen items, an MFC can store thousands of items the retailer knows customers want most, from consumables to electronics. The end goal is to fulfill the order in minutes from the time it is placed. The order will then be picked up by shoppers or dispatched for delivery by third-party or Walmart in-home drivers.

Another benefit of the automated MFC is that one center can facilitate several stores, creating more efficiencies. One big difference for Walmart’s MFC strategy is that the locations are slated for busy stores that require more labor to pick orders. The MFC is also located in closer proximity to customers allowing for lower final-mile costs.

Source: https://talkbusiness.net/2021/09/the-supply-side-micro-fulfillment-centers-newest-retail-supply-chain-strategy/