Innovation through micro-fulfillment and shared resources
2022 has been a rough year for retailers.
Between not enough of the inventory that’s in demand, too much inventory that isn’t, and a persistent shortage of space available for fulfillment, keeping costs down and efficiency up has been challenging to say the least.
What’s more, contrary to most expectations, in-person shopping has been making a comeback. According to the Wall Street Journal, consumer buying habits were roughly back to their pre pandemic trend by the fourth quarter of 2021.
In fact, WSJ reported that March of this year was the first month to record a year-over-year drop in e-commerce sales since November 2013. Meanwhile, brick-and-mortar sales rose by 11.2%.
While no one expects the convenience of online shopping will be abandoned anytime soon, the spike of in-person shopping does highlight how dynamic the market has become. Retailers must be ready for anything.
Our clients’ challenges are no different. And they look to us to help them innovate logistics solutions that can meet those challenges. So it seemed fitting to share two somewhat small innovations we’re implementing for clients in order to tame costs, boost efficiencies and increase agility:
Micro fulfillment centers (MFCs) and resource sharing.
Big promise in micro fulfillment
MFCs break up the major, centralized fulfillment warehouse model into smaller, sometimes highly automated centers that serve both e-commerce and local store pick-ups.
They are placed close to end consumers (often population-dense areas) in an effort to reduce the cost and time it takes to deliver orders. MFCs could occupy a fraction of a large warehouse (more on this later), or they could be located in a dedicated, much smaller distribution or warehouse space, typically ranging between 5,000 and 50,000 square feet. As a result, retailers can more quickly deploy fast-moving items.
In fact, MFCs are also popping up inside retail locations.
In a blog post earlier this year, for example, Walmart claimed that leveraging stores in their network as MFCs is “redefining last-mile delivery.” The retail giant also reported a 20% increase in pickup and delivery capacity, and a 170% increase in orders from its stores.
Yet these weren’t the only improvements the retail giant touted. Walmart also cited the reduction of its environmental impact as an important benefit of its new strategies.
According to the forest conservation group Canopy, the 241 million cartons needed to ship online orders to customers every year requires the pulping of 3.3 billion trees. And Statista reported that 37% of GHG emitted in 2020 were traced back to the shipping and return of products.
(Incidentally, comedian Bill Maher recently cited similar statistics in order to make a case for going back to the mall.)
By leveling up its capacity to deliver in-demand products directly to consumers, Walmart appears to be betting that in-store MFCs will not only help increase its agility, boost its efficiency and lower its costs, the retailer also expects the strategy to help it get greener.
And apparently, Walmart is not alone in its enthusiasm for MFCs. Research from Interact Analysis projects that almost 7,300 automated MFCs will be installed by the end of 2030. Compare that to just 86 installed by the end of 2021.
Since one of our clients also operates multiple retail locations, we suggested they use a strategy similar to Walmart’s. In fact, this client was set up almost perfectly to operate unique, small footprint MFCs inside of their retail spaces.
Whereas a larger MFC operated by 12-25 people might be considered a “hub,” these much smaller locations would be the “spokes,” each run by one or two people.
These spokes satisfy fulfillment, returns and curbside pickup at each of the client’s locations, and close proximity to a lot of consumers and other retail spaces would increase efficiency.
Unsurprisingly, the client has shown more and more interest in these spokes versus a hub.
A lack of fulfillment space has also been a constraint for many retailers, especially those looking to operate in very tight real estate markets.
To secure space, retailers have to move quickly when they find something. In many cases, they can find themselves bidding on buildings that haven’t yet been completed.
One of the ways we’re helping clients like these innovate is by consolidating their operations with others. They not only share space, they can also share some of the labor, supplies and equipment.
Of course, this arrangement works best when “partners” have operations that are countercyclical to each other. So, for example, shared labor can focus on one client in the morning and another in the afternoon.
It’s a kind of 3PL model that allows clients to resolve their space issues in a creative way and lower costs since they do not have to own all of the assets they need to run their operations.
Solving tough challenges through small innovations
Micro-fulfillment centers and shared resources may not be big or even groundbreaking concepts, but what we’re finding is that you don’t need big moves to make a significant difference in your logistics operations.
And for an industry still navigating the challenges of the 2020s, even small innovations could help a tumultuous future be a lot less rough.
How can we help you innovate in 2022?
nGROUP helps labor-intensive operations run a more cost-effective and productive workforce. How? Through our performance-based model that incentivizes results. We offer both insourcing and outsourced third party logistics (3PL) so you can have the flexible, expert support you need to hit your targets.
We help you find enough great people so your shifts are always full. We provide on-site management to relieve your team and guide those teams to maximize their production, while keeping costs low. We use in-house technology to provide visibility into the inner workings of your operation, giving you the information you need to discover more efficiency.
If logistics and/or labor management headaches are holding you back — give us a call today. We help retail distribution, wholesale distribution, reverse logistics, fresh food production, and light manufacturing operations gain an edge through a more cost-effective, productive labor force and logistics operation. Don’t let new or old logistics and/or labor headaches compromise your ability to compete. Call nGROUP today and win.