Micro Fulfilment Centers: Do You Need Micro Warehousing?

As an ecommerce business grows, there are many changes it will undergo along the way. Brands can expect to celebrate wins, face challenges, and experience various growing pains.  Learning how to manage increased demand can be categorized as all of the above.

Rising demands will lead to a need for increased fulfilment capacities, which will then come with its own set of challenges. Throughout its lifetime, an ecommerce business will have to make considerations for how to adapt and thrive, sometimes having to reassess factors like warehouses and fulfilment centres.

During this process, you may even consider if switching to micro fulfilment centres may be beneficial to your business. This post helps you explore those possible benefits and whether or not you should use micro warehousing.

What is a micro fulfilment centre?

A micro fulfilment centre (or MFC) is a small-scale storage facility that is used by ecommerce businesses to store their inventory closer to the end consumer so they can reduce cost and transit times. These fulfilment centres are often highly automated, helping to improve operational efficiency.

Micro fulfilment centres vs. traditional warehousing

Other than their purpose, micro fulfilment centres and traditional, large-scale warehouses are starkly different in terms of size. As a result, they each have their unique set of benefits for businesses.

Micro fulfilment centres

No larger than 10,000 square feet, micro fulfilment centres operate on a smaller scale. They’re normally located in an existing store or warehouse so as not to disrupt normal operations. Due to their smaller capacity, they can only carry about 24-48 hours’ worth of inventory and require regular restocking. These fulfilment centres are not intended for long-term storage but are meant for having products ready to pick, pack, and ship as soon as orders come in.

Larger fulfilment centres

Larger fulfilment centres typically fall in the 300,000-square-foot range but can be much larger depending on the size of operations. For example, both Amazon and Nike have substantial fulfilment centres in Tennessee. Amazon’s fulfilment centre is around 3.6 million square feet and Nike’s distribution centre is 2.8 million square feet.

Larger fulfilment centres have enough space to store massive amounts of inventory, which may last for several months of operations and may not need to be replenished as often.

Downsides of micro warehousing and micro fulfilment centres

Micro warehousing can bring down the cost of fulfilment while speeding up delivery times. This option can be a serious consideration for many businesses that are looking to optimise their operational processes. However, it’s also important to consider some of the challenges you’ll have to face when utilising micro fulfilment centres.

Requires constant inventory replenishment

With micro fulfilment centres being unable to store large amounts of inventory at a time, replenishment can be a challenge. They can only hold inventory for about 24-48 hours’ worth of operations, which means you need to be proactive with your inventory reorders. Having an automated system in place to handle your inventory reorders is essential when using a micro fulfilment centre.

That being said, you’ll still need to consider the high cost of regularly transporting goods from one place to another.

Relies on unpredictable consumer demands

Consumer demand is constantly changing, with unprecedented situations often influencing it. The market changes resulting from COVID-19 are proof enough that businesses can’t always predict how consumer demands will shift. So with micro warehousing, the limited storage capacity can make it challenging to quickly adapt to these unpredictable changes in demand.

For example, you may see a surge in demand overnight because an influencer posted about your organic soaps. The limited inventory in a micro fulfilment centre may not be enough to fulfil all the orders that are coming in from different parts of the country.

Increased risk of stockouts

As a result of the limited capacity, micro fulfilment centres may not always be able to keep optimal levels of inventory at all times. And unpredictable changes in consumer demand can often lead to stockouts, which will throw your whole supply chain for a loop while leaving you with many disappointed customers.

Depends on customer locations

One of the biggest benefits of micro warehousing is storing inventory closer to where your main markets are.

But since this system is highly dependent on customer locations, it also means that changes in the market and existing customer profiles can have a negative impact on your operations and may require constant reassessment.

Not viable for all SKU types

Many micro fulfilment centres are highly automated to improve operational efficiency. While this is undoubtedly a good thing, it also means that micro warehousing isn’t always suitable for all types of products such as larger items.

You may end up seeing significant wear on your machines as a result of fulfilling heavy items like furniture and large household appliances. Not to mention large SKUs take up space, so you’ll have to resort to storing fewer items to align with the storage capacity of micro fulfilment centres.

Is micro warehousing the future of ecommerce?

As consumers come to expect fast and free shipping thanks to the fulfilment experience offered by large retailers like Amazon, smaller businesses feel the pressure to meet these expectations too.

That’s why outsourced fulfilment options and micro warehousing have become so popular in the past few years. These solutions help to address the fulfilment needs of growing ecommerce businesses.

Micro warehousing brings inventory closer to end consumers to speed up transit times, allowing businesses to offer faster delivery times. The main limitation is storage capacity, as micro fulfilment centres can only store about two days’ worth of inventory. Micro fulfilment centres may be unable to handle the large fulfilment needs of growing ecommerce operations.

However smaller businesses, especially ones with limited resources and smaller fulfilment needs, may find micro fulfilment centres ideal for optimising their fulfilment processes.

For larger businesses and scaling ecommerce operations, outsourcing fulfilment to a 3PL is an innovative way to optimise the delivery experience without the massive investments needed with larger fulfilment centres and the capacity restrictions of micro fulfilment centres. Businesses can leave order fulfilment processes like picking, packing, and delivery to the experts and scale their delivery experiences to the level of retail giants like Amazon.

Moreover, 3PLs can store large amounts of inventory across a vast network of fulfilment centres to speed up delivery times while avoiding capacity limitations.

Benefits of micro warehousing and micro fulfilment centres

While micro warehousing has its challenges, the benefits may outweigh the limiting factors for some brands depending on their goals.

Accelerated order fulfilment

As mentioned earlier, most micro fulfilment centres are highly automated. For instance, picking lists are automatically generated to optimise the process and the process itself is often carried out by machines, where applicable. This significantly speeds up order fulfilment, ensuring that orders are sent out the door shortly after they are received.

Faster delivery times

Micro fulfilment centres are located close to the end consumers, which means that orders are delivered quickly since they have to travel for shorter durations. In addition, since packages have to cross fewer shipping zones, the cost of shipping is lower which allows businesses to offer their customers fast and affordable delivery experiences.

Enhanced customer service

By utilising micro fulfilment centres, businesses are able to enhance the customer experience thanks to faster deliveries. Additionally, having fulfilment locations closer to customers enables returns, refunds, and exchanges to be completed more quickly, which increases customer satisfaction.

Many micro fulfilment centres function as dark stores, where customers can pick up their orders locally without having to wait for shipping. As a result, businesses can further improve the customer experience by offering multiple delivery and pickup options.

Cost-effective expansion

Giant fulfilment centres has are expensive to set up and operate (think back to Amazon and Nike’s huge distribution centres). Smaller businesses don’t have the budget or resources to have a storage facility of such scales. With micro warehousing, businesses can offer faster fulfilment experiences without having to invest as much. While there might be some capacity restrictions, using micro fulfilment centres makes it easier for brands to scale their operations.

Increased sales

By offering fast and affordable shipping via micro fulfilment centre, you’re removing two of the most common barriers when it comes to consumers buying products: slow shipping speeds and expensive shipping costs.

As more people end up converting, you drive more sales. Increased sales means increased revenue, which can then help you to scale your business.

Alternative solutions to micro fulfilment

Micro fulfilment centres allow faster fulfilment without huge financial investments. This may be perfect for small-scale businesses that aren’t looking to grow their operations significantly.

But the smaller capacities may not be viable for scaling ecommerce businesses that are seeing increased fulfilment demands. And with giant fulfilment centres like that of Amazon not being a financially feasible solution, there’s a need to consider other alternatives.

Let’s take a look at some of the best alternative solutions to micro warehousing:

Logistics centres

Businesses can opt to partner with logistics centres, which are essentially warehouses that also provide some additional logistics services in addition to storage space. Some logistics centres even have several locations within their network, so you can distribute your inventory across multiple regions.

These are a good alternative to micro fulfilment centres since they have the capacity to take on more inventory to support your growing fulfilment demands. But keep in mind that some logistics centres may be a bit limited in that they only oversee the transferring of goods between different distribution centres. It’s important to carefully assess the level of service that a logistics centre can provide before deciding to partner with one.

Distribution centres

Ecommerce businesses can also choose to store and ship out products from distribution centres. These are specialized warehouses that function as a hub for strategically storing finished goods while also handling other value-added services like order fulfilment. They’re a bit more robust than logistics centres, going beyond storage services and helping ecommerce businesses to optimise their supply chain.

Distribution centres also offer inbound and outbound logistics services, taking care of the entire process of receiving inventory and delivering orders to the end consumers. Usually operated by 3PLs, distributions centres can even provide dedicated support, infrastructure, and technology to help ecommerce businesses save on time and logistics cost.

How ShipBob solves a range of fulfilment problems

Partnering with a 3PL like ShipBob is a great way to solve all the major fulfilment problems that you may face – whether you’re a small-scale business or a growing brand. With a distributed network of fulfilment centres and robust technology, ShipBob is the only fulfilment partner you need to streamline your supply chain processes.

Manage your inventory efficiently

Inventory management is a major challenge for most ecommerce businesses, especially if they have a large amounts of SKUs. It can be difficult to keep track of how your inventory is moving, how much of it you have, and when you need to order more. So your inventory storage needs go beyond simply warehousing your products.

ShipBob lets you sync your inventory with your online store, providing you with real-time updates on inventory levels. This means you can proactively keep track of when to reorder inventory across different fulfilment centres and prevent stockouts.

Distribute your inventory strategically

One of the main perks of micro warehousing is being able to store your inventory closer to your end customers to improve shipping speeds and decrease costs. With ShipBob’s 3PL services, you can enjoy the same perks through our distributed network of fulfilment centres. This allows you to store your inventory strategically across multiple locations and send orders out from the nearest fulfilment centre to the final-mile delivery destination.

Additionally, the ShipBob technology automatically provides you with recommendations on how to best distribute your inventory based on historical performance and sales data. This helps you to keep your shipping costs low while maintaining optimal levels of inventory across major markets. For example, if you see that a certain region is seeing high inventory turnover for a particular SKU, you can relocate some of the stock from a slow-moving fulfilment centre to optimise the distribution.

Provide 2-day shipping

While 2-day shipping was once considered a luxury, it has now become the norm in the ecommerce industry with retail giants like Amazon and Walmart changing consumer expectations. Working with ShipBob enables you to meet these expectations by storing your inventory closer to where your customers are.

In addition, our existing relationships with leading shipping couriers can give you discounted shipping rates so your customers can still enjoy expedited shipping at affordable rates.

Improve your returns management process

The returns process plays an important role in the overall customer experience, which calls for a need to optimise it. ShipBob helps you update your returns management process by handling returned orders and integrating with your returns software to streamline the entire experience for your customers.

Operating your own micro fulfilment centre?

If you’re running your own micro fulfilment centre and need a powerful warehouse management system to improve your processes and workflows, ShipBob’s WMS might be the solution for you.

Our proprietary WMS is an all-in-one platform that improves your fulfilment with features like warehouse, inventory and order management, pick and pack processes, reporting and analytics, access to our Developer API, and more.

If this sounds like the system your facility needs, connect with our team to learn more.

Micro fulfilment centre FAQs

Here are answers to the top questions about micro fulfilment centres.

How much does a micro fulfilment centre cost?

It typically costs around $3-$5 per order to fulfil orders through a micro fulfilment centre.

Does micro warehousing increase supply chain efficiency?

Micro warehousing improves supply chain efficiency to some extent, since it enables faster shipping and accelerated fulfilment. However, the addition of nodes may increase the complexity of your supply chain.

What is the purpose of a micro fulfilment centre?

The purpose of a micro fulfilment centre is to store inventory closer to the end consumers so that goods don’t have to travel too far to be delivered, which can reduce shipping cost and transit times.

Are micro fulfilment warehouses part of last-mile delivery?

Micro fulfilment warehouses are typically the last node before orders are delivered, making them a vital part of last-mile delivery.

Is micro warehousing popular for ecommerce businesses?

With the need to provide faster deliveries and the reasonably lower cost, micro warehousing has become very popular among ecommerce businesses.

Does ShipBob provide micro fulfilment?

ShipBob has dozens of fulfilment centres across the world, allowing ecommerce brands to split their inventory across regions.