Business

Micro-fulfillment Centers (MFCs): The 'Hyperlocal' Solution

When it comes to eCommerce fulfillment models available to grocers, what are best practices? Which models are the most cost-effective, and how can businesses navigate the ever-changing waters of new e-tail technology? AutoStore took a deep-dive look into online fulfillment, and after exploring the complexities of in-store picking, we saw the importance of having a dedicated space for fulfilling orders. That brought us to the pros and cons of fast pick areas and dark stores. Now we'll explore the third leg of the “technology du jour” that offers its own unique solutions to grocers: micro-fulfillment centers, or MFCs.

What exactly are MFCs?

Example of automated cube storage within an existing store. Order fulfillment happens in the center ‘aisles’, while customers can shop specialty departments (bakery, deli, seafood, etc) along the perimeter and pick up online orders.

Like dark stores and fast pick areas, MFCs provide a dedicated space for grocers to store and process goods to be sold online. The term MFC generally implies a sophisticated automation system, employing a strategic combination of robotics and humans to fulfill each order. They’re called “micro” because they can be located in a separate location, or they can be installed in extra space within the store. Yet they are known for their impressive levels of productivity, speed, and accuracy, with some reportedly churning out as many as 4,000 orders per week.

Because they combine economy-of-size with cutting-edge automation, some say MFCs give grocers the best of both worlds: the proximity to customers of in-store picking, with the efficiency of large, automated facilities.

Here are the key aspects of a highly effective MFC:

1) They utilize an optimized blend of automation and manual labor.

In a well-run MFC, robots bring the inventory to order pickers in a fashion called "goods to person," using methods that are designed to optimize both storage space and the fulfillment process, such as cube storage, floor-based, and/or shuttle systems. The picker takes the product from the inventory tote, and puts it into the customer tote as directed by the system. Human staff verify that the final order is correct and problem-free (for example, fruit is unbruised and meat is packaged at the appropriate temperature) before sending the order out for pick-up or delivery. This integration of human and machine labor ensures maximum efficiency and accuracy.

2) MFCs don’t require much space.

Some are housed in-store, in a back room, or a converted storage space. Others are located in a separate piece of real estate, either in a dark store or in a building bought for the purpose of fulfillment only. According to data reported in Grocery Dive, newly constructed MFCs tend to fall around the 10,000-sf mark and reportedly as low as 5,000 sf. (Contrast this to regional grocery chains’ warehouses, which tend to cover 600,000 sf or more.)

Their smaller size brings us to their third key aspect:

3) They’re “hyperlocal.”

Because they’re often at the store – or if not, they’re close by – MFCs are closely intertwined with your store’s inventory and SKU systems, allowing for more accurate management. This can also cut down on staffing, delivery, and real estate costs.

4) They stand to solve one of eGrocery’s most pressing problems.

That’s right – MFCs are a potential solution to the dreaded “last mile,” which has long been a headache for grocers. Because they’re hyperlocal, MFCs are closer to your customers’ homes than a large, centralized warehouse, which shortens turnaround times significantly.

MFCs have the potential to optimize the relationship between space, cost, and functionality in your grocery business. As more grocers put these systems into action, it will be vital to monitor their efficiency through markers like flexibility, cost, storage density, scalability, and reliability – all key features in a successful fulfillment model.

The rise of MFCs has been a favorite industry prediction for years now, and in 2021, we’re starting to see those predictions come true. In recent months, grocery giants who had previously utilized massive, centralized warehouses (such as Ahold Delhaize, Woolworths, Albertsons, and Walmart) have begun investing in third-party technology to test out MFCs, finding that they provide a more cost-effective and efficient method of fulfillment.

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