What is on the Horizon for Micro Fulfillment Centers?

Posted: 10/15/2021 - 09:00
What is on the Horizon for Micro Fulfillment Centers?

What is on the Horizon for Micro Fulfillment Centers?

As we are hopefully moving beyond the pandemic, one positive trend that began during the height of 2020 supply chain upheavals was the emergence of the Micro Fulfillment Center (MFC). Supply chains made swift seismic shifts to accommodate new business models during pandemic and have gained a new attitude toward flexibility and fixing what remains broken. Technology exists to accomplish additional changes that will help manufacturers, brands, retailers, and supply chains meet a new and uncertain future.

The Decline of the Mall

A report done by Credit Suisse in 2017 estimated that by 2022, 20% to 25% of malls would be shuttered. By 2019, retailers had already announced more than 8,600 store closures and when COVID-19 hit in 2020, that number escalated exponentially. Retailers in every category have either disappeared or become shadows of their former powerful brick-and-mortar selves.

There is hope on the horizon as savvy retailers begin to breathe new life into their brands – and storefronts - by turning mall stores into Showcase Centers.

The mall of the future may look very different to consumers and retailers. Giant anchor department stores and branded shops will give way to Showcase Centers. These stores may have one of each item in a range of sizes for customers to select. Although it may take a few beats for consumers to get used to not getting the item to take home, they will instead have an easy opportunity to visit a nearby MFC to pick up their item. MFCs located nearby the Showcase Center may even ship the item directly to the customer, perhaps even the same day – given their shortened last mile.

The MFC of the Future

The MFC in retail environments is already a reality and supply chain managers need to keep it top-of-mind because COVID accelerated the trend. Retailers have resources to make simple changes and will immediately benefit from moving away from doing fulfillment in their stores. They also have options: set up their own MFC or contract with an MFC company that has an operation in proximity to the store location and has the technology to handle the retailer’s inventory and fulfillment. 

An automated, hyperlocal MFC has a unique ability to lower e-commerce costs for retailers by reducing such costs related to storage, retrieval and picking, as well as last mile delivery and real estate.

Automating the MFC

The key benefit of MFCs is that automation can be accomplished at the end of the supply chain, and this can be done seamlessly by deploying with RFID technology. Put simply, MFC processes focus on the basic metric, “do I have the right product to fill that order?” Whether by a person, via a bar code or utilizing vision automation, there is always a stop that must occur to answer that question. RFID automatically verifies having the right product for the right order without necessitating that stop.

Automation with RFID also solves front end replenishment problems. The fact is replenishment of items from the manufacturer or local Distribution Center can still be manual today. However, widely used technology like RFID can unlock an automated mechanism to pick items from a warehouse and “follow” it through to the MFC and ultimately, the customer.

Implementing a Total Supply Chain Solution

An end-to-end RFID solution addresses the number-one challenge of knowing where every product is physically located, at every point of the entire supply chain.  The industry understands RFID solves the visibility problem in inventory, whether in stores, in a Distribution Center or through a contract with an MFC.

The language of supply chains is changing, and there is new focus on what the industry calls “Interpretation Tools.” In an RFID Solution, these tools encompass:

  • RFID labels to tag products at the item, case and/or pallet levels
  • RFID readers such as tunnels, chambers, portals, undermounts, overheads and handhelds
  • Software systems that enable product data capture, interpretation, storage, sharing and connectivity (MFCs are likely to have systems in place that are adaptable to read RFID tags) 

Key Advantages of RFID in MFCs

RFID optimizes fulfillment for the retailer and is essential to meet omnichannel demands for localized distribution in e-commerce. The advantages of employing RFID in MFCs are significant, allowing accuracy, immediacy and speed for localized distribution. Importantly, an RFID solution eliminates the need to validate orders through legacy processes, because RFID automates those processes. The best news is that with RFID, decentralized MFC distribution and last mile processes generated by the retailer, same day delivery becomes an achievable goal.

RFID in the MFC also supports sustainability goals. Less distance travelled in the last mile requires less gas, and by reducing error, necessitates fewer returns, which in turn means less use of fuel, paper boxes and other resources.

What’s Next for MFCs

Get ready to see more and more MFCs in locations where customers are likely to reside. As e-commerce continues to take on a more central role for consumers, retailers will be tasked with shipping to customers’ homes or opening MFCs that are convenient to customers. As MFCs gain importance in the omnichannel race to retain customers, a total RFID Solution will get retailers across the finish line.


About The Author

Ryan Yost's picture

Ryan Yost is Vice president/general manager for the Printer Solutions Division (PSD) for Avery Dennison Corporation. In his role, he is responsible for worldwide leadership of and strategy for the Printer Solutions Division, focused on building partnerships and solutions within the Food, Apparel and Fulfillment industries. For more information, visit https://printers.averydennison.com/en/home.html.