Micro-Fulfillment Centers. The next stage of the fight for the last mile

Warehouses are generally located on the outskirts of major cities. The choice of location is determined by land prices, easy access to transportation and distribution networks. This scheme is being challenged by micro-fulfillment centers. They are created within the boundaries of urban agglomerations, even in their very centers. These are small facilities that are a response to the rapid development and growing requirements of the e-commerce industry. And they are worth a closer look.

Special features of micro-fulfillment centers

Small warehouses in densely populated urban locations have both numerous advantages and disadvantages. Here is a summary of the most important features of micro-fulfillment centers:

  • location in an urban area – micro-warehouses are built on the outskirts, and often also in city centers, which attract large groups of potential customers;
  • small storage space – there are a lot of micro-warehouses but not very spacious;
  • limited assortment – insufficient space and the need to quickly complete orders limit the range of goods to be stored;
  • warehouse and shop in one – warehouses located in urban areas often take the form of a dark store, i.e. a shop intended only for online sales: their staff are pickers (they complete orders) and couriers (they deliver parcels to the customer, usually on scooters or bicycles);
  • relatively high initial costs – rental or purchase prices for real estate are much higher within cities than outside.

What problems do micro-fulfillment centers solve?

They are one of the ways to solve the problem of the increasing costs of handling orders in e-commerce. Moving logistics to city centers, i.e. close to where potential customers live, is to be a remedy for last-mile delivery problems. They are designed to improve the way the last stage of delivery is arranged and speed it up. 

Last mile logistics generates high costs and poses the greatest risk of delays, deliveries to the wrong address, lost or damaged shipments. What are the causes of these problems? The reasons are known: many delivery points (the customer no longer comes to the store, but gives the delivery address), different delivery options (courier delivery, collection at the point of sale or in a parcel locker), temporary or permanent congestion in cities (plus sudden, unpredictable congestion due to road accidents, infrastructure failures or random events). The number of variables is too large to be controlled by precise scheduling.

So small warehouses located in the cities that allow you to shorten the distance between the central warehouse and the customers are the solution to the problem. They enable couriers to switch from vans to bicycles and scooters. Thanks to this, many small shipments, including documents and business correspondence, can reach recipients on time in congested areas or parts of cities closed to delivery vehicles.

The location close to the customer is also to mitigate the negative impact of returns. The goods sent back do not travel a long way to the central warehouse, but only back to the micro warehouse, where they are used in new orders. Shortening transport routes reduces costs and reduces the carbon footprint of logistics.

Micro-fulfillment centers speed up last-mile logistics. They allow you to make deliveries in the q-commerce model, i.e. shipments within 24 hours or on the same day, and even within less than an hour. Such quick deliveries allow for online ordering of food products with a short shelf life.

A warehouse located so close to the end customers is a way to gain their loyalty. If someone is waiting for an urgent shipment, there is nothing more frustrating than a delay. On-time delivery by a well-mannered courier is crucial in adding value in the supply chain.

As you can easily see, the viability of creating small warehouses in cities is neither obvious nor guaranteed. The decision to create a network of micro warehouses should be the result of juxtaposing the high initial costs (rental and purchase prices of real estate) with the potential cost savings related to shortening the distance to the end customer.