E-Fulfillment: increasingly automated, small, and urban

07/06/2021

Micro-Fulfillment and Nano-Fulfillment: the distribution centers of the future are able to meet increasingly stringent delivery times

The pandemic has completely turned the trends of the world economy upside down, impacting especially some sectors, including e-commerce, which is experiencing significant growth.

Following the lockdown measures, purchasing habits and consumer behaviors have changed considerably, and many have been forced to try new purchasing models for the first time, to name a few: home delivery, buy-online-pickup-in-store (BOPIS) or "click-and-collect."

For example, if we look at e-grocery, one of the leading sectors of e-commerce, the data collected during 2020 speaks for itself:

• In Italy the e-food penetration rate more than doubled, going from 6% in 2019 to 14.2% in 2020 (source: Statista)
• In the USA in 2020 the e-grocery sector experienced an increase of $30.86 billion over the previous year
• In the UK, Tesco's online grocery business climbed from about 9% to 16% of its total sales in the country in the first quarter of 2020

This trend does not seem to stop, and it could have grown even more, considering that consumer demand exceeded the supply over the last year.

These new purchasing habits, now quite established, force all operators in the sector to offer omnichannel sales models; large and small players on the one hand are forced to manage many more orders (from purchase to delivery) and on the other face great problems relating to the management of customer experience and customer impatience, that is, the management of consumers who have never been so impatient and demanding.

An opportunity to be seized: omnichannel logistics

It is increasingly clear that a non-digitalized and automated supply chain has several bottle-necks such as out-of-date demand planning processes, uncontrolled inventories, errors in order preparation, and the inability to act and react promptly to any sudden changes in market conditions, just to name a few. In the omnichannel era, any retailer, large or small, needs to invest significant resources in its supply chain, so as to make it as digitalized, prescriptive, and autonomous as possible. Another key factor is certainly the warehouse, which must be increasingly automated and efficient, able to guarantee fast and precise shipments and to manage stock reliably.

What does omnichannel really mean?

Until just a few years ago, shopping was only possible in the physical store; with the introduction of e-commerce, the consumer has been offered the opportunity to choose whether to buy online or at the physical store, or to opt for hybrid forms of purchasing, for example evaluating the product online and purchasing it at the store or vice versa. This forced retailers to adopt a multi-channel approach that should enable consumers to buy both online and offline, without interruptions in their purchasing process.

From large Distribution Centers to Micro-Fulfillment Centers and Nano-Fulfillment Centers

Today, the classic large and delocalized distribution centers (CDC), capable of managing many SKUs (Stock Keeping Units) are being increasingly abandoned in favor of smaller distribution centers, such as Micro- Fulfillment Centers (MFC), ideal for D2C or B2C commerce and located near large urban areas, or Nano-Fulfillment Centers (NFC), which are mini-hubs located within large urban areas, even smaller and extremely automated, often with plug & play solutions. Compared to large distribution centers, MFCs and NFCs manage fewer SKUs - from 1,000 to 10,000 per day - but much more quickly.

In fact, the main objective of MFCs or NFCs is to bring the product closer to the customer, with faster deliveries and lower logistics costs, since they are less expensive solutions when compared to large distribution centers; rental costs as well as labor costs are undoubtedly lower, thanks to a higher level of automation and smaller footprints.

The main advantages of MFCs and NFCs can be summarized as follows:

faster construction and installation times (an MFC or NFC can be operational within 4-8 weeks)
faster deliveries (even same day)
better management of last mile delivery (being closer to the final consumer)
low labor costs thanks to higher automation levels
ability to manage different purchase models: home delivery, in-store purchase, click and collect, BOPIS
direct relationship between retailer and customer, without third parties involved with the risk of affecting the customer’s experience

Which automated solutions are most suited for MFCs or NFCs?

Modula automated vertical storage systems are particularly suited for both MFCs and NFCs since they exploit the height of the premises, while for premises with low ceilings Modula offers its automated horizontal storage systems.

These systems, when combined with picking solutions such as the Picking Cart, the Picking Station or Put To Light systems, can significantly optimize productivity and improve accuracy in order preparation.

Space optimization, fewer errors (thanks to accessories that guide the operator during picking operations), and increased productivity (e.g., a manual picker can execute up to a hundred cycles/hour while with an automated solution that number can be doubled) are just some of the advantages a Modula automated storage system can provide.
The integration of a Modula automated storage system with trays into the logistic flow is simple and quick, as is its installation (the storage system can be commissioned in 8-10 weeks).

Modula automated vertical storage systems also provide great flexibility given that they can be relocated if needed and that, being modular, they can be combined with additional storage systems at any time. These are significant aspects to be taken into account when choosing an automated solution.

Last but not least, it should be noted that the investment for the purchase of a Modula automated storage system is affordable for any company, whether small, medium or large.

Modula’s thirty years of experience and more than 10,000 units installed just in Italy are a guarantee for the customer in terms of business continuity and after-sales services.

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