CSA Exclusive: Gartner sees microfulfillment as vital tool for on-demand grocery

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CSA Exclusive: Gartner sees microfulfillment as vital tool for on-demand grocery

By Dan Berthiaume - 04/08/2020
grocery shoppers

Microfulfillment technology can turn brick-and-mortar grocery stores into high-density online distribution hubs.

Chain Store Age recently spoke with Tom Enright, VP and analyst with Gartner, about the opportunity emerging microfulfillment solutions offer retailers, especially in the grocery sector, looking to engage in omnichannel commerce. Enright explained how microfulfillment works and how it can boost productivity and volume in the enterprise supply chain.

How would you define microfulfillment?
“Microfulfillment is a distribution model emerging within the retail grocery sector that uses small-scale warehouse facilities located in urban areas to operate same- or next-day delivery order fulfilment. These facilities are typically located in the back of, or next to existing stores. 

“They allow for high-density product storage and use shuttle systems or other forms of material handling automation to put away and retrieve products for consumer orders at high speed. The model is a goods-to-person style of automation and robotics, where the human stays in one place and automation delivers the goods to be picked to them. This model can significantly increase picking productivity when compared to traditional, manual, in-store picking.”

What advantages does microfulfillment offer over traditional fulfillment solutions?
“Microfulfillment centers are designed to leverage automation or robotics to drive scalable and adaptable fulfillment speed at low cost. This contrasts with traditional approaches to material handling automation in the retail sector, where the thought was that ‘bigger is better.’”

“Traditional automated fulfillment operations looked to leverage size and scale to minimize cost-per-unit shipped, however those operations struggled to be near consumers due to real estate costs and land availability in urban areas. These conventional automated fulfillment operations required complex and expensive distribution centers that typically took years to design and deploy, and seven or more years to payback. 

“By contrast, microfulfillment centers challenge the notion of bigger is better by providing smaller footprints, automation and/or robotics enablement, and fulfillment-as-a-service distribution points that are specifically designed to cost-effectively enable on-demand fulfillment.”

When should a retailer consider implementing microfulfillment?
“Retailers that currently fulfill online grocery orders using their store inventory and workforce but are likely to hit capacity constraints in the medium-term, could consider microfulfillment as a means of improving productivity at that location. This could also mean that neighboring stores could have their in-store picking activities taken over, in part or in full by the additional capacity of the microfulfillment center.”

“The establishment of a microfulfillment center could represent a strategic initiative to operate sufficient order fulfillment capacity in a specific location, or an interim step towards a much larger capacity dark store model in a larger urban area. The volume of shopper in any population size is a key determining factor as to whether a microfulfillment center or dark store would be most suitable.”

Is microfulfillment an effective solution for retailers outside the grocery vertical?
“There are few indications that the microfulfillment model will be adopted at scale outside of the grocery sector for the foreseeable future. It’s suitability to the grocery sector lies in the size of the average consumer’s grocery order, which often contains more than 40-50 items. By contrast non-grocery items average two or three items.

“The grocery basket size presents greater opportunities for productivity improvement between humans and robotics compared to that which could be obtained in non-grocery orders. Early evidence from grocery microfulfillment trials points to a 10-fold improvement in productivity, and it’s not possible to gain that level from the much smaller non-grocery basket contents.”