Major retailers offer increasingly faster delivery times, down to a matter of hours for certain products. This means customer attraction and retention can rest heavily on localized e-commerce capabilities. As a result, retailers are turning to the geographical distribution of their fulfillment networks and implementing Micro-Fulfillment Center (MFC) solutions to place inventory close to the consumer and shorten the last mile. This resource provides an outlook on the micro-fulfillment industry, looking at regional factors, vertical markets, and key technologies, with strategic guidance for both technology vendors and end users.
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Major retailers offer increasingly faster delivery times, down to a matter of hours for certain products. This means customer attraction and retention can rest heavily on localized e-commerce capabilities. As a result, retailers are turning to the geographical distribution of their fulfillment networks and implementing Micro-Fulfillment Center (MFC) solutions to place inventory close to the consumer and shorten the last mile.
This resource provides an outlook on the micro-fulfillment industry, looking at regional factors, vertical markets, and key technologies, with strategic guidance for both technology vendors and end users.
Market Overview
- Currently, deployments of MFCs are heavily concentrated in North America with the region accounting for roughly 80% of the new deployments in 2022. Big investments in automation and e-commerce fulfillment capabilities from U.S.-based retail giants, including Target, Walmart, and Kroger, have largely driven this.
- Over the next 5 years, this trend is largely expected to continue, with U.S. retailers maintaining the highest investment in automated MFCs, but a growing focus on last-mile capabilities across Europe, Asia-Pacific, and the Rest of World (RoW) will result in a more even spread of deployments in the medium to long term.
- Food & beverage will remain the primary industry for MFC deployments, maintaining the highest level of spending on automation solutions.
- The small nature of the products and the frequency of prescription deliveries is encouraging investment in Automated Storage & Retrieval System (AS/RS) solutions and robotic picking systems, removing manual tasks from pharmacists and automating intricate picking operations.
- As a driving structure behind standalone and in-store MFC picking operations, ABI Research forecasts global revenue in AS/RS solutions from MFCs to grow at a Compound Annual Growth Rate (CAGR) of 34.03% from 2021 to 2027.
- To gauge the popularity of MFCs in the years to come, below are the forecast revenue for various technologies in MFCs:
- AS/RS Revenue from MFCs: Growing at a CAGR of 34.03%, AS/RS revenue for MFCs will increase from US$167.1 million in 2021 to US$1.3 billion by 2027
- Autonomous Mobile Robot (AMR) Revenue from MFCs: Growing at a CAGR of 64.67%, AMR revenue for MFCs will increase from US$6.83 million in 2021 to US$224 million by 2027.
- Warehouse Management System (WMS) Revenue from MFCs: Growing at a CAGR of 64.40%, WMS revenue for MFCs will increase from US$1.74 million in 2021 to US$56 million by 2027.
“As next-day and same-day delivery services have become more common, companies are recognizing the need to make rapid online fulfillment work in order to stay competitive.” - Ryan Wiggin, Industry Analyst at ABI Research
Key Decision Items
The following sections provide strategic guidance for MFC solution providers and MFC end users. The first three sections are intended for the former, with the next three sections geared toward the latter.
Consider Partnerships with System Integrators to Ease Deployment
Developing strategic partnerships with integrators can help outsource the sales, project delivery, pricing, and ongoing management of MFC solutions to a company that has deeper experience in deployment. Choosing a global integrator can also help tap into new markets, marketing the solution to a broader client base that has existing relations with the integrator.
Use a Warehouse Execution System (WES) to Orchestrate Automation
Many end users fail to see the operational benefits of automated equipment if an effective system, such as a Warehouse Execution System (WES), is not deployed. The system manages the flow of goods and compatibility with manual pickers. Vendors of automated equipment for MFCs should consider compatible execution systems or partner with a provider to offer a joint package.
Sell the Performance of the Automated Solution, Not the Solution Itself
One challenge holding back micro-fulfillment solutions is that it is difficult for end users to see the ROI over manual picking, with many companies still investing in manual picker productivity. If end users are to be confident in adopting automated micro-fulfillment solutions, vendors should establish contracts that guarantee throughput and picking rates, encouraging not only adoption, but also continuous improvement.
The next few sections provide some recommendations for retailers that are looking to implement MFC solutions in their fulfillment centers/warehouses.
Develop Forecasting and Replenishment Analytics as Part of Micro-Fulfillment Strategies
Adding extra nodes to the supply chain can add more complexities. By decentralizing inventory and creating fast throughput MFCs, stronger forecasting and advanced analytics must be put in place to ensure upstream supply chains are well-informed and stockouts are kept to a minimum. When established, MFCs can be used to obtain localized data, and replenishment should be tailored accordingly.
Make Sure MFCs and the Level of Automation Is Right for Your Business
It is imperative for retail users of MFC solutions to consider brand, network, real estate, and inventory strategy before adopting micro-fulfillment solutions. Based on current capabilities and available capital, investing in automation within existing fulfillment centers may deliver the efficiencies in storage and order fulfillment required for the online delivery coverage and speed intended. MFCs should not be shoehorned into current operations, but rather augment the flow of goods to consumers based on geographical constraints.
Pair MFCs with a Cost-Effective Distribution Network, or Focus on Collection Offerings
Online retail profitability will be hindered by the cost of home delivery, regardless of how efficient MFCs can be. Consider partnerships with last-mile delivery companies or expansion of internal fleets to include home delivery vehicles, but consumers are seeing the same level of convenience in click-and-collect and curbside options as well.
The pandemic did accelerate home delivery, but recent data show much lower-than-expected online uptake. Deploying MFC solutions should not be seen as purely home delivery enablers, but as augmenting an omnichannel offering that creates flexibility in the customer experience.
Key Market Players to Watch
- Alert Technologies
- AutoStore
- Dematic
- Fabric
- HAI Robotics
- InVia Robotics
- Ocado
- Swisslog
- Takeoff Technologies
- Zebra Technologies
Dig Deeper for the Full Picture
For a more detailed overview of the current and future uptake of MFCs, various solution providers, and enabling technologies, download ABI Research’s Micro-Fulfillment Trends research report.
Not ready for the report yet? Check out our following content:
- Where Does the Smart Label Market Currently Stand? [Research Highlight]
- Micro-Fulfillment: Definition, Use Cases, and Different Types [blog]
- Retailers Can Bring Automation into Their Micro-Fulfillment Centers (MFCs) with These Technologies [blog]
This content is part of the company’s Supply Chain Management & Logistics Research Service.
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