Micro Fulfillment: The Move to Same-Day and Next-Day Delivery

By | Supply Chain Management

Amazon continues to drive change in the e-commerce arena, aggressively growing their next-day, Prime delivery initiative. Today, it is nearly impossible for most e-commerce merchants to offer the combination of free-shipping and next-day delivery to most of the continental US, without compromising profit using costly Express delivery services. However, by 2022, Amazon is on track to support affordable next-day delivery to most US addresses and, today, offers the largest on-demand, same-day delivery network, Amazon Flex, in North America.

The question begs, what drives Amazon’s speed-to-market, competitive advantage?

  • Over 110 Giant Fulfillment Centers – No other merchant, 3PL, or parcel carrier comes close to the scope and size of Amazon’s fulfillment center network, which allows them to put more product SKU’s closer to the consumer.
  • Amazon’s Growing Last Mile Delivery Network – This network boasts hundreds of local delivery terminals and tens-of-thousands delivery vehicles/drivers, all focused on the e-commerce, home delivery.
  • Amazon Air – Amazon’s exclusive fleet of over 60 wide-body cargo jets, whose sole focus is to support positioning and repositioning of merchandise in support next-day delivery, is a huge competitive advantage.

How 3PL Companies Can Compete Against Amazon

The Amazon fulfillment advantage is overwhelming, but not impossible to compete against.

For example, large big-box merchants like Walmart and Target are using their stores as forward stocking fulfillment centers to support same-day/next-day delivery and in-store pick-up by the consumer. However, this solution is not an option for most e-commerce merchants, that possess no retail footprint. These merchants are still dependent on their existing, 2-day ground delivery model via regional fulfillment centers.

While the 2-day ground model is reliable and cost-efficient, it cannot support same-day and next-day delivery across most markets that are served via this legacy distribution model.

Two-day ground delivery is not dead, but it is old news.  E-commerce merchants and 3d party fulfillment service providers must design and embrace affordable same-day and next-day delivery solutions, if they are to take back Amazon’s speed-to-market delivery advantage.

The Micro Fulfillment Center (MFC) Revolution

This is how the MFC model works:

  • 3rd party fulfillment organizations and only the largest retailers locate smaller fulfillment centers close to or within large metro marketplaces, nearer to the consumer.
  • These forward stocking, micro fulfillment centers can serve multiple merchants, and support same-day and next-day delivery to the consumers in the immediately adjacent metro marketplaces.
  • MFC’s tend to incorporate robotic product pick technology that drives faster order processing and lower operational cost, specific to labor expense.
  • MFC’s support fewer SKU’s versus large fulfilment centers, and usually warehouse products with high turn-over rates.
  • Ideally, replenishment of MFC’s takes place during off-peak traffic periods, and in many cases, during the late evening and early morning hours.

Delivery Service Options

  • Same-Day Delivery – The MFC model is ideally suited to be supported via a same-day, on-demand delivery solution, which matches up well with Amazon’s same-day delivery service offering, Amazon Flex.
  • Next-Day Delivery – This service option allows for the bundling of multiple delivery stops within a route and the ability to make scheduled delivery stops, which drives efficiency and reduced cost per stop. Numerous carriers offer next-day, same market delivery, to include small local delivery companies and UPS/FedEx.

MFC’s Barriers to Success

  • Land Acquisition Expense – Property within or adjacent to major metro markets is expensive.
  • Robotic Product Pick Functionality – While robotics displaces human labor costs over time, upfront cost is high.
  • On-Demand, Same-Day Delivery – This service can be costly if needed to support unbundled delivery stop routing, point-to-point deliveries.
  • Middle Sized/Small Market Support – The MFC model only works well in large metro markets and struggles in smaller markets where it is difficult to achieve any reasonable kind of delivery stop density.

The 2-day ground fulfillment model is still relevant as there is much that the MFC cannot support and the MFC fulfillment model may only be suitable for smaller SKU’s. However, while the challenges to designing and implementing low-cost micro fulfillment solutions are numerous, they must be overcome if e-commerce merchants are to successfully compete against Amazon’s free shipping, same-day/next-day, Prime value proposition.

Survival in the marketplace is a great motivator towards overcoming barriers to success, so expect MFC fulfillment models to evolve and become viable e-commerce fulfillment solutions.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

Questions to Ask Before Entering a Shipping and Fulfillment Partnership

By | Shipping

Starting your own eCommerce venture is a labor of love. Beginning with conceptualizing and designing products to building a marketing strategy, and finally packing and shipping your products to customers – each step gets you closer to running a successful eCommerce enterprise. As your business expands, there will be lots to do, leaving you with little time to devote to the eCommerce fulfillment process. This is where a fulfillment partner can ease your burden, ensuring you stay on top of the packaging, shipping and delivery service. If you are considering outsourcing the order fulfillment process to a vendor, here are the top questions to ask a shipping company. Also, take a look at what you need to determine yourself before selecting an order fulfillment service provider.

Read More

Understanding the Market Conditions Behind Inventory Shortages

By | Supply Chain Management

Understanding the current market conditions sets your business up for growth. When market conditions surge in either direction, companies need to make sure they can keep up with trends and remain solvent in an evolving market. Inventory management remains crucial for both traditional and eCommerce businesses amid fluctuations in the economy and supply chains. A careful analysis of supply chain availability helps businesses predict and prevent inventory shortages during periods when supply does not meet the demands of consumers.

Read More

Fulfillment Center Costs: What Retail Startups Need to Know

By | Shipping

If you are an e-commerce retailer, at some point you may consider enlisting the services of a fulfillment center. Partnering with a fulfillment center has many benefits, but there are a few drawbacks as well. Here we’ll focus on what factors into fulfillment center costs, specifically those that may be prohibitive for a small business looking to expand its e-commerce presence.

Read More

Order Fulfillment Terminology & Fees

By | Supply Chain Management

The order fulfillment process includes all of the steps a company takes between receiving a new order and delivering it to the customer. An effective order fulfillment strategy is key to ensuring impeccable client service, which builds a good brand reputation for your e-commerce business. About 38% of online customers say that a negative delivery experience will deter them from shopping at that online store again. To prevent such an adverse outcome for your online business, you must manage and implement key steps in the order fulfillment process. Here are some important order fulfillment terms and related pricing.

Read More

Tips to Improve Your Customer Support Interactions

By | Newegg Bridge Customer Service

Learning how to improve customer service interactions helps businesses maintain client satisfaction and develop long-term retention. While you may have excellent products and services, your customer support staff is the driving force behind higher sales. As the faces of your business, these employees represent your company from the first interaction. As such, making sure that they are providing good service offers customer interaction benefits that include business growth and improved satisfaction throughout client relationships. Add the following tips to your new-hire and ongoing training regiments and help make sure that you help keep customers happy and fulfill their expectations throughout the sales process.

Read More

Newegg Bridge

When Does Outsourcing Customer Support Make Sense?

By | Newegg Bridge Customer Service

Beyond the products and services you offer, your customer support team has the potential to make or break your business. These staff members are the face of your company and are frequently the first human interaction a potential customer receives. Not having enough resources for optimal customer service staffing, or even having the wrong people in those positions, can drastically affect your brand’s image and loyalty.

Read More

Order Fulfillment: What It Is and Why Getting It Right Is Essential for Your Business

By | Shipping, Supply Chain Management
Order fulfillment includes the entire process of receiving, processing, picking, packing and shipping orders to your customers. Without a good order fulfillment strategy in place, customers may never receive their product, or have the wrong items shipped. When either of these occurs, the likelihood of a customer choosing to continue using your company is slim. Understanding the processes and using them correctly for both in-house and e-commerce order fulfillment will help your business retain customers.

Read More

Things That Could Go Wrong with In-House Fulfillment

By | Shipping, Supply Chain Management
Whether you run a small business or a large corporation, in-house fulfillment mistakes can happen. With the many moving parts that go into storing, packaging and shipping products to your customers, these processes offer plenty of room for error. While most orders ship out correctly, the ones that are delayed or even incorrect can have a major impact on your revenue and brand image, even if it something out of your control. From a traditional warehouse setting to e-commerce fulfillment services, the following mistakes can happen for a number of reasons. The key is knowing how to avoid them and keep your business running smoothly.

Read More