The retail sector is facing unprecedented pressure to enhance its omnichannel commerce after the surge in the e-grocery market. As the customers have shifted to online grocery shopping, huge sales are accelerating the demand for logistics automation in the retail industry. The future of the retail industry is relying on automation in micro fulfillment centers, which can cater to the immense need of the e-grocery segment and fulfill the goals of fast, cheap, and flexible delivery services. The MFCs focus on using small, highly-automated warehouse facilities in densely populated urban locations near to the end customer to improve the time of delivering goods and enhance customer experience.
As per the new market research report ‘Logistics Automation Market’, “The global logistics automation market size is projected to grow from US$ 48.4 billion in 2020 to US$ 88.9 billion by 2026, at a CAGR of 10.6 percent during the forecast period.” These stats show that the growth of the businesses will hugely depend on smart business solutions and reduced last-mile delivery costs.
During the pre-pandemic days, the retail stores and supermarkets were performing manually and with an increased workforce to meet the demand for online orders but now the inclination toward digitalization has pushed them to adopt technology in retail logistics. The most affected category from the change in consumer behavior is the grocery segment. The e-commerce grocery sales witnessed an increase of 43 percent between March 2020 and 2021, according to Brick Meets Click data (via Grocery Dive). The immense traction in the logistics automation industry was observed after a change in consumer behavior, digital transformation in the industry, the emergence of IoT, advancements in robotics, and increasing demand to ensure workforce safety.
Presently, the e-grocery segment is facing the challenges of long pick-up times and delayed last-mile deliveries. The time taken for picking up an e-grocery is 60 minutes, which makes the segment an unsuccessful burden for grocers. The MFCs can reduce this time to 6 minutes by providing faster service for customers while boosting profits for retailers. Other than being cost-effective, MFC’s ensure fast delivery of orders in less than 2-hours from the time it is placed till it gets delivered. As per the estimation of global supply chain consulting firm Chainalytics, the typical cost per order is $10-$15 with manual picking and an MFC reduces it to only $3-$5.
The conventional process of inventory control and order fulfillment is complex, which makes automation a necessity for the MFCs. The need for enhanced robotic integration in retail can be fulfilled by equipping storage systems with mobile robots in a goods-to-robot (GTR) configuration with the potential to integrate robotic arm and artificial intelligence (AI) technologies for picking. The MFCs are equipped with shuttles for faster delivery. Automated MFCs can deliver 5,000 orders in a day and handle up to 10,000 SKUs.
These MFCs can be located in dense urban areas because of their small size which varies from 2,000 to 50,000 square feet. They, therefore, demand less rent than customer fulfillment centers (CFCs). MGCs are typically located within 40 miles of their customers and their proximity contributes to reduced last-mile delivery costs.
The robotics companies can contribute to this journey as retailers by providing robotics and automation in fulfillment centers to execute order baskets for the e-grocery customer. MFCs offer services such as in-store pick, dark stores, semi-automated fulfillment, and full-scale automated warehouses to discover a way to lower grocery fulfillment costs.
According to the NRF survey, more than 40 percent of retailers have faster fulfillment of online orders as their top customer-facing priority. MFCs are a compelling solution for retailers looking to reduce the physical footprints of their fulfillment centers. They contain innovative robotic systems that leverage AI algorithms to achieve faster, seamless, and efficient fulfillment. The use of MFCs will benefit specialty retailers, department stores, warehouse clubs, and big-box retailers. Also, they can be installed in an existing supermarket setup, enabling a hyper-local function, reducing the cost of last-mile delivery. Also, they fit in 2,000 square feet of space and can serve a cluster of stores and support e-commerce fulfillment with highly responsive customer service. MFC’s with automation and AI can ensure quality control and data management with a smaller warehouse. They ensure the customers receive the right shipments at the correct addresses.
MFCs are the future of retail and e-commerce and are already changing the landscape of the industry that is undergoing rapid technological advances to meet customer expectations.