4170 Stillwater Drive, Duluth, Georgia 30096 | 678.576.0562 | carlos@cavazquez.com | cavazquez.com Micro - fulfillment centers: a ll hype or an effective ecommerce strategy? Micro - fulfillment centers (MFCs) are an increasingly popular ecommerce strategy. MFCs can effectively meet rising volumes, the changing geographical nature of ecommerce demand and same - day delivery. However, they’re not for everybody. Industry giants like Amazon and China’s Alibaba have largely driven the last decade’s “best - in - class” ecommerce fulfillment strategy. They’ve invested in the latest robotics and automation for their large - footprint operations, known as customer fulfillment centers (CFCs). Such centers help continually redefine target productivity and service levels. Many companies try to mimic the success of these large - scale solutions. The goal: reduce your operating expense s (OpEx) with MFC facilities designed to provide competitive productivity and service levels. For some, MFCs are game - changers . Others have experienced varying levels of success. Here are three things to consider when deciding if going “micro” is the best move for your operation. 1. What are your footprint and location requirements? “Micro” is a relative term for MFCs. The size of a micro - fulfillment center can range from 5,000 to 20,000 square feet. The smaller size allows for urban locations, typically within 40 miles of your customers. Plus, smaller footprints mean lower rents than a CFC. And closer proximity to consumers means lower final mile delivery costs. It follows that your required footprint depends on the forecast number of orders you expect to fulfill from that location. You can build a model to compare these two primary factors. It should include some accompanying variables: rents, proximity to courie r hubs and localized demographic data, to name a few. This data helps determine optimal MFC locations. Retailers with existing brick - and - mortar locations can take a shortcut on their MFC journey. They can make room for in - store fulfillment by repurposing and reorganizing under - utilized space. For example, a leading grocer redesigned its stock rooms to fulfi ll orders for that store and several nearby locations. This fulfillment method reduced OpEx for all the stores involved. 4170 Stillwater Drive, Duluth, Georgia 30096 | 678.576.0562 | carlos@cavazquez.com | cavazquez.com 2. Are your SKU profiles, counts and order velocities best served by an MFC? Facility design variables combine the best SKU counts, profiles and order velocities. Depending on the planned automation level, you can realistically set up an operation in 10,000 square feet or less that can house from 5,000 to 15,000 SKUs. SKU profile s of mainly small items ordered and fulfilled at the reach or inner - pack level are the best fit for an MFC - level facility. 3. What’s your order - picking method — manual or automated? If you’re looking to operate an MFC with little to no robotics or automation, you can manage a broader assortment of SKUs within a given footprint. However, you should expect a higher cost per order due to the expected lower throughput rates. If you want to add automation to your MFC, you can pick orders much faster, but you can only choose a limited number of SKUs. What should your company do? Like a lot of things, it depends. Answering these questions as accurately as possible can help you determine if the advantages of MFCs outweigh the cost and service performance of traditional fulfillment operations for your org anization. Contact us and see how NTT DATA ’s Supply Chain Operations practice will make sure you’re prepared to take advantage of the latest distribution facility types and methods Our top supply chain talent, enabled by proven, leading - edge digital assets — tools, methods and content — deliver actionable insights and measurable outcomes to some of today’s largest and most complex supply chains.