The Role Automated Micro-Fulfillment Will Play This Holiday Season

As holiday shoppers move online in droves this year, retailers are scrambling to find efficient ways to meet the rising demand. Automated micro-fulfillment centers (MFCs if you're in the know) may be the answer.

By Kelly Kearsley, Contributor

From augmented reality (AR) that allows customers to “try on” clothes via their mobile device to chatbots ready to answer questions at any hour, technology is transforming how, when, and where we shop. However, one of the most revolutionary innovations is happening outside the customer view: Automated micro-fulfillment centers (MFCs) represent a sea-change in how retailers configure their supply chains—and how fast they can meet customer demand for products.

MFCs are small-scale distribution centers, usually set up in big cities. Steve Hornyak, chief commercial officer of Fabric, an Israeli robotic micro-fulfillment startup with U.S. headquarters in New York, says the consumer demand for same-day and next-day delivery of items has required retailers to rethink how they organize their supply chains. “As you compress those cycles, you have to get the goods closer to the customer,” he says.

While many retailers will utilize MFCs to meet rising demand this holiday season, humans still do most of the order picking. But innovators in the space say that’s about to change. Coming soon are robots and software that automate the process, accelerating retailers’ ability to complete orders and dramatically reducing the need for human involvement.

Small Centers, Big Impact

The COVID-19 crisis dramatically accelerated online sales of pretty much everything. Adobe Analytics, for example, predicts that this holiday season, ecommerce will increase by 33 percent from the previous year, with sales reaching $189 billion. Mike Futch, president of Tompkins Robotics, says the pandemic was a game-changer for the retail industry. “It was the greatest disruption we’ve had in the retail sector in decades, and it drove a real leap forward for ecommerce,” he says. Futch’s company provides robotic solutions for traditional distribution centers, and recently debuted a robotic system for micro-fulfillment.

This holiday season, ecommerce will increase by 33% from the previous year, with sales reaching $189 billion..

—Adobe Analytics 2020 Predictions

As consumers have ramped up their online ordering, their expectations for rapid delivery, largely driven by Amazon’s same-day and next-day options, have also increased. Consider that retailers averaged 3.6 days from click-to-delivery in 2019, down from 5.9 days in 2016, according to research from Bain. By comparison, Amazon averaged 2.2 days last year (and that was pre-pandemic).

“After COVID-19, you may see ecommerce drop a bit, but it will never go back to the way things were before,” Futch explains. Retailers have leaned into micro-fulfillment to meet the need. As a stop-gap measure during the pandemic, for example, Whole Foods established dark stores in major urban areas to exclusively serve its online orders. Other retailers are building specific MFCs or designating portions of existing stores for ecommerce. But while such moves help retailers fulfill orders more quickly, many still rely on “human pickers,” i.e. the people putting online orders together.

“Most retailers aren’t outfitted from a labor perspective to meet the demand,” Futch says. Finding enough workers is a challenge, not to mention the fact that humans are more prone to making errors in orders. And for companies that haven’t established MFCs, balancing online with in-store demand is even more complicated. Workers shopping for online orders can decimate the shelves of local stores, causing inventory issues for regular, in-person shoppers.

Enter the Robots

Retailers have been using robotics in traditional fulfillment centers for years. But the rise of micro-fulfillment has created the recent need for robotics and systems designed for smaller places. And there’s a growing world of innovative robotics companies that are striving to win big in the micro-fulfillment market. Fabric provides an example. The company builds customized storage stacks, utilizing spaces as small as 6,000-square-feet to hold product inventory.

Robotic pickers move up and down the stacks, selecting items. The company utilizes height to get the most storage space out of small spaces. Self-driving carts deliver orders to employees, who distribute them for delivery. The company touts its “agent-based” technology, which it says allows for graceful degradation. Because there are no conveyors, if one component malfunctions, the others still continue operating. Hornyak notes the automated systems reduce errors in orders and increase the number of orders a retailer can fulfill by five to 10 times. Significantly, in the COVID-era, when people are especially cognizant of too much contact, robotic fulfillment also reduces the number of people touching products.

Futch, with Tompkins Robotics, notes that it’s unlikely that most retailers will be able to build brand new, automated MFCs in every place that they operate—that’s a significant investment. His company sees an opportunity in a standalone robotics solution that retailers can pop-up in the backroom of existing stores. In their version, employees still manually pick items, but in large batches—say for 50 orders. The robots then sort the items further for individual orders and eventual delivery.

The New Retail Reality

Futch says that the pandemic has accelerated initiatives by retailers who were already interested in MFC automation, and sent those who hadn’t yet thought about it into a mad dash. He anticipates that within five years, robotic micro-fulfillment in some form will likely be the standard for the industry. “If at that point, you still don’t have the infrastructure you need, you’re probably losing,” Futch says.

Further in the future, Hornyak envisions that the last mile of the process —the delivery to customers—will be automated, as well. Robots at an MFC will select your order, and a driverless vehicle will bring it to your door. For now, the demand for products ordered and delivered as soon as possible remains on the rise. And for this holiday season and may more to come, retailers will increasingly turn to innovative technology—and non-human helpers—to meet it.