Micro Fulfillment vs. China Fulfillment

Micro fulfillment

It shouldn’t be any surprise that new fulfillment styles continue to pop up and become the focus of conversation. One of the latest fulfillment strategies to come to light is one called micro fulfillment, and it’s caught the eye of many businesses. However, any business should examine any new fulfillment style and compare it to existing options before heavily investing. 

A lot of our clients have asked about incorporating micro fulfillment into their overall supply chain, and they have a lot of questions about how it compares to our specialty, China fulfillment. EcommOps is the leader in China fulfillment, helping dozens of companies create flexible, reliable supply chains that leverage China manufacturing and mature shipping lines. 

In this article, the experts at EcommOps will dive into micro fulfillment. We’ll discuss what micro fulfillment is, why it’s rising in popularity, and how it compares to China fulfillment. By the end of the article, you’ll have the tools you need to choose the fulfillment strategy that works best for your business. 

What Is a Micro Fulfillment Center?

Micro fulfillment center

A micro fulfillment center (MFC) is a small fulfillment center that is usually located in a densely populated area (like a large city). The idea is that the micro fulfillment center ships orders exclusively to the small, surrounding area, with the intent of dramatically improving last mile delivery. 

As the name implies, MFCs are small, usually 10,000 square feet or less. They can be small, standalone buildings (like a traditional warehouse might be), or they can be incorporated into existing buildings. For example, many large retailers (like Wal-Mart) will have micro fulfillment centers in their stores to fulfill online orders to local customers. 

Micro Fulfillment Centers Focus Only On Fulfillment

Traditional fulfillment centers often do more than just ship products out. Sometimes they may play a role in product assembly or general production, which requires more resources and more strategies. These needs and focuses can make fulfilling orders slower than they otherwise could be (since there are a lot more moving parts). 

MFCs will exclusively focus on inventory management, picking, and shipping. This focus on just a few processes helps the fulfillment process be more streamlined, which helps make 1-2 day shipping (sometimes even same-day shipping) possible for customers. 

Why Are Micro Fulfillment Centers Rising in Popularity?

Mega retailers like Wal-Mart and Amazon have taken the time to refine their fulfillment logistics for customers, forcing shipping speeds to be faster and faster. Since they showed that offering customers guaranteed fast shipping times, it put pressure on other businesses to also create a way to offer fulfillment times as short as 1-2 days. 

Fast shipping Amazon truck

However, unlike Amazon and Walmart, the vast majority of businesses don’t have the infrastructure to have major warehouses in multiple parts of the country to keep shipping times short, which is an issue that micro fulfillment can help solve. 

It requires far less resources to establish an MFC compared to a traditional warehouse. If a business sees that they have a large customer base in a densely populated market, an MFC allows them to compete with the mega retailers’ shipping times without needing to make a major investment of a major warehouse in that area. 

The relatively low barrier of entry to fast shipping time to local customers is the primary reason why MFCs are on the rise. 

What Are the Cons of Micro Fulfillment?

As with any fulfillment strategy, micro fulfillment is not without its drawbacks:

High Cost Associated with Local Warehousing

A micro fulfillment center might be less expensive than an enormous warehouse, but it’s still not free. Operating and maintaining an MFC still costs money, and storing and maintaining inventory can add up quickly. This is a particular problem for businesses that are testing a new product and aren’t sure if there will even be demand for it at all. 

Complicated Back-End Systems

Micro fulfillment requires excellent implementation of inventory management and fulfillment software. Since the main benefit is fast fulfillment, that means your software has to be streamlined and working as intended. However, because fulfillment needs to be faster, this can make back-end systems far more complicated than traditional warehousing. 

Increased Liability

Increased Liability

Since they are small and specialized, MFCs aren’t usually leased or rented. Instead, your business is going to have to purchase it themselves, which will be a hefty investment. Depending on your location, you should expect around $3 million or more to establish an MFC, which is capital many businesses (especially fledgling ecommerce stores) don’t have. 

Not Ideal for All Products

Micro fulfillment really only works well for small, easily managed products. If a business wants to sell large, heavy, bulk products, they’ll take up too much space in a small warehouse for micro fulfillment to make sense. 

Micro Fulfillment Still Uses Freight Shipping

Micro fulfillment might have incredibly fast last-mile fulfillment, but it still relies on traditional freight shipping to stock inventory. So, if you happen to run out of stock, you’re still typically waiting for at least a month before you get a restock from a China warehouse. If this is during Q4, you can expect to wait even longer for new inventory to arrive. 

What is China Fulfillment?

Now that we have a solid grasp on what micro fulfillment is, we can take a quick look at what China fulfillment is. In short, China fulfillment is a supply chain strategy that ships customers orders directly from China (and sea freight shipping is cut out entirely). So, instead of a supply chain that looks like this:

China Fulfillment
  • Company places large bulk product order (3-6 months inventory)  with factory
  • Product order is completed and packed into shipping containers
  • Shipment arrives at the company’s selected country and clears customs
  • Domestic freight delivers orders to a domestic fulfillment center
  • Inventory is unpacked, cataloged, and repackaged in preparation for customer shipment
  • Product order is placed by end customer
  • Customer orders are fulfilled

A supply chain that uses China fulfillment looks like this:

  • Company places small bulk product order (1-2 weeks of inventory) with factory
  • Products are shipped from the factory to a nearby fulfillment center in China
  • Inventory is unpacked, cataloged, and repackaged in preparation for customer shipment
  • Product order is placed by end customer
  • Customer orders are fulfilled

What are the Pros and Cons of China Fulfillment?

China fulfillment offers a lot of benefits, but also has drawbacks, just like any fulfillment strategy:

Pro: Lower Inventory Risk

You don’t have to make a bulk order of inventory when you use China fulfillment. Buying smaller amounts of inventory at a time means you don’t have to make such a large, upfront investment in inventory. If a product doesn’t end up catching fire, you won’t lose nearly as much in inventory than you would with a traditional large product order. 

Pro: Lower Warehousing Costs

Since you’re ordering less inventory at a time, you’re storing less inventory, too. That means you pay less for inventory storage, which helps to keep general costs low. 

Pro: Fast (and Less Expensive) International Shipping

China fulfillment allows businesses to ship to nearly any country in around 5-8 days. It also cuts international shipping costs by 50% or more compared to traditional fulfillment methods. 

Flexibility to scale ecommerce fulfillment

Pro: Flexible to Demand

We already mentioned that if you don’t have a lot of demand on a product with China fulfillment, you don’t lose out on much, but what happens if demand spikes? The lead times between factories and warehouses is extremely short with China fulfillment (sometimes a day or less), which means you can place product orders and meet demand without losing out on sales. 

Con: Slower Than Domestic Fulfillment

You won’t ever get true 2-day shipping with China fulfillment like you sometimes can with domestic shipping. However, when you include the time it takes to restock inventory, it can end up being much faster to use China fulfillment. 

Con: Sometimes Higher Pricing than Bulk Shipment

Sometimes, the price-per-unit when making bulk orders and shipping via sea freight will be less than when utilizing China fulfillment alone (though this is not always the case). This is why many businesses use a hybrid fulfillment approach (which we’ll talk about a bit later in this article). 

Con: Not Ideal for All Products

Similarly to micro fulfillment, China fulfillment is not a match for all product types. However, if a product is meant for ecommerce, China fulfillment will generally be a good match. 

How Does China Fulfillment Compare to Micro Fulfillment?

Now that we have a general idea of what China fulfillment and micro fulfillment are, how do they compare? 

China Fulfillment Is Focused on the Entire Supply Chain, Micro Fulfillment Is Focused on Last-Mile Delivery

China fulfillment describes an entire supply chain. It includes partnering with a China factory, delivering products to a China fulfillment center, and shipping products to customers. Micro fulfillment only describes last mile delivery and not an entire supply chain. Most of the time, micro fulfillment uses traditional freight shipping (just like traditional fulfillment does). 

Air freight global fulfillment

Micro Fulfillment Offers Fast Shipping from Domestic Warehouses, China Fulfillment Offers Faster Time to Market

The reason why micro fulfillment is rising in popularity is because of how quickly it can get products from local MFCs to customers (even as quickly as same-day shipping). However, that doesn’t include the total time to market from when products are ordered to when products are in customers’ hands. 

Since micro fulfillment uses traditional bulk ordering, time to market is not 24 hours. It can be as long as 45-60 days, which can be problematic if you’re experiencing periods of high demand. 

China fulfillment will ship orders directly from China, while micro fulfillment ships from local warehouses. 

China Fulfillment Requires Less Liability Than Micro Fulfillment

With micro fulfillment, your business owns the warehouse, which is a big liability (especially for new operations). With China fulfillment, your business pays a 3PL (like EcommOps), to fulfill orders, similarly to how most 3PLs in any location operate. There’s no liability to own a business or property, which helps lower the risk of operation. In addition to the warehouse cost, integrating China fulfillment into your supply chain greatly reduces the up-front investment required for inventory. Lead times between Chinese factories and the EcommOps fulfillment centers are as low as 1-2 days.

Should You Use China Fulfillment or Micro Fulfillment?

How does a business choose between China fulfillment or micro fulfillment? Micro fulfillment is generally ideal for businesses that:

  • Have the capital to invest in multiple small warehouses
  • Have high demand in densely populated markets where exceptionally fast delivery time is crucial for competing
  • Are experts in back-end fulfillment systems

China fulfillment is general ideal for businesses that:

  • Need a flexible supply chain
  • Need fast shipping to anywhere in the world (but same-day or 2-day shipping isn’t crucial)
  • Don’t have the resources to buy permanent MFCs
  • Want to keep warehousing costs and inventory risk low
China Fulfillment Center

See a Need for Both? Consider Hybrid Fulfillment

You don’t necessarily have to choose China fulfillment or micro fulfillment. If your business sees a need for both, you can consider a hybrid approach. Here’s an example of how that can look:

  • Your MFC is fulfilling orders for local customers. 
  • When inventory hits a certain threshold, you place a bulk, freight order for new products. 
  • While the products are in route, China fulfillment ships orders to customers so you don’t miss out on demand. 
  • When your MFC is replenished, you can begin local fulfillment. 

In this strategy, you need to make sure that customers have appropriate shipping expectations (telling a customer they’re getting same-day shipping but they end up getting it in several days can lead to bad reviews or even refund requests). Just make sure your back-end fulfillment systems are able to communicate when new products need to be ordered, and when which warehouse needs to fulfill orders. 

EcommOps, China Fulfillment Leaders

For most businesses, China fulfillment offers a low-risk, flexible strategy that meets their needs in a powerful way. If you’d like the help of the leaders in China fulfillment to create a flexible supply chain, then reach out to us! Fill out our online form, and we’ll be in touch on how we can make China fulfillment work for you.

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