By Philipp Schitter, Vice President Business Development APAC, AutoStore
Made up of just 710 square kilometres of land and coming in at 0.9 times the size of New York City, real estate in Singapore is understandably scarce. In developing the city-state’s land, Singapore’s government has allocations and plans for residential, community, healthcare, transportation, and educational purposes — among others.
Warehousing and order fulfilment facilities are undoubtedly much further down the list of priorities given how immensely valuable land is in Singapore. A far cry from the government’s list, consumers in Singapore will have order fulfilment much higher on their list of priorities, compounded by the influx of e-commerce shopping and prevalence of ordering goods online. With that, can Micro Fulfilment Centres (MFCs) be the answer to satisfy everyone’s agenda?
Maximising Space with Micro Fulfilment
In a small nation such as Singapore, space for logistics is hard to come by. With five million residents crammed inside one tiny tropical island, micro fulfilment can be seen as a strategy to meet consumer demands — ensuring faster delivery and pick-up times for online purchases.
Designed to make the fulfilment process quicker and more efficient, micro fulfilment utilises localised warehousing. Singapore’s dense population and small landscape makes it the ideal location for MFCs, as these hubs will be located smack in the middle of densely populated central locations which will help with improving delivery times.
A MFC is a small-scale storage facility that is used by e-commerce businesses to store their inventory closer to the end consumer. This results in a reduction of cost and transit times. Compared to traditional warehousing, MFCs are smaller — taking up between 30 and 100 square metres of space, a far cry from conventional warehouses and their massive 30,000 square metres of real estate.
The compact design of MFCs enable them to be established in small areas such as parking lots and behind existing stalls. Due to their smaller capacity, they can only carry about two days’ worth of inventory and require regular restocking. These fulfilment centres are meant for having products ready to be picked, packed, and shipped as soon as orders come in.
The small size of MFCs are often combined with the speed of automation to help with improving operational efficiency. Automation assists with a multitude of tasks which can include picking, packing, and order receipt printing. MFCs can be the alternative for businesses to meet consumer demands and invest in supply chain technology — which ultimately helps them with their bottom line and boost customer satisfaction.
Why Micro Fulfilment will be Important
The shift of consumer behaviour from physical stores to the online landscape has been monumental. According to a study by Facebook Inc and Bain & Co, there has been over 97% smartphone penetration in 2022, resulting in 28 million digital consumers — an 8% growth when compared to the numbers from 2021.
Consumers have been flocking online for their purchases, resulting in a growing demand of for order fulfilment in an already stretched logistical scene in Singapore.
In fact, 38% of online shoppers indicated that they will abandon their orders if their delivery takes longer than a week to be fulfilled. Breaking the statistics down further, 15% of online shoppers said they would abandon their orders if delivery took between four to five days.
Customers have grown accustomed to a wide range of rapid delivery options provided by e-commerce conglomerates, fulfilling orders as quickly as possible.
This translates to added pressure on smaller retailers who might not be capable of meeting this demand, with customers potentially turning their back against them in favour of businesses which can satisfy their craving for almost instant fulfilment.
Micro fulfilment will help take some of the stress away from conventional warehouses feeling the strain of the increased rate of online orders. Having another warehouse to store goods for e-commerce sales would help but having multiple warehouses (albeit smaller) scattered across the island will help tremendously with storage space, delivery time, and ultimately — customer satisfaction.
Micro Fulfilment’s Potential in Singapore
Taking into account the situation in Seoul, South Korea, Singapore can potentially look at their concept and build upon it. Home to 9.5 million people, Seoul has similar land constraints with just 605 square kilometres of land to work with.
Tying in the growing demand for electric vehicles, petrol station companies in Seoul are researching the repurposing of their stations into MFCs, giving the logistics industry a huge number of potential centres scattered around the city. GS Caltex — the biggest gas station chain in Korea, has a strong initiative along Seoul city cooperating to create and realise this micro fulfilment model through the usage of their petrol stations city wide.
Automated Storage and Retrieval Systems (ASRS) provided by AutoStore in these models help fulfil orders with an uptime of 99.7%, along with 100% access to stock and 24/7 operability. The conceptualised system will harness a system making use of robots on elevated grids to deliver items stored in compactly stacked bins to ports for picking. This ensures robotic precision in sorting, storing, and retrieval of the sheer amount of goods these online sales put warehouses through. Its dense cubic layout, built vertically upwards, can quadruple storage capacity, and unlock the true potential of these petrol stations, fulfilling orders across the city.
Though still a concept, Singapore could reap the benefits of this model. Petrol stations might not be the only places to make MFCs, with the beauty of these centres being its small requirement of space enabling it to spring out anywhere — from parking lots to the back of stores. It will not be a surprise to see MFCs over the horizon, and a version of one coming to a space near you.