The pandemic has accelerated the proliferation of eCommerce by up to six years, and the grocery sector has been one of the most impacted, albeit positively, due to vast surges in online sales. However, there are associated challenges when it comes to eCommerce fulfilment and delivery, particularly in parts of Southeast Asia where there is a high reliance on imports, but land availability and limitations on international travel are disconnecting the flow of the eCommerce supply chain.
Online grocery delivery and rapid ‘store-to-door’ delivery exploded in Southeast Asia during the pandemic, with businesses such as foodpanda in Singapore offering delivery of over 40,000 products across groceries, drinks, health, pharmaceuticals and electronics in under 25 mins through a mobile app. Singapore’s largest online supermarket, RedMart, also offers fast and flexible delivery with a ‘sunrise’ 7am next day delivery option catering to professionals who want their groceries delivered before work, as well as an eco-friendly option that allows RedMart to deliver to more homes in an area within certain windows of time.
As online sales and ‘store-to-door’ delivery popularity is set to continue to rise well beyond the end of the pandemic – research from Google, Temasek Holdings Pte and Bain & Co. shows eCommerce is set to grow from $62 billion in 2020 to $172 billion by 2025 in Southeast Asia – many grocers and retailers are struggling to keep up with the competitiveness and turn a profit from online deliveries. To combat this, one innovation gaining pace for a proactive and resilient supply chain is micro-fulfilment centres.
Micro-fulfilment is the new 2021 supply chain
COVID-19 did not just fast-track eCommerce uptake, it also accelerated advances in technology, pushed corporate boards to revaluate their traditional business models and forced them to rethink relationships between retailers, disruptive start-ups, and automation innovations. This set the scene for a potentially radical shake up of fulfilment strategies across Southeast Asia and the world into 2021 and beyond.
At its core, micro-fulfilment aims to speed up the delivery of goods to consumers by bringing the product closer to the consumer. As the name suggests, micro-fulfilment sites are far smaller than the traditional retail model of sprawling, labour-intensive distribution centres located in just a few remote locations. By adding more automated operations to smaller urban sites and even the backs of physical stores, retailers have the goal of slashing delivery times for online orders, allowing products to reach customers in a matter of hours, rather than days.
Micro-fulfilment also comes with a number of additional benefits. Cheaper than larger, fully robotics-equipped warehouses, the approach of a fully automated micro-fulfilment improves COVID-19 safety, reducing the costs of floorspace and expediting the picking process. It also enables late ordering cut-offs, which reduces the carbon footprint of delivery networks by being closer to the consumer and providing additional collection points away from busy store locations, which in a region like Southeast Asia, can become incredibly advantageous.
The fundamentals of micro-fulfilment
Beyond the challenges of adapting to a more entrepreneurial mindset, the practical aspects of making micro-fulfilment centres work efficiently rests on three core pillars. Firstly, making sure that you have an effective omnichannel offering that connects eCommerce orders to the appropriate micro-fulfilment centres is essential. Secondly, ensuring you have complete visibility of inventory is an equally important factor for maintaining accurate insights into stock availability, so you will never end up out of pocket. Finally, making sure you have an in-warehouse system in place to meet the exact delivery demands of the end customer will see you through to a well-managed and proactive micro-fulfilment strategy.
Other beneficial aspects of micro-fulfilment centres for retailers in Southeast Asia are the options available when it comes to setting them up. You can set up micro-fulfilment centres to primarily service customers in the local area of one store, or you can also set up a ‘spoke-hub’ distribution model where one centre is able to serve many different stores. Another approach could even be to set up a ‘dark store’ as a micro-fulfilment centre.
Smart fulfilment to streamline 2021 supply chain operations
While there is no doubt that the pandemic accelerated a more flexible and innovative approach to supply chain operations for many businesses in 2020, 2021 will push even more business in Southeast Asia to redefine their fulfilment strategy to future-proof operations. As many grocers and retailers remain reluctant to use their current store base for eCommerce fulfilment – because it can interrupt customers and cause issues around social distancing – concepts such as automation and micro-fulfilment will likely be the winners this year and beyond.
While there are still many challenges ahead, we should have a positive outlook. 2020 showed the willingness of retailers and senior leadership decision makers in Southeast Asia to go above and beyond normal conventions, and as this approach carries into 2021, this should herald an exciting year during which fresh innovations, such as micro-fulfilment, build momentum.
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About Manhattan Associates
Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers.
Manhattan Associates designs, builds and delivers leading edge cloud and on-premises solutions so that across the store, through your network or from your fulfilment centre, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com/en-au
By, Richard Wright, Managing Director, SEA, Manhattan Associates