Micro-fulfillment is on everyone’s lips these days, or so it seems, as retailers compete to drastically slash delivery times for online orders, allowing products and fresh grocery items to reach customers in a matter of hours, rather than a day or two.
Global retail giants such as Walmart and Amazon have already launched micro-fulfillment centers (MFCs), tapping automation companies that offer robotic, high-density storage and picking systems.
In South Korea, a handful of delivery and logistics companies are offering micro-fulfillment services in limited, compact geographic areas on a pilot basis.
LG CNS Co., the IT service arm of LG Group, now aims to take such services to the next level and launch drive-through MFCs later this year, the first of their kind in Korea.
Just like the drive-through outlets run by Starbucks and other food chains, customers can order what they want online and drop by to pick up the goods, according to LG CNS.
“We will establish more than two drive-through MFCs in Seoul and other regions this year and then consider expanding such facilities,” said a company official.
LG CNS plans to jointly launch drive-through MFCs with Norwegian warehouse automation firm AutoStore.
The two companies have already cooperated in launching and operating automated robotic warehouse systems at LG’s two logistics centers -- one in Uiwang Gyeonggi Province and the other in the southern port city of Busan.
LG CNS to launch Korea's first drive-through MFCs in Korea NEARER TO CUSTOMERS
As the lingering COVID-19 pandemic continues to keep people indoors and away from public places, online shopping is catching on globally.
Micro-fulfillment centers aim to speed up the delivery of goods to consumers by bringing the product closer to the consumer. As the name suggests, micro-fulfillment sites are smaller than the traditional retail model of labor-intensive distribution centers.
By placing them nearer consumers, micro-fulfillment centers can significantly cut down on last-mile delivery times, enhancing inner-city efficiencies.
For warehouse operators, the micro-fulfillment center can increase efficiency with robots that pick out items from storage aisles and shuttle them to packing staff or directly to customers waiting at the drive-through fulfillment centers.
LG CNS said using artificial intelligence (AI) technology, its MFCs can determine products in high demand at any given time, making it even more efficient to keep inventories at appropriate levels in certain regions.
Vegetables and other fresh food will be key items for the MFC services, according to LG.
“A micro-fulfillment center can cover a distribution area within a 5-km radius. Given the size of Seoul, we’ll be able to deliver even fresh grocery items in the entire metropolitan area within a couple of hours,” said Lee Jun-ho, an executive in charge of smart logistics at LG CNS.
Traditional logistics and fulfillment center
QUICK COMMERCE
Analysts say that micro-fulfillment centers will play an increasingly important role in the post-pandemic retail market as online shopping and quick delivery become the new norms in e-commerce.
Domestically, Mesh Korea, which runs delivery app Vroong, is currently leading the micro-fulfillment service market.
The company has been operating a micro-fulfillment center in southern Seoul since April this year.
Logistics IT platform service firm Barogo, in which Korea’s retail giant CJ Group and 11Street Co., the e-commerce arm under major mobile carrier SK Telecom Co., invested, is also considering establishing an MFC in Seoul and the surrounding area.
GLOBAL RACE FOR MFCs
With consumers increasingly shop online, retailers around the world are under pressure to deliver orders faster, brightening the outlook for micro-fulfillment services
In the US, Amazon has partnered with tech firm Dematic and launched MFCs in five major cities, including Philadelphia, Phoenix and Dallas.
Another retail giant, Walmart, is also expanding its automated fulfillment centers in partnership with tech companies such as Dematic, Fabric and Alert Innovation.
LG CNS to launch Korea's first drive-through MFCs in Korea Alert Innovation created the Alphabot automated picking system Walmart began testing at the end of 2019.
According to market researcher Logistics IQ, more than 2,000 MFCs will be up and running in the US by 2026 with MFC-related market growing to $10 billion by then.
The e-grocery market based on automated fulfillment centers is forecast to grow to account for 10% of the entire fresh food distribution market by 2025. In 2030, about 10% of 40,000 grocery stores in the US are expected to use micro-fulfillment centers, according to Logistics IQ.
In a parking garage beneath a skyscraper in the heart of Tel Aviv, Israel-based robotic fulfillment solution provider Fabric is currently running the world’s first automated MFC for Super-pharm, a drugstore chain and health and beauty retailer.
Write to Joo-Wan Kim at kjwan@hankyung.com In-Soo Nam edited this article.
