Logistics - Cross Docking in the Warehouse
Cross docking can optimize material movement costs
The term cross docking refers to moving product from a manufacturing plant and delivers it directly to the customer with little or no material handling in between. Cross docking not only reduces material handling but also reduces the need to store the products in the warehouse.
In most cases, the products sent from the manufacturing area to the loading dock has been allocated for outbound deliveries.
In some instances, the products will not arrive at the loading dock from the manufacturing area but may arrive as a purchased product that is being re-sold or being delivered from another of the companies manufacturing plants for shipment from the warehouse.
Cross docking solutions allow companies to expedite shipments to customers, which means that customers often get what they want when they want it - the goal of optimized supply chain. But the risks of cross docking, which will be examined below - make it a process that's best left for the one-offs and not implemented into your standard operating procedures.
Many companies have benefitted from using cross docking. Some of the benefits include:
- Reduction in labor costs, as the products no longer requires picking and put away in the warehouse.
- Reduction in the time from production to the customer, which helps improve customer satisfaction.
- Reduction in the need for warehouse space, as there is no requirement to storage the products.
Types of Cross Docking
There are a number of cross docking scenarios that are available to the warehouse management. Companies will use the type of cross docking that is applicable to the type of products that they are shipping.
- Manufacturing Cross Docking – This procedure involves the receiving of purchased and inbound products that are required by manufacturing. The warehouse may receive the products and prepare sub-assemblies for the production orders.
- Distributor Cross Docking – This process consolidates inbound products from different vendors into a mixed product pallet, which is delivered to the customer when the final item is received. For example, computer parts distributors can source their components from various vendors and combine them into one shipment for the customer.
- Transportation Cross Docking – This operation combines shipments from a number of different carriers in the less-than-truckload (LTL) and small package industries to gain economies of scale.
- Retail Cross Docking – This process involves the receipt of products from multiple vendors and sorting onto outbound trucks for a number of retail stores. This method was used by Wal-Mart in the 1980s. They would procure two types of products, items they sell each day of the year, called staple stock, and large quantities products which are purchased once and sold by the stores and not usually stocked again. This second type of procurement is called direct freight and Wal-Mart minimizes any warehouse costs with direct freight by using cross docking and keeping it in the warehouse for as little time as possible.
- Opportunistic Cross Docking – This can be used in any warehouse, transferring a product directly from the goods receiving dock to the outbound shipping dock to meet a known demand, i.e. a customer sales order.
Products Suitable for Cross Docking
There are materials that are better suited to cross docking than others. The list below shows a number of types of material that are more suited to cross docking.
- Perishable items that require immediate shipment
- High-quality items that do not require quality inspections during goods receipt
- Products that are pre-tagged (bar coded, RFID), pre-ticketed, and ready for sale at the customer
- Promotional items and items that are being launched
- Staple retail products with a constant demand or low demand variance
- Pre-picked, pre-packaged customer orders from another production plant or warehouse
Risks Associated with Cross Docking
Because products aren't put away in the company's prescribed fashion - there is increased risk with a loss of inventory control by using cross docking in the long term.
To implement cost docking effectively, warehouse and supply chain managers should implement robust inventory control processes and train warehouse employees on those processes. Even though cross docked items are not put away in the company's prescribed fashion, that does not lessen the need to account for those goods while accounting for stock and reconciling supplier and customer invoices.
Updated by Gary Marion, Logistics and Supply Chain Expert.