What is cross docking? Benefits and 3 Types

The cross dock procedure can be very beneficial to the efficiency of a supply chain. But why? What is cross docking and why does it help?

Cross docking most often occurs at a sorting or material handling facility which may or may not be a part of a storage warehouse operation. The procedure is an effective tool to help supply chain managers balance the least amount of cushion stock on hand while lowering the risk of a stock out. But what exactly is cross docking?

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What is Cross-Docking?

Cross docking is a logistics procedure that immediately transfers materials from one dock to another. Instead of storing as inventory, cross docked materials may only go through receiving and sorting before loading onto a truck for shipping. In other words, cross-docking is the process of unloading materials from an inbound transportation, and loading it onto outbound transportation with no storage.

Sometimes the cross docking may involve certain amounts of processing. For example, LCL (less than container load) require a cross dock procedure to sort importer’s materials to their destinations. Typically, this process is called transloading. In these circumstances, the facility must ensure that materials transfer to the correct outbound truck. If not, the materials could end up at the wrong destination.

What is a cross docking warehouse?

A cross docking warehouse is a type of contract warehouse that is dedicated solely to these services. Whereas some warehouses may offer long term storage or fulfillment solutions, cross docking facilities do not. The benefit of a dedicated cross docking warehouse is the scalability and efficiency of operations. Most often, cross docking is an additional service offered by fulfillment or distribution centers.

An illustration of the cross docking process

For the most efficient and cost-effective operations, these facilities must adopt the shortest possible distance between inbound and outbound docks. Therefore, the shape of the system matters greatly. A large square shaped warehouse may not function well as a scalable dedicated cross-docking service provider due to the large distance from one dock to the other.

It is recommended that docks are no more than 100-200 feet apart for the best efficiency in these cross docking procedures. For smaller operations, a rectangle or I shaped layout works great. However as operations scale to more and more simultaneous doors, an X shaped facility is best.

3 Types of Cross Dock Procedures

In true (or “pure”) cross docking, there is no storage. That means that material does not “sit” in a warehouse for any period of time before the next phase of the supply chain. However that is not always the case as every supply chain has different needs and requirements. Below are the 3 main types of cross dock procedures.

  1. Pallet In & Out
    When the manufacturer or previous step in the supply chain sufficiently labels and organizes materials by product and destination, it is a simple procedure for warehouse operators. Also known as “pure cross docking”, pallets are simply moved from inbound trucks to their outbound trucks, non-stop. An example of this is the aforementioned cross docking of LTCs.
  2. Case-load order makeup
    Sometimes materials require reconfiguration for various reasons. Usually, inventory assigned to cases of SKUs need delivery in special quantities to customers. In these circumstances, cross docking becomes a “multiple-touch” procedure. This means that materials stop in a staging zone or floor-space area and require labor to re-palletize them.
  3. Consolidation
    In some supply chains, materials can come from multiple sources. A manufacturer may have several suppliers which each ship parts in a different way. In these scenarios, a cross docking facility can consolidate these goods into a single shipment methodology to the assembly line. For example, ocean, rail, and trucking freight could all receive at a facility and then transfer to an outbound truck for the manufacturing line. In this example, there may be some short term storage requirements.
A shipping container yard inspection area

Benefits of Cross Docking

  • Faster Logistics Operations & Delivery Time
    Probably the primary reason for implementing cross docking in supply chains is a reduction in the overall delivery lead time. This translates into a much lower cash-flow burden on the company and a more “just in time” business model.
  • Reduced Costs
    Of course, every business decisions really comes down to cost. What is the ultimate cost of having longer lead times and slower delivery? Cross dock procedures help alleviate those, but also directly reduce cost. That’s because materials handling is the only warehouse service. Cross docking reduces storage, labor, and pick pack fees because materials are simply in and out. This is the ultimate goal of a supply chain manager – reduce stock without increasing risk of stock out.
  • Scalable Supply Chain Operations
    A cost effective and efficient method of consolidating multiple vendors enables companies to broaden their supply chain to more methods of transportation. That is, only if these vendors are efficient enough to scale with their expanding supply chain operations. Regardless if that’s the case, cross docking acts as a funnel enabling scalability in a broader supply chain.

Risks of Cross Docking Supply Chains

While the benefits of cross docking processes seem great, there are also some risks to consider. Primarily, the process is suited for high-volume products which means if your demand shifts, you could have a costly inventory situation.

If your cross-docking process involves consolidation, you may introduce some risk as suppliers do not always meet their forecasted delivery dates. In these circumstances, your logistics provider may not be able to process your inventory due to missing elements. If it is a dedicated cross-dock warehouse, then you may get into trouble if your lead times are too far off, as these providers do not maintain large volumes of storage space.

Generally speaking, this type of sorting procedure is best suited for mature supply chains that have high-volume, high-value, or even seasonal demand curves. If you purchase your material in bulk quantities for longer consumption periods, you may want to consider traditional warehousing.

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