Fourth Party Logistics (4PL) is a fairly new concept that has grown popular in recent years. What is it and how can it benefit your business?
What is cross docking? Benefits and 3 Types of Cross-Docking
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?
Table of Contents
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.
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.
Pre-Distribution vs. Post-Distribution Cross Docking
There are two main methods of cross-docking: pre-distribution cross-docking and post-distribution cross-docking. pre-distribution and post-distribution cross-docking are effective logistics methods for retailers and distributors looking to streamline their supply chain and improve efficiency. The choice between the two methods ultimately depends on the specific needs and goals of the company.
Pre-Distribution Cross Docking
Pre-distribution cross-docking is a logistics method that involves quickly moving goods from suppliers to end-customers with very little time spent in the cross-docking warehouse. This is accomplished by having the warehouse staff aware of the end-customer even before the shipment arrives at the dock. The staff then quickly unloads, sorts, and repackages the goods according to predetermined distribution instructions.
This process is best suited for retailers that manage their own warehouses and have direct insight into their customer and supplier relationships. By knowing the end-customer beforehand, the retailer can quickly move the goods through the cross-docking facility and onto their final destination. This results in reduced inventory holding costs and faster delivery times.
Post-Distribution Cross Docking
Post-distribution cross-docking involves storing goods at the cross-docking facility until the next leg of the journey is clear. This process allows for distributors and retailers to take the time needed to strategically decide where to ship the inventory based on inventory forecasting and current inventory counts. This can result in increased inventory holding costs but provides more flexibility in the distribution process.
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 moving into the next step. You can think of it sort of like a cross-docking terminal of sorts where materials may stay for a very brief time either to unload or load, and then move to their next destination. 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.
- Pallet In & Out
When the manufacturer or previous step in supply chain management 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.
- 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.
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.
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 services reduce storage costs, labor costs, shipping costs, and pick pack fees because materials are simply in and out. This is the ultimate goal of supply chain management – 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 logistics 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 a logistics operation to scale much easier.
Risks of Cross Docking
While the benefits of a cross docking operation 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 solution 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.
There are many ways to transport product in the supply chain. Transloading helps optimize that process. But what is it and how does it help?
What is a fulfillment center and how does it differ from a distribution center? How do I decide which is right for my business?
There was a time when businesses revolved centrally around the customer and their needs. Decisions were made based on what is best for the customer first. People did what they said they would, and jobs were completed on time. AMS carries on the tradition of customer service today.