Cross-docking services are defined as having the ability to receive product and immediately ship it out without putting it into a 3PL warehouse. When implemented properly, this practice has many advantages, especially in the areas of lowering costs
and saving time.
Key advantages of cross-docking include:
- Reduced handling costs and operating costs
- Reduced storage of inventory
- Reduced warehousing costs
- Reduced fuel costs from consolidating LTL shipments into full loads
- Streamlined supply chain resulting in products getting from manufacturer to distributor to customer faster
Before initiating the use of cross-docking services, companies should be sure that all potential partners have the necessary storage capacities. In addition, partners should also have an adequate transport fleet to operate cross-docking, as well as an adequate IT system.
Some products are better suited to cross-docking than others. Here is a short list of materials that are well suited to cross-docking:
- Perishable goods requiring immediate shipment
- High-quality items that do not require quality inspections during the receiving process
- Products that are pre-tagged (with bar code, RFID, etc.), pre-ticketed and ready for sale to the customer
- Promotional items and items being launched
- Staple retail products with a constant demand and/or low demand variance
- Pre-picked, pre-packaged customer orders from another production plant or warehouse
Cross-docking was first utilized in the U.S. trucking industry in the 1930s and has been in continuous use in LTL (less than truckload) operations ever since. The U.S. military adopted cross-docking during the 1950s. Wal-Mart pioneered the use of cross-docking services in the retail sector in the late 1980s.
The use of cross-docking has only continued to increase over the years. A survey conducted by The Cross-Docking Trends Reports shows an increase of 16.5 percent in the last three years with 68.5 percent of the companies surveyed currently using cross-docking within their supply chains.
Typical scenarios well suited to cross-docking include:
- Deconsolidation — Where large shipments such as railcar lots are broken up into smaller lots for ease of delivery
- Consolidation — Where a number of smaller shipments are combined into one larger shipment for more economical transport
- “Hub/Spoke” — Where goods are transported to one central location and then sorted for delivery to various other destinations
By eliminating the put-away process, companies reduce 3PL warehouse requirements and inventory levels when using cross-docking. In addition, these firms reap the benefits of consolidating their freight which lowers transportation costs, while at the same time improving product availability.
Successful implementation of cross-docking is dependent on continuous communications between suppliers, distribution centers and all points of sale in the supply chain. This can and should ideally include logistics software integration between supplier(s), vendor(s) and shipper(s), as well as the ability to track inventory in transit.
The savings in time and money realized from the use of cross-docking can be significant, but depend on a variety of factors including the handling methods used, the complexity of loads, freight costs for the commodities being shipped, the costs associated with inventory in transit, and the customer/supplier geography (especially when an individual corporate client has numerous branch locations, distribution centers and/or retail locations).
With its flexibility, efficiency and ability to accommodate unpredictable customer demand, more and more cross-docking is seen as a winning strategy for adapting to the current economic environment and business conditions.
For more information about cross-docking capabilities, visit the FW Warehousing Cross-Docking Services page.