Finance:Cross-docking
Cross-docking is a logistical practice of Just-In-Time Scheduling where materials are delivered directly from a manufacturer or a mode of transportation to a customer or another mode of transportation. Cross-docking often aims to minimise overheads related to storing goods between shipments or while awaiting a customer's order.[1] This may be done to change the type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles (or containers) with the same or similar destinations.
Cross-docking takes place in a distribution docking terminal; usually consisting of trucks and dock doors on two (inbound and outbound) sides with minimal storage space.[2]
In the LTL trucking industry, cross-docking is done by moving cargo from one transport vehicle directly onto another, with minimal or no warehousing. In retail practice, cross-docking operations may utilize staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship.
History
Cross-dock operations were pioneered in the US trucking industry in the 1930s[citation needed], and have been in continuous use in less-than-truckload operations ever since. The US military began using cross-docking operations in the 1950s. Wal-Mart began using cross-docking in the retail sector in the late 1980s.
As of 2014 almost half of all US warehouses are cross-docking. [3]
Advantages of retail cross-docking
- Streamlines the supply chain, from point of origin to point of sale [4]
- Reduces labor costs through less inventory handling [5]
- Reduces inventory holding costs by reducing storage times and potentially eliminating the need to retain safety stock [2]
- Products reach the distributor, and consequently the customer, faster [4]
- Reduces or eliminates warehousing costs
- May increase available retail sales space
- Less risk of inventory handling
- No need for large warehouse areas
- Easier to screen product quality
Risks of cross-docking
- Fewer suppliers[3]
- Supply chain vulnerability from disruptions[3]
- Reduced storage availability[3]
- An adequate transport fleet is needed to operate
- A computerized logistics system is needed
- Additional freight handling can lead to product damage
- Labor costs are also incurred in the moving and shipping of stock
- Accidentally splitting up shipments larger than a single pallet leading to multiple deliveries or lost items
Types of cross-docking
- Full pallet load operation[6]
- Case-load order makeup[6]
- Hybrid cross-docking[6]
- Opportunistic cross-docking[6]
- Truck/rail consolidation[6]
- Short-term storage[6]
Typical applications
- "Hub and spoke" arrangements, where materials are brought in to one central location and then sorted for delivery to a variety of destinations
- Consolidation arrangements, where a variety of smaller shipments are combined into one larger shipment for economy of transport
- Deconsolidation arrangements, where large shipments (e.g., railcar lots) are broken down into smaller lots for ease of delivery
Retail cross-dock example: using cross-docking, Wal-Mart was able to effectively leverage its logistical volume into a core strategic competency.
- Wal-Mart operates an extensive satellite network of distribution centers serviced by company-owned trucks
- Wal-Mart's satellite network sends point-of-sale (POS) data directly to 4,000 vendors.
- Each register is directly connected to a satellite system sending sales information to Wal-Mart’s headquarters and distribution centers.
Factors influencing the use of retail cross-docks
- Cross-docking depends on continuous communication between suppliers, distribution centers, and all points of sale
- Customer and supplier geography, particularly when a single corporate customer has many multiple branches or using points
- Freight costs for the commodities being transported
- Cost of inventory in transit
- Complexity of loads
- Handling methods
- Logistics software integration between supplier(s), vendor, and shipper
- Tracking of inventory in transit
Products suitable for cross-docking
- Perishable goods – These are products that are time sensitive like agricultural products and require instant shipping. Other products that use Last In First Out inventory management method may also apply cross docking.[7]
- Staple products – Staple products like staple food, clothes always have a high demand and go through a less storage time. Businesses with these types of products may include them in their cross docking model to reduce storage costs.
- Promotional items – Cross-docking comes in handy for eCommerce platforms that have clearance sale programs.
Cross-dock facility design
Cross-dock facilities are generally designed in an "I" configuration, which is an elongated rectangle. The goal in using this shape is to maximize the number of inbound and outbound doors that can be added to the facility while keeping the floor area inside the facility to a minimum. Bartholdi and Gue (2004) demonstrated that this shape is ideal for facilities with 150 doors or less. For facilities with 150–200 doors, a "T" shape is more cost effective. Finally, for facilities with 200 or more doors, the cost-minimizing shape is an "X".[8]
References
- ↑ Álvarez-Pérez, González-Velarde, Fowler. Crossdocking— Just in Time scheduling: an alternative solution approach. Journal of the Operational Research Society, 2009.
- ↑ 2.0 2.1 Sehgal, Vivek (2009). Enterprise supply chain management : integrating best-in-class processes. Hoboken, N.J.: Wiley. ISBN 978-1-119-19834-5. OCLC 428439918. https://www.worldcat.org/oclc/428439918.
- ↑ 3.0 3.1 3.2 3.3 Moody, K. (2019). Labour and the contradictory logic of logistics. Work Organisation, Labour & Globalisation, 13(1), 79-95. doi:10.13169/workorgalaboglob.13.1.0079
- ↑ 4.0 4.1 Puckett, Sean M.; Hensher, David A.; Battellino, Helen (2006). "The Adjustment of Supply Chains to New States: A Qualitative Assessment of Decision Relationships with Reference to Congestion Charging". International Journal of Transport Economics / Rivista Internazionale di Economia dei Trasporti 33 (3): 313–339. http://www.jstor.org/stable/42747807.
- ↑ Sehgal, Vivek (2009). Enterprise supply chain management : integrating best-in-class processes. Hoboken, N.J.: Wiley. ISBN 978-1-119-19834-5. OCLC 428439918. https://www.worldcat.org/oclc/428439918.
- ↑ 6.0 6.1 6.2 6.3 6.4 6.5 Ray, Kulwiec (2004). "Crossdocking as a Supply Chain Strategy". https://www.ame.org/sites/default/files/target_articles/04-20-3-Crossdocking.pdf.
- ↑ "Effective Warehousing for Inbound and Outbound Operations - SIPMM Publications" (in en-US). SIPMM Publications. 2020-10-04. https://publication.sipmm.edu.sg/effective-warehousing-inbound-outbound-operations-2/#Cross_Docking_Strategy.
- ↑ Bartholdi, John J.; Gue, Kevin R. (May 2004). "The Best Shape for a Crossdock". Transportation Science 38 (2): 235–244. doi:10.1287/trsc.1030.0077.
Making the Move to Crossdocking, Maida Napolitano and the staff of Gross & Associates, 2000 copyright, www.werc.org
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