Cross Docking: What Is It?
Cross docking optimizes transportation costs and warehousing costs of goods in the supply chain, by removing the need for storage to hold inventory in between transits. Cross docking normally occurs in a distribution docking terminal. Typically, full inbound trucks carrying one type of cargo arrive at one side of the cross dock, and full outbound trucks with mixed cargo leave from the other side. Cross docking allows for transport efficiency, where a delivery of a full truckload of a single item to a single location is not needed or wanted.
For example, if you are a retailer who is purchasing items from a variety of different suppliers and has a cross dock operation in place, you can get a full truckload of items from a supplier (e.g. containing nothing but shampoo), sort it in the cross dock in such a way that you can get items from multiple inbound trucks, combine what you need and send a full truckload with mixed items out to your stores. This enables the stores to receive a full truckload of all the items they need, meaning they do not have to deal with multiple deliveries which can increase costs and increase the time needed to devote to inventory management when it comes to receiving products. This is where an effective cross dock operation can help to save money in the supply chain by optimizing the shipping process.
An example is in the LTL (Less-Than-Truck Load) freight shipping industry, which is built on the assumption of cross docking, so a truck will be filled in one location with pallets of items all earmarked for delivery to multiple locations. The LTL (Less-Than-Truck Load) freight shipping industry is a critical component of the broader transportation and logistics sector. It specializes in transporting smaller shipments that do not require a full truckload. Instead of filling an entire truck with goods from one origin to one destination, LTL carriers consolidate multiple shipments from various shippers into a single truck. These shipments are destined for multiple delivery locations, and this process is often facilitated by cross docking.
Cross docking helps minimize the need for long-term storage of goods. In this process, incoming shipments from different suppliers are temporarily unloaded at a cross docking terminal or distribution center. Instead of being stored, the products are quickly sorted and then reloaded onto outbound trucks for delivery to their respective destinations, helping to streamline the supply chain and reduce handling and storage costs.
What Is an Example of a Cross Docking Operation?
To visualize a cross docking operation, imagine a hallway-like setup with numerous doors on either side. In a distribution center, you will have delivery trucks on one side of the center that arrives with items manufactured by various manufacturing companies, and on the other side, you will have mixed loads with workers filling up multiple pallets from the various inbound trucks. There could be numerous Cross docking operations happening simultaneously.
A real-life example of a cross docking operation is where various retailers are receiving goods from a manufacturer that is required to be distributed across multiple stores across a national network. The manufacturer will first move this into the first cross dock at its distribution center or warehouse where it is being separated out to be delivered to the distribution centers of different retailers.
When the goods arrive at the retailers' own distribution centers, they will have another cross dock operation in order to fill trucks to deliver the goods to the various retail stores. Think of this as an old-fashioned organizational chart that starts from the top and gradually fans out as the grid gets bigger.
What Are the Advantages of Cross Docking?
The main advantage of a cross docking implementation is the cost saving and efficiencies that it can provide to manufacturers, retailers, and logistics providers.
If there are immediate needs for a particular good, as soon as it hits the receiving dock, if the business has a system that can recognize the goods, it can use the cross docking process to move those goods directly to shipping and ship out to a customer.
Cross docking is being used across multiple industries and e-commerce leaders are continuously innovating strategies to trim time and distance to the consumer, such as drop shipping and pushing inventory to stocking locations where they have forecasted demand.
Rapid, efficient cross docking ensures inventory flows rapidly, reducing storage costs and improving delivery times. Cross docks are a key component of an efficient supply chain operation.
An effective cross docking solution has numerous benefits:
- Increases productivity — the same staff can now cross dock and ship more orders per day
- Improves shipping times for higher customer satisfaction
- Improves utilization of material handling equipment
- Improves vehicle utilization — trucks are fully loaded with the right shipments and shipments are aggregated to minimize mileage