The supply chain in modern business is of prime importance for a variety of reasons.
For businesses to succeed, they need their supply chain to be agile, quick, and productive.
One of the strategies that can be implemented by organizations to gain a competitive edge, is cross docking.
If followed correctly and in the correct circumstances, it can increase efficiency and reduce the time taken for handling.
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What Is Cross-Docking?
The storage component is effectively removed in the supply chain when cross-docking is implemented.
Cross docking in supply chain is a procedure whereby products from the manufacturing facility or supplier warehouse straight to a retail chain or customer, with the goods spending hardly any time lying in the warehouse.
Cross docking happens in a docking terminal; here there are trucks and dock doors on inbound and outbound sides with nominal space for storage.
Products are unloaded from trucks or trains and almost immediately loaded onto trucks or trains, headed for the end-user: the retail store/chain or customers.
If many shipments are headed for the same destination, fewer transport vehicles will be required; large shipments can be put in smaller groups.
In both cases, you have a more efficient and leaner supply chain.
The term cross docking refers to the process where goods are received via the inbound dock and sent across to the outbound dock.
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How Does Cross Docking Work?
To put it simply, goods come via trucks or trains and are assigned to the inbound side of the cross dock terminal at the receiving or incoming dock.
After docking the inbound transport, the goods can be sent to the outbound destinations directly or indirectly.
Employees may unload, sort, and examine the goods to determine their destinations, and after that, these goods are sent to the outbound cross dock terminal.
Conveyor belts, forklifts, pallet trucks, etc. are generally used to move them to the outbound dock.
There they are loaded onto trucks or trains and sent off on their way to the customers.
While it’s not a complex process, it’s not very easy either.
The process has to be carried out in an organized and precise manner.
You can decide which products you want to handle the traditional way, and which ones you want to cross dock.
You can be in full control if you own the cross docking warehouse as well.
If your warehousing and shipping is outsourced, you can discuss cross docking implementation with your provider.
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Cross Docking vs. Drop Shipping
It is important to distinguish between cross docking and drop shipping.
Both are methods that help you prevent inventory from lying in your warehouses.
In dropshipping, the items are sold directly from your supplier to your customer, and you don’t come into the picture – you merely facilitate the sale.
In cross-docking, the products are first sent to your warehouse, where it is sorted and repacked, and sent out immediately to your customers.
Dropshipping is immensely popular as no inventory holding cost or physical counts are incurred by anyone.
Pre-Distribution vs. Post-Distribution Cross-Docking
There are two main types of cross docking – pre-distribution, and post-distribution.
In pre-distribution, the customer is known or identified before the products are released by the supplier, and after the goods are received at the inbound dock, they are organized and repacked as per instructions received beforehand.
In post-distribution, the goods are sorted at the facility or warehouse, customers are determined at the cross-docking facility, depending on demand.
In this method, the products may stay a little longer in the facility; however, it is beneficial from the sellers’ viewpoint as they are able to make more informed choices about the destination for their goods based on sales forecasts, inventory in stores, POS trends, etc.
When is Cross-Docking Used?
Cross docking does help in having a leaner supply chain, but it may not be suitable for every business or warehouse.
It is essential that you study the costs, productivity factors, how satisfied or not your customers are, and how it will change for your business before you make a decision.
Cross docking is especially useful for products with temperature control, perishables, goods that are already sorted and packed, and so on.
Here you can speed up the supply chain and distribution process and make it more efficient with cross docking.
Cross docking is particularly useful for businesses with high inventory turnover rates, like pharmaceuticals, fashion industry, food,
Why is Cross Docking used?
- It offers a centralized place for the sorting of products, and for the combination of similar products that have to be shipped and delivered to several destinations quickly and efficiently
- You can consolidate multiple small loads of goods into a single transportation method and reduce expenses
- Large product loads can be broken down into small loads to be transported easily to customers
Advantages of Cross Docking
- Storage space requirements can be reduced, leading to overall savings in costs. Precious warehouse space can be utilized for products that simply need to be stored before they can be sold or sent to the customers.
- Storing, handling, counting, securing, and insuring inventory costs money; you also lose money when products get damaged, lost, or stolen. Cross-docking eliminates these expenses as the goods are immediately sent to outbound transport with minimal holding time. The reduction in cost is one of the biggest benefits of cross docking.
- As they are hardly stored and handled minimally at the warehouse, there is very little risk of your products getting spoilt or damaged, leading to better quality products. Basically, your products are taken from one truck and put into another, with no stock being stored for a certain amount of time. The only time the products will spend at your cross docking warehouse is when they are waiting for the outbound truck to arrive so they can be loaded on it.
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- As the goods are immediately sent out once received, it significantly reduces the time taken for delivery of those items to the customer. Cross docking ensures a speedy distribution process, and higher efficiency and significantly reduces lead time.
- Labor costs are reduced as there is no longer any need to pick and put away stock; this means you need fewer workers at the warehouse.
- The cross docking process eliminates the worry about the dead stock; as your products are immediately scanned and shipped, there is no danger of them becoming obsolete; you also don’t have to worry about re-ordering, or items getting stocked out.
- As customers receive their orders quickly, you can ensure higher customer satisfaction; this, in turn, helps to boost your reputation for quick deliveries.
- When your loading and unloading systems are simplified and streamlined, and you achieve quick movement of goods from inbound trucks to outbound, you can ensure speedy shipments, giving you an edge over your competitors.
Disadvantages of Cross Docking
Like everything else, while cross-docking offers several benefits, it does have its drawbacks. Let’s see what they are:
- The preparation can be very time-consuming; it has to be planned and executed meticulously to ensure its success. Otherwise, you may have scheduling conflicts on your hands and have accidents because you have no proper systems in place for warehouse management. Ideally, in the cross docking process, shipments should not spend over 24 hours in the cross-docking warehouse or distribution facility.
- It takes a pretty hefty investment to set up a cross docking operation; you need dock terminals, and a sizeable fleet of trucks and other transport vehicles to handle the cross docking operation. You will also need space to park your vehicles when they are not running.
- Cross-docking is a very precise operation and it requires quick, efficient workers, smooth and seamless workflows, and sophisticated technology for it to be successful. It may be necessary to have an EDI or electronic data interchange for streamlining the purchase process and supply chain management software to efficiently track your products from suppliers to your docks right up to your customers.
- You need to purchase forklifts, conveyor belts, pallet trucks, and other equipment to ensure smooth and fast operations.
- Multiple deliveries are often handled in a single day, and therefore it is vital that all the goods have to be unloaded from the inbound trucks and loaded onto the outbound trucks swiftly, within tight time schedules. If you are not able to do that, it will lead to congestion in the dock, and may even cause some of the goods to get damaged, stolen, or lost.
- It is not suitable for industries with low inventory turnover rates; examples – furniture, office stationery, etc.
- Your suppliers may not always be able to comply with the stringent deadlines that cross docking necessitates. There is no room for mistakes in either lead times or product quality; therefore you need to ensure that your suppliers are reliable and capable of meeting your requirements.
Is Cross-Docking Right For Me?
We have seen the pros and cons of cross-docking above, and from that, we can conclude that for cross-docking to work and give you the benefits you need, you need to streamline your transport, unloading, and loading processes, have sophisticated tech, a high inventory turnover rate, and be very organized and precise.
If you have the capability to do this, or you have a reliable third-party logistics company that can provide this facility, then you will definitely benefit from cross docking.
But in the event you are not able to do so, a traditional warehouse approach may be the best bet for you.
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What You Need if You’re Not Cross Docking
If cross-docking is not suitable for your business and your products, then, of course, you need to go the traditional method of stocking goods in your warehouse till they are sold.
It would be wise in such a case to invest in a robust inventory management system with other integrated tools that will help you run your business effectively and spur your growth onwards.
Tranquil ERP is a cloud-based inventory system that will help you do this and a whole lot more.
You can streamline all your processes like procurement, manufacturing, finance, HR and payroll, along with inventory management.
You can get real-time data about inventory levels, generate reports for better forecasting, and even configure the system to send out orders automatically when stocks become low.
Unsure of how it will help your business? Schedule a demo with us to know more. Our team will be present to answer all your queries.