Modern supply chains are designed to enable speed, cost-savings, and efficiency all at once while ensuring that goods get to the end consumer at the right time. Labor, in particular, is a logistics cost that tends to be a large line item.
Fortunately, there is a way to reduce these excess costs by reducing the need to store products or eliminating the requirement for full inventory maintenance at an interim location altogether. Cross-docking is a supply chain technique that makes distribution more efficient and streamlines the fulfillment and product replenishment cycle.
The automobile industry has focused on optimizing a just-in-time delivery and cross-docking supply chain model for years. You can optimize your cross docking and other supply chain methods by implementing effective inventory management software to improve the efficiency of your supply chain management processing.
This blog discusses the concept of cross-docking and how it benefits shippers by reducing both costs and lead time in delivery processes.
What is Cross-Docking?
Cross-docking is a supply chain method that aims to speed up goods delivery and improve supply chain efficiency. It includes unloading products from vehicles, making incoming shipments at a logistics facility, and moving them forward to vehicles handling the outgoing shipments, needing little or no storage time in between. Businesses use cross-docking to move products from multiple suppliers, break down bulk shipments into smaller parts, and reorganize them for efficient delivery to retailers, fulfillment facilities, and customers.
Cross-docking needs close coordination among an organization’s supply chain partners, suppliers, and carriers. This effort pays off in multiple ways. Companies can deliver goods faster, minimize the need for excess inventory space, optimize inventory control, and reduce labor and transportation costs.
In its purest form, cross-docking means directly transferring goods from inbound to outbound shipping channels at a logistics facility without the need to place the product in storage. This method is called cross-docking because products cross the docks, transferring from vehicles that arrive at a receiving dock to vehicles that accept these products at a shipping dock. Although goods usually do not spend much time in storage, cross-docking may sometimes involve short-term storage of the products, like cold chain goods.
Because of cross-docking’s fast delivery times, the technique is widely utilized for supply chain management strategies by companies that need to transport high-volume goods more quickly. Many organizations perform this method at specific docking facilities near major transportation hubs, like seaports and airports. These cross-docking facilities are usually I-shaped, with inbound channels on one side and outbound channels on another. This configuration can boost the efficiency of delivery time, save costs, and improve customer experience.
When is Cross-Docking applicable?
Cross-docking is best suited to specific product types and business needs. For instance, companies that need to send large volumes of time-sensitive products enable cross-docking to move goods to stores quickly. E-commerce suppliers apply cross-docking as a competitive strategy to offer fast shipping to customers.
Let’s take a look at products that can be a perfect match for cross-docking:
- Perishable products: Companies must deliver food and other agricultural products to customers while the goods are as fresh as possible. The longer shipping takes, the less time stores have to sell the product before it expires. Perishable products require appropriate supply chain planning. That is why the cross-docking method is well-suited for them.
- Seasonal promotional products: These products need to reach the store quickly because they will be in demand for only a limited time.
- High-volume goods with consistent demand: A continuous level of demand makes it simple for businesses to accurately evaluate the demand planning process. They can arrange the delivery with the supplier and ensure sufficient carrier capacity to move products continuously via the facility. Mostly, large retailers apply cross-docking to replenish the supply of high-volume products at their stores.
- Products with minimum need for inspection: Some products do not need inspection on arrival to ensure compliance with industry standards. They can be easily moved directly from inbound to outbound channels.
- Products with specialized environmental conditions: Some goods, like certain pharmaceutical products, must be kept at specific temperatures and moved in trucks equipped to maintain those temperatures. Cross-docking eliminates the need for costly cold chain facilities at distribution points, because the products can be directly shipped between the inbound and outbound channels.
Benefits of Cross-Docking
Cross-docking can deliver an extensive range of business benefits. In addition to facilitating faster shipping, cross-docking can help companies improve supply chain efficiency by lowering the costs of storing, handling, and transporting inventory.
Some of the key benefits of cross-docking include:
Reduced inventory storage costs: Cross-docking lowers and sometimes eliminates the need for costly warehouse space to store products during their journey from manufacturer to customer. This method also reduces other supply chain management costs, such as tracking items while they are in the warehouse.
Faster shipping: Cross-docking speeds up the delivery of goods to business partners and customers because the goods spend less time in warehouses. This is essential for retail and B2B sellers under pressure to deliver products quickly to meet buyer expectations.
Reduced labor costs: Reducing the need for warehouse storage means less handling is needed. Workers only have to move products between inbound and outbound channels. This decreases the need to maintain a large labor force and thus saves on labor costs.
Low risk of wastage and spoilage: The more frequently goods are handled and the longer they are kept in the storage facility, the greater the risk of damage. Cross-docking reduces the need to manage special requirements, making products less likely to face damage. Moreover, because perishable goods are not kept in the warehouse for long, there is less risk of spoilage or expiration. This gives you optimum inventory control and improved visibility.
Lower shipping costs: Cross-docking typically enables businesses to save on shipping costs. Companies can combine or split loads to optimize the amount and size of required resources to distribute goods. This method streamlines your shipping and improves the efficiency of supply chain planning.
Refine your supply chain management with Avercast
Avercast, A TransImpact company, provides high-performance Inventory Management Software to access complete visibility into your supply chain. Our agile demand forecasting software delivers accurate predictions for better decision-making. To explore more about our solutions, book a demo or talk to our experts.