What is Cross-Docking and Why Is It Important? - ChicagoShipper

The retail supply chain is designed to enable efficiency, speed, and cost savings while ensuring that products reach the end consumer promptly. 

Labor costs, in particular, are logistics costs, which tend to account for the majority of total costs. 

Luckily, there are ways to reduce the effort by reducing the need to store the product or by eliminating the need for complete warehousing in the middle. Cross-docking is a logistics system that makes distribution more efficient and speeds up the fulfillment and replenishment cycle. 

For decades, the automotive industry has focused on just-in-time delivery and optimizing cross-docking supply chain models. 

With the help of the growth of inventory automation and another supply chain advanced technology, additional accessibility is added to the logistics operations for e-commerce when it comes to cross-docking. 

This article describes the types of cross-docking processes available in the retail industry, their benefits, and how  3PL can help you implement a cross-docking solution. 

Cross-Docking Definition 

Cross-docking is a lean supply chain model that transfers finished goods directly or quickly from a supplier or manufacturer to a customer or retailer with little or no handling or warehousing (such as holding inventory in a  warehouse). 

This allows inventory to be placed closer to the end customer (for example, using a distributed inventory model) to expedite replenishment, reduce middle and last-mile transportation costs, and improve service to end customers. 

In the majority of cases, the finished product is unloaded from inbound transport (from the supplier) to the inbound dock, sorted and integrated at the cross-dock terminal, and immediately loaded onto the outbound vehicle (customer or dealer) at the outbound dock. This saves time and effort in the receiving dock and helps move inventory to the next stage. 

Cross-docking can speed up the retail fulfillment process for bulk email and eliminate the need for long-term (or short-term) warehousing. 

Advantages of Cross-Docking 

Cross-docking is ideal for companies that want to enable a slimmer supply chain, speed up the order processing process, reduce costs, and reduce the time it takes for a product to reach a hub or customer. 

Sharing with you some of the advantages of cross-docking for e-commerce businesses: 

  • Speedy Shipping & Receiving Timeframe 

Goods arrive at their final destination sooner because the effort required to store the goods can be completely reduced or eliminated. Large batches are split into smaller cargoes and loaded into the cargo headings in the same direction, improving transport efficiency. 

In addition, goods receipts are less complicated because instead of entering inventory into the warehouse management system WMS, only goods receipts, and shipments need to be recorded at the time of goods receipt, in comparison to scanning for the purpose of optimizing the movement of products. 

  • Lesser Fees and Time Savings 

Cost of goods sold (COGS) accounts for a significant portion of inventory costs. In addition to purchasing the product, the company also has to pay for shipping and shipping for the first and last miles. 

But with cross-docking, businesses don’t need a large e-commerce warehouse to deliver their products to their customers in a cost-effective way. Cross-docking provides a more efficient inventory management process and supports speedy reloading such as just-in-time inventory. 

Also, as opposed to monitoring stock float in the course of your whole e-trade delivery chain, stock monitoring is completed in bulk. It also reduces labor, saves time while maintaining inventory levels, and enables a more efficient warehouse system. 

  • Provides a Central Place to Handle Products 

Streamline your supply chain by delivering the last mile from a central location called the cross-dock warehouse. In other words, the distribution center functions as a sorting facility. 

At cross-docking locations, products are categorized and assigned to multiple carriers based on their shipping addresses. 

In addition, having a central hub for managing inventory is a great solution for B2B fulfillment, eliminating the need to stock inventory and select and ship individual items. 

  • Reduction of Handled Materials 

Cross-docking operations require less material handling as it reduces the need for movement tracking, ease of storage, and protection and management of multiple SKUs. Cross-docking allows you to maintain high turnover. 

Some items also take advantage of reduced material handling throughout the supply chain to maintain quality. This is especially true for fresh foods such as foods and beverages. 

In addition, some products (cosmetics, medicines, vitamins, dietary supplements, etc.) have a short shelf life and a less complex supply chain, which benefits end-users and other companies from receiving products early. 

High-value products also benefit from cross-docking, as they are less likely to be damaged by picking or pre-shipment intermediate storage. 

Who can take advantage of cross-docking and how? 

Cross-docking is a term commonly used by importers and exporters with stable, constant demand and high turnover. However, almost any company can adopt this process if it fits into the supply chain strategy and infrastructure. The following are the types of businesses that will take advantage of the cross-dock supply chain model. 

  • Businesses That Sell Short-lived Items 

Does your business sell important, high-demand products and short-lived fresh foods? 

If so, you should go cross-docking. Cross-docking eliminates the need for the supplier to store the product before selling it to another company, reducing the time it takes for the product to reach the end-user.

With cross-docking, upon receipt, many of the products are immediately transported to the exit transport dock by forklift, conveyor, or pallet truck. This reduces the risk of perishables being overdue and allows retailers to extend their sales period. 

  • Businesses That Have Various Suppliers 

Inventory typically bypasses the entire warehousing process and ships directly from one destination to another, making it easier to manage goods arriving at multiple suppliers or  distribution centers in other regions. 

Using this method, you can efficiently and quickly receive, sort, combine, and send packages from different suppliers to minimize transportation and storage costs. 

What are cross-docking types? 

Today, many e-commerce players are moving from traditional sales management models to a cross-docking approach. There are actually two major types of cross-docking and these are pre-distribution and post-distribution. Let’s know the difference. 

  • Pre-Distribution 

With the pre-distribution type of cross-docking, goods are discharged, sorted, and repacked according to pre-determined distribution directions. 

If the warehouse personnel already know the end customer before the supplier ships the goods, when the shipment arrives at the dock, it will be unloaded, sorted, and repacked according to the pre-agreed distribution directions. 

With this pre-distribution method, inventory spends very little time in the cross-docking warehouse. Ideal for retailers who manage their warehouses and have direct visibility into all of their customer-supplier relationships. 

  • Post-distribution 

In the post-distribution process, the goods are stored in a cross-docking facility until the next itinerary is clear. With this type of service, inventory remains in the cross-docking warehouse for a little longer. 

Distributors and retailers, on the other hand, need to spend the time needed to strategically determine where to ship their inventory based on forecast and current inventory values. 

Cross-Docking Methods 

Below is a breakdown of the three most common cross-docking methods, depending on the type of business, the products you sell, and the needs of your customers. 

1. Continuous Cross-Docking 

With continuous cross-docking, there may be a non-forestall and direct glide of stock thru a cross-docking facility from inbound to outbound shipments. 

Continuous cross-docking reduces cargo unloading and loading latency in the event of an event, such as a truck arriving at a facility at different times. 

2. Consolidation Arrangements 

Under the consolidation arrangement, many small shipments are combined into one large shipment before shipping. This is beneficial because it is not always beneficial to ship each small package individually from the cross-docking location. 

The consolidation arrangement requires that the goods be temporarily stored in the warehouse until they can consume a full truckload space (in most cases, they are stored in the staging area rather than in other inventory). However, the advantage lies in the fact that it helps reduce shipping fees. 

3. De-consolidation Method 

The de-consolidation method is technically the opposite of the consolidation method. 

Upon de-consolidation, large cargo is split into smaller batches, making transportation to customers easier and faster. This method is typically used for direct delivery to consumers. 

 Conclusion: 

In a traditional warehouse system, inventory is unloaded from the incoming wagon or semi-trailer and stored in the warehouse. It will then be repacked and shipped. However, with the cross-docking system, orders are processed much faster. This supply chain strategy is used  when juggling perishables and multiple vendors. 

Learn more about cross-docking by contacting us here at Chicago Shipper!