Cross-docking has great potential as a distribution tactic in logistics and supply chains. It’s a mode of transporting materials directly from the supplier or manufacturer to the customer with marginal or no storage costs. Implementing a supply chain management system facilitates cross-docking processes and reduces issues related to storage, labor overhead, fulfillment speed and more.

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Most companies use this approach to enhance timely deliveries. The main objective behind using cross-docking is to reduce costs and boost operational efficiency simultaneously.

Table of Contents:

• What Is Cross-docking?
• Different Types
• Key Benefits
• Methods
• Tips To Improve
• Conclusion

What Is Cross-docking?

Cross-docking is a distribution practice for fast-moving consumer goods in supply chains and logistics. This distribution system helps unload goods from inbound vehicles and load them onto outbound trucks, eliminating storage costs. Minimizing storage costs allows cross-docking operations to streamline overall supply chains and move goods faster across the market.

This process boosts satisfaction by positioning inventory closer to the end customer while minimizing middle and last-mile shipping costs. Cross-docking services often occur in docking terminals where workers move goods directly to outbound vehicles, eliminating the need for storage.

Removing the storage link in supply chains cuts labor costs associated with order fulfillment processes. However, setting up cross-docking terminals requires in-depth planning, coordination and execution. Although it enables faster order fulfillment, the preparation process can be time-consuming.

Most ERP, supply chain, transportation and warehouse management solutions support cross-docking services.

Types

With cross-docking as an ideal strategy, businesses are taking it up a notch to streamline their logistics and transportation system. They’re using it as their go-to solution for timely deliveries. Let’s look at the two basic types of cross-docking processes.

1. Pre-distribution

Pre-distribution is the process of unloading, sorting and repacking items according to predetermined instructions. Customers are already known to the suppliers before they release the items.

For example, suppose the warehouse manager identifies the customer before the supplier ships the item. In that case, it’s unloaded, sorted and packed according to their predecided distribution instructions once the shipment reaches the dock. This method is ideal for retailers who manage their warehouses and want a complete customer and supplier relationship overview.

2. Post-distribution

On the other hand, post-distribution is where sorting takes place according to market demand. Till then, sorting stays on hold in the distribution center. This method allows retailers and sellers to make smart decisions based on sales trends, forecasts, in-store inventory and more.

Cross-docking isn’t always suitable for all business models but can greatly benefit the logistics, manufacturing, retail, automotive, food and beverage industries. These industries use cross-docking services for multiple reasons and are closely associated with the just-in-time delivery approach.

• Reduce the possibility of food spoilage by moving items quickly with no storage requirements.
• Avoid costly storage fees.
• Lower risk of inventory damage.
• Reduce labor costs.

These industries trade in time-critical conditions and thus heavily rely on cross-docking services to support their distribution channels.

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Primary Benefits

Cross-docking offers a wide range of advantages, some of which are as follows:

Minimize Warehouse Space

On average, a warehouse space’s cost per square foot ranges between $6.53 to $7.96. Imagine the amount businesses spend on warehousing costs. Cross-docking eliminates the need for storage space as these goods are transferred immediately to outbound vehicles with no storage requirements.

Companies often use cross-dock terminals that provide a seamless platform to unload, sort and distribute goods to their assigned outbound delivery trucks.

Reduce Material Handling

Minimal material handling helps maintain product quality for highly perishable items like food and beverages. Since products like pharmaceuticals and supplements have a shorter shelf life, delivering them without damage (that usually occurs during storage) improves customer satisfaction.

Cross-docking services facilitate high inventory turnover. They optimize the flow of goods, reduce shipping costs and boost efficiency.

Lower Inventory Costs

Cross-docking reduces the need for packaging and storing items. It eliminates costs associated with storage, picking and packing, labor and more. Companies use this solution along with just-in-time delivery to lower inventory costs.

Eliminate Risks

Minimize product-related risks involved with handling. Since less shuffling of goods takes place in and out of storage, there’s less chance of damage. As a result, products are safe, and inventory loss drops.

Improve Shipping and Receiving Times

Since goods are immediately shipped, delivery automatically takes less time. It increases shipping efficiency by breaking down bigger batches into smaller shipments and loading them on freights headed in the same direction.

Walmart dominates the supply chain space by including cross-docking as part of its vendor-managed inventory (VMI) initiative. With this initiative, manufacturers track when goods are low and when to send them to Walmart stores while maintaining their warehouse inventory.

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Methods

Cross-docking may vary based on the business and product type, customer requirements and more. However, below are the three primary cross-docking methods most commonly used for order fulfillment.

Continuous Cross-docking

Inventory flows non-stop with this method. In such scenarios, the terminal will have a cross-docking facility through which inventory moves directly from inbound to outbound shipments.

This method is the simplest but requires the right automation and transportation system.

Consolidation Arrangements

This method combines multiple small shipments into a single load for shipping. This arrangement works great when the logistics facility receives smaller shipments from separate suppliers or production centers. The facility stores this shipment temporarily and consolidates it into a larger group to reduce costs.

The benefits include eliminating goods handling costs and better compliance.

De-consolidation

This method is the reverse version of the consolidation arrangement wherein the logistics facility breaks down large shipments into smaller batches for seamless transportation. De-consolidation is an ideal method for retail and direct-to-consumer (DTC) fulfillment.

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Tips To Improve

Although cross-docking is an ideal supply chain strategy, managing it without the right tips can lead to errors. Here are a few tips to improve cross-docking services.

Barcodes

Not labeling your products with barcode labels can cause unnecessary delays during receiving and shipping. Companies are starting to optimize supply chain performance using advanced ship notice (ASN), integrated GS1-128 barcoded labels and robust warehouse management software.

A GS1-128 label isn’t an ordinary barcode. It contains important information, including batch, serial, lot numbers, product dates, global trade item numbers (GTIN) and more. With this label, a shipper can easily inform the buyer about the shipment’s contents.

Each carton must have the GS1-128 barcode label for receiving and shipping accuracy.

Advanced Ship Notice (ASN)

Advanced ship notice is among the best practices for cross-docking. ASN provides electronic communication between suppliers and customers by sending notifications about shipment creation against a purchase order and information about the items.

It provides information about order shipment and carrier details via electronic data interchange (EDI), emails or other communication channels in advance.

Warehouse Management Systems (WMS)

The most common warehouse-receiving process is via ASN. It sends notifications of deliveries yet to arrive at the dock for unloading. Implementing ASN without a robust WMS system will have lesser value since suppliers cannot access shipment information.

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Conclusion

Cross-docking is a great solution for companies looking to cut down warehousing costs and streamline their supply chain. However, it’s not a one-size-fits-all solution. The upfront costs may be high, and establishing cross-docking services require careful examination of your industry.

However, cross-docking can be highly cost-effective for businesses running high-volume shipments or transportation needs.

How has cross-docking benefited your industry? Tell us with a comment.