The current business environment requires faster and lower cost logistics operations, capable of supporting marketing strategies, managing supplier and customer networks, and enabling practices such as Just-In-time.
Cross-docking is an interesting logistical operation concept in response to these needs. It speeds up the flow of goods, reduces costs by condensing loads and, ideally, eliminates warehousing. Let's see why.
The basic foundation of cross-docking is the routing of products that come from suppliers to consumers without inventory. For a better understanding of what this is about, let's look at the following example.
Let's consider the operation of a network of mini-markets installed at gas stations. Suppose there are five types of products, each with its unique supplier: drinks, cookies, chocolates, magazines, and cigarettes. Also assume that there are 20 stores.
Thus, five trucks (one from each supplier) arrive at the warehouse on the side called “entrance”. Twenty trucks enter on the “exit” side. The products, as they are removed from the suppliers' trucks, are forwarded (routed) to the vehicles that will take the goods to the stores, in the right amount for each customer. This operation takes a few hours and does not require any storage.
Let's analyze what happened in this example. The flow of goods was accelerated because suppliers and customers all “met” in the same place, and there were no long waits or storage. The cost was reduced because both incoming and outgoing loads were condensed, had a single origin (factory and DC respectively) and a single destination (DC and store respectively). All of this was achieved despite working with five suppliers and 20 stores. That is, we verify through an example how cross-docking can offer answers to the logistical challenges that we saw in the first paragraph.
Some problems, however, can happen. One is to get all that coordination to get five vendors together without major delays. On the other hand, managing product selection, arrangement and routing information with a minimum of storage can be critical. These are the main technical problems to be solved for the implementation of cross-docking.
DEFINITION OF CROSS DOCKING
A very simplistic definition of cross-docking is: “cross-docking is an operation in which products are routed to their destinations as soon as they are received at a warehouse or distribution center”.
Another, more elaborate definition is: “cross-docking is a process where products are received at a facility, occasionally together with other products of the same destination, are shipped at the earliest opportunity, without long storage. This requires high knowledge of inbound products, their destinations, and a system to properly route them to outbound vehicles.”
Regardless of which phrase is adopted as a definition, there are three essential points for an operation to be called cross-docking.
- The total time the merchandise stays in the premises where cross-docking takes place must be kept to a minimum. Some experts limit the maximum time to consider cross-docking as one day; some logistics service providers, on the other hand, do not charge storage fees if the product remains for up to three days. What should be kept in mind is that the residence time of the products is a critical factor in cross-docking.
2. Upon receipt, the product must be sent directly to the exit vehicle or remain in a picking area, but it can never be stored. Inventory has been eliminated with cross-docking.
3. A system capable of coordinating exchanges of products and information is indispensable. Coordination between the different cross-docking participants is essential, especially regarding the times in which the vehicles will arrive at the cross-docking operator.
Finally, we will call the company that actually performs the cross-docking, coordinating and implementing the activities, the Cross-Docking Operator (OCD).
BENEFITS AND DISADVANTAGES OF CROSS-DOCKING
For cross-docking to be possible and to achieve its objectives, some care must be taken, mainly regarding the choice of products, suppliers, information flows and products and people. For example, products that require a minimum of handling, have a high cost of storage (perishability, opportunity cost), have barcodes that help the routing process and have a known demand pattern and low variability are ideal for distribution. by cross-docking.
Vendors must also be chosen carefully. The ideal suppliers are able to provide the ordered quantity of the product at the exact time. They are also capable of configuring their products efficiently in terms of handling and have a good communication channel with the OCD. Note that the physical configuration of the product is critical in determining the complexity of cross-docking, because products that are labeled, stowed, and easy to handle work faster and require additional care.
The ideal flow of information synchronizes the operation partners, coordinates the flow of materials correctly to meet the demand and, preferably, dispenses paper. The ideal cross-docking has a transportation network, equipment and operations to support the flow of products from supplier to consumer. It shall provide, where necessary, packaging, kitting, ordering and other services.
Finally, people who work in the ideal cross-docking recognize the importance of moving products instead of storing them. Being able to perceive strengths and weaknesses, update themselves technologically and coordinate suppliers and consumers.
Therefore, cross-docking is a complex process, full of details, and for that very reason requires maturity from customers and suppliers, in the sense of knowing how to specify their real needs and their limitations.
We can then think about the main benefits and difficulties of cross-docking. The main economic benefits come from labor savings (in handling and storage), reduction of storage costs, reduction of inventory losses and opportunity costs. The main difficulties occur because many people do not know how to operate cross-docking.
Benefits of cross-docking:
- Increases the speed of product flow and inventory circulation.
• Reduces handling cost.
• Enables efficient consolidation of products.
• Supports Just-In-Time strategies.
• Promotes better use of resources.
• Reduces space requirement.
• Reduces product damage due to less handling.
• Reduces product theft and compression.
• Reduces obsolescence (and shelf life issues) of products.
• Accelerates payment to the supplier, therefore improves partnerships.
• Decreases paper usage associated with inventory processing.
Disadvantages of Cross-docking:
- Difficulty in determining candidate products.
• Requires synchronization of suppliers and demand.
• Imperfect relationships with suppliers; little or no credibility in suppliers; supplier reluctance.
• Unions fear job losses.
• Inadequate facilities or insufficient returns on investment to justify the purchase, renovation or construction of an appropriate DC.
• Inadequate information systems.
• Management does not always have a holistic and targeted view of the supply chain.
• Fear of stock-out due to lack of safety stock.
CARRYING OUT A CROSS-DOCKING
Considering the benefits and difficulties of operating a Cross-Docking, a methodology for designing and operating cross-docking must be considered. The following table shows the main steps of one of these methodologies, proposed by the Warehouse Education and Research Council.
Phase 1: Negotiation
- Identify “candidate” products and suppliers for the Cross-Docking operation.
• Identify strengths and weaknesses in the current system: current operation, facilities and equipment, information systems, customers and transport.
• Develop preliminary recommendations for eliminating weaknesses and strengthening.
• Communicating recommendations with suppliers and negotiating Cross-Docking guidelines.
• Determine requirements for Phase 2: Planning and Design.
Phase 2: Planning and Design
- Cross-Docking Design.
• Develop economic analyzes of alternatives.
• Select the most appropriate alternative.
Phase 3: Economic Justification
- Create integrated cost models and determine return on investment.
• Model product costs and determine profitability.
• Determine projected costs and savings and level of sharing along the supply chain.
Phase 4: Implementation
- Develop an implementation plan.
• Implement a pilot program.
• Implement a comprehensive cross-docking system.
• Develop procedures and standards for periodic monitoring and program expansion.
