Cross-Docking Rediscovered

While not a new practice, there has been a resurgence of interest in cross-docking in recent years. According to the 2011 Cross-Docking Trends Report, a recent study sponsored by Saddle Creek Corporation, cross-docking is on the rise, with 68.5% of survey respondents reporting that they use the practice today—up more than 16% from the benchmark study just three years ago.

With so many companies cross-docking, it makes sense to understand what motivates them to use the practice. While cross-docking offers numerous benefits, those most frequently mentioned in the study were improving service levels (37.9%) and reducing transportation costs (32.4%).

Improve Service

Cross-docking improves customer service—both to the direct customer and the end user—by enabling products to reach their end destination more quickly and economically than individual LTL shipments.

Cross-docking can also be used to get the right mix of products to the customer. Some cross-docks break apart pallets into individual orders—layer picking or even case picking to get stores what they need. Store-ready orders can be prepared by suppliers for shipment to the cross-dock, and then routed for store delivery utilizing the most cost-effective mode of transportation.

Reduce Transportation Costs

The biggest opportunities for cross-dock savings are transportation related. Taking advantage of transportation efficiencies allows companies to mitigate the impact of today’s rising fuel costs. Considerable freight savings also can be achieved by consolidating LTL shipments into full loads to the cross-dock and, whenever possible, combining outbound shipments with those of multiple vendors going to the same destination.

Cross-docking can also help to control overall logistics costs. The high velocity of cross-docking allows many companies to reduce inventory carrying costs since they are fulfilling exact orders and don’t require safety stock. This does require careful planning and order management for optimal effectiveness.

Better Product Quality

Cross-docking can be effective in helping to identify and address quality problems before they become issues. As today’s sustainability initiatives minimize protective packaging, products often arrive in sub-par condition. Production issues can also be a factor. When several incoming shipments are going to numerous destinations, cross-docking provides a central point for monitoring product quality. It offers the opportunity to inspect product from all incoming shipments and ensure that outgoing shipments are built consistently.

Cross-docking can allow for remarkable customization as well. For example, a customers’ product can be sorted and picked down to the case or even the “each” level. What’s more, promotional materials can also be delivered through the cross-dock supply chain versus the significantly more expensive parcel approach. Moving manual processes back upstream makes downstream distribution much more efficient.

It’s Economical

What makes cross-docking a viable strategy in today’s economic environment? The practice delivers significant value with very little commitment and a relatively minor financial investment. In place of bricks and mortar, cross-dock practitioners’ investments are in the form of time and energy put into process improvement and process change. They focus on improving communication flow, tightening up relationships with carriers, and improving service performance.

It’s not surprising, then, that more than 40% of survey respondents who have been cross-docking for four years or more say that recent challenging economic conditions have prompted them to increase cross-docking.

Where it Works Best

In its purest form, cross-docking is the process of receiving product and shipping it out the same day or overnight without putting it into storage. It typically works best with high-volume, low-touch products and a limited number of SKUs.