As the need to move inventory increases, more logistics managers are turning to cross-docking—the practice that skips storage altogether.

Cross-docking has long offered a way to increase inventory velocity, but it’s only now that many warehouse professionals are taking notice. Because companies can ill afford to let inventory sit, many are starting to ‘cross-dock’ or move merchandise directly from receiving dock to shipping dock, while bypassing storage. Already a norm in Europe, cross-docking is gaining acceptance in North America as well, analysts and industry observers note. In fact, GSC Logistics Inc., a third-party logistics provider for several industries, says there has been a 30% jump in cross-docking this year. In addition, this practice will keep on spreading “as companies try to better manage their inventory,” says Andy Garcia, executive vice president at California-based GSC. “The new paradigm is not just inventory management; it’s inventory velocity management,” says Yasser Mahmud, product manager at Dallas-based EXE Technologies Inc., a supply chain software solutions company.

Cross-docking not only gets the item to the customer faster, but it also cuts inventory costs, material handling and personnel time. In the current standard practice, boxes have to be unloaded and then the items inside placed in shelves until orders for them are received. In cross-docking, if incoming merchandise can fulfill a pending order, it is taken directly to shipping without being put in storage, bypassing existing inventory. “Pick sequence is changed,” says David Habib, product consulting vice president at Colorado-based Swisslog, one of the world’s largest supply chain solutions providers. “Instead of moving product to storage, and then having someone pick it, the new product that just came in substitutes for the product in storage,” he says. Cross-docking is also beneficial when there’s insufficient stock of a particular product in inventory to complete an order. When that product comes into the receiving dock, it is transferred directly to the shipping dock to fill the order. In this example, a stock-out and possible customer dissatisfaction are both averted.

Although the concept of cross-docking is simple, its implementation is complicated. Careful preparation is a must. Logistics managers who want to switch to this rapid system have to first establish a formal plan, including starting a cross-docking pilot program and evaluating its effectiveness. Once the plan is set, logistics managers must partner with other members of the supply chain. Since cross-docking affects the entire supply chain, everyone’s cooperation must be gained and adjustments made wherever necessary. For example, if manufacturing has to pay extra costs to enable cross-docking through the supply chain, then the manufacturing cost structure must be readjusted appropriately. This applies to every member of the supply chain, such as trucking and packaging. In addition, constant communication must be maintained between supply chain members. For instance, the member receiving the merchandise must be informed of its identity, quantity, etc. before it even arrives in the dock. Computer connectivity via the Internet or EDI (electronic data interchange) is therefore crucial.

Controlling the flow of merchandise is also critical in cross-docking. A warehouse management system (WMS) accomplishes this by receiving product information via the Internet or EDI and keeping track of product movement. It supports the real-time requirements of cross-docking, receiving order details from customers and later informing them of the shipment’s carrier and arrival date and time. Furthermore, the WMS also tracks warehouse performance, including labor and dock utilization. This is important in cross-docking because this process demands a reallocation of resources, shifting the emphasis away from storage and orderpicking to receiving and shipping. For example, peak workload may intensify because it’s more difficult to evenly distribute workload in cross-docking. Thus, the peak workload’s length and when it occurs must be studied to determine how to utilize labor and dock equipment most effectively.

Indeed, cross-docking’s many benefits can only be reaped after meticulous planning and execution. In addition, this process requires a great degree of tactical management. All the planning, partnering, readjustment and reallocation of resources are not enough. When the unavoidable problems arise, someone must be able to figure out how to work around them.

Sources: Cross-docking Spreads
Jennifer Baljko Shah
EBN, April 5, 2002
http://www.ebnews.com/story/OEG20020405S0028

Cut the Crossdock Hype
Mary Aichlmayr
Transportation & Distribution, May 2002
http://www.tdmagazine.com/FrmNewsLoader/index.asp?articleID=49866

Crossdocking Gets Smarter
Bernie Knill
Material Handling Management, June 1, 2000
http://www.mhesource.com/default.asp?section=articlearchive