Updated: Feb 9, 2022
Article by Shanta Sloan and Rosita Johnson
Cross-docking is the practice of collecting inbound freight from suppliers or carriers and delivering it to the final destination with little to no storage between the transfer. Cross-docking reduces the need to store materials in a warehouse, which reduces labor and inventory holding costs. All materials are dispatched directly for delivery to the next stakeholder in the supply chain. Cross-docking occurs at a distribution center or a docking facility and is beneficial for companies with high shipment volume, and who are looking to increase shipment accuracy and to offset any uncertainties associated with the extended lead times.
There are different methods of cross-docking, depending on shipment volume and the number of the origin and destination point(s). The consolidation method is primarily used for freight coming from numerous sources with few destinations: smaller shipments are merged into larger loads and are sent off to the next drop point. Deconsolidation is a more appropriate method for large shipments arriving from several distributors or suppliers and items being separated into smaller loads based on the location of the final delivery point.
Some companies end up using a hybrid model, both deconsolidation and consolidation, which is useful for deliveries to remote locations. For example, one of ASCI’s clients used a cross-docking facility in Anchorage, Alaska, to inspect items for accuracy and then group them by the destination location (East versus West side) in Prudhoe Bay, Alaska. While the inspection process added a complexity and a slight delay to the overall process, it ended up saving money and time in the long run by:
a. reducing the number of incorrect or damaged items being shipped from Prudhoe Bay back to the supplier
b. customers receiving a correct and undamaged items in time for their project.
Over/Short/Damaged/Discrepant (OSDD) is the process we utilized at the cross-dock facility to keep track of the incorrect or damaged product returns and exchanges. ASCI’s SmartTracker was used to record details of the OSDDs, including the status of the return or exchange and any useful notes between our team and the supplier who provided the product.
Cross-docking provides a variety of advantages, not just reducing the inventory holding costs for non-stock items that need to go directly to the customer. Streamlining the entire supply chain is one of the benefits for large companies with frequent and high volume shipments. Without the need for a true distribution center, warehouse storage and warehouse management costs are no longer a factor, and the product is moved quickly from one step in the supply chain to the next. Shipment accuracy is another outcome if the freight is being inspected prior to outbound shipment.
There are some downsides with cross-docking, such as potential for damaged or mishandled shipment due to the additional freight-handling point as well as labor costs associated with processing and organizing the shipments. Also, if the cross-docking operation is not executed well, including inconsistent outbound shipment days and times or poor layout of the warehouse and the bay area(s), it can end up increasing overall costs and negating the cost savings achieved by the reduced inventory costs. Last, the lack of data visibility and automation can add complexities and increase costs to the overall logistics operations and eventually lead to company deciding to eliminate the cross-docking function and facility.
Efficient cross-docking has a direct flow, with minimal dwell time, and the lowest handling and storage time possible. Cross-docking reduces cycle time and increases delivery system responsiveness and versatility. If done properly, cross-docking may be the best decision your company makes in order to improve your supply chain operations.