Cross-docking

Cross-docking is a practice in logistics of unloading materials from an incoming semi-trailer truck or rail car and loading these materials in outbound trailers or rail cars, with little or no storage in between. This may be done to change type of conveyance, or to sort material intended for different destinations, or to combine material from different origins.

In purest form this is done directly, with minimal or no warehousing. In practice many "cross-docking" operations require large staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship. If the staging takes hours or a day the operation is usually referred to as a "cross-dock" distribution center. If it takes several days or even weeks the operation is usually considered a warehouse. This was first pioneered by Wal Mart.

Crossdocking is used to decrease inventory storage by streamlining the flow between the supplier and the manufacturer.

Typical applications

• "Hub and spoke" arrangements, where materials are brought in to one central location and then sorted for delivery to a variety of destinations
• Consolidation arrangements, where a variety of smaller shipments are combined into one larger shipment for economy of transport
• Deconsolidation arrangements, where large shipments (e.g. railcar lots) are broken down into smaller lots for ease of delivery.

Advantages of Cross-Docking

• Reduces handling costs, operating costs, and the storage of inventory
• Products get to the distributor and consequently to the customer quicker
• Cuts down or virtually eliminates warehousing costs
• Helps to increase available sales space
• Stock comes into the cross-docking center already pre-allocated to replenish an order placed by a retailer.
• Retailers have the ability to streamline the supply chain from point of origin to point of sale through cross docking
• Operating costs and inventory levels are reduced and perspective sale space is increased

How Wal Mart is so successful

• Wal Mart runs 85% of its goods through its cross docking system
• Cross docking is one way Wal Mart reduces its cost of sales by 2-3%
• This is a contributing factor to allow Wal Mart to offer lower prices

Loading Docks

• Instead of goods spending valuable time in the warehouse, they are crossed from one loading dock to another in 48 hours or less
• This enables them to be in the store and ready to be sold

Wal Mart’s Communication Network

• Cross Docking relies on continuous communication between Wal Mart’s suppliers, distribution centers, and every point of sale system in each store.
• This enables orders to flow in, get packaged and then shipped.

How do they do this?

• Wal Mart operates their own satellite network
• Wal Mart’s satellite network sends the point of sale (POS) data directly to 4,000 vendors.
• Each register is directly connected to a satellite system and sales information is instantly relayed to Wal Mart’s headquarters and distribution centers.
• Each store manager communicates via the satellite network with other managers to discuss sales and market trends and strategies.

Trucking Network

• Wal mart has over 80 distribution centers throughout the country.
• They are serviced by 2,000 company owned trucks
• The truck fleet allows Wal Mart to ship goods from its warehouses to stores in under 48 hours.
• Store shelves are then restocked- twice a week on average while the industry average is once every two weeks
• K-Mart and other competitors do not own their own trucking fleet like Wal Mart.
• This results in hourly wages and overhead added to the costs of shipping on the links connecting distribution centers to stores

Factors influencing the use of cross-docks

• Customer and supplier geography -- particularly when a single corporate customer has many multiple branches or using points
• Freight costs for the commodities being transported
• Cost of inventory in transit
• Complexity of loads
• Handling methods
• Logistics software integration between supplier(s), vendor, and shipper
• Tracking of inventory in transit