What is Cross-Docking and How is it Beneficial?
In the world of logistics, methods, and systems that can simplify and streamline the supply chain while cutting costs are constantly being refined and customized to better benefit individual businesses. Cross-docking is one such method.
Cross-docking is the practice of unloading freight from an inbound load, and then loading it directly into an outbound shipment with little to no storage in-between. Essentially, when companies use the cross-docking method, a distribution center functions more as a sorting center than an actual storage or warehouse facility.
For example, in a cross-docking facility, the main function of the distribution center is as a place where goods quickly move through to the next stage of the shipping process. Storage space is minimal, and everything must be carefully organized according to inbound and outbound shipments. Inbound shipments are quickly sorted and placed directly into the outbound trucks or shipping containers and they are generally processed and shipped within 24 hours of arriving at a docking terminal.
Of course, in order to function at optimal levels, cross-docking facilities require a high degree of automation with careful control and visibility of suppliers to end customers. To achieve this, most businesses rely on the support and tools that a well-rounded 3PL can bring to the table. Here at Redwood, we equip our clients with not only professional consultation and mitigation where needed, but we also offer them tools such as RedwoodConnect 2.0 that can help them gain more visibility and control over all of their processes.
Methods of Cross-Docking
There are three primary methods used in cross-docking. The first, and simplest method, is continuous cross-docking. This is the most direct application. In continuous cross-docking, products and materials are continuously moved through a central site, moving directly from inbound to outbound shipments. There are occasionally minimal wait times incurred in the event that trucks arrive at the facility at different times.
Consolidation arrangements are another method. This is the process of merging several smaller products or freight loads into one larger load in the cross-docking facility. Some items that are held in the minimal storage at the site may be combined with the inbound products to form full truckload shipments.
The third method is deconsolidation, which is the obvious opposite of the consolidation method. Rather than combining several smaller loads into one large load, in the deconsolidation method, a large load is broken down into several smaller ones for easier transport and generally is used in direct-to-consumer shipments.
Benefits and Risks of Using Cross-Docking
Cross-docking provides a variety of advantages, the primary one being a streamlining of the supply chain. Without the need for a true distribution center, warehouse storage and management costs are no longer a factor, and the product is moved quickly from one step in the supply chain to the next.
Less inventory handling also means a reduction in labor costs, as well a reduction in the risk of damage in the inventory handling phase. A reduction in inventory holding costs is another cost-benefit, and thanks to the reduction in storage times and quicker processing, products reach the distributor and the end consumer faster.
There are, however, some risks associated with switching to cross-docking…
It’s important that companies wishing to adopt cross-docking in order to streamline their process understand the initial costs and requirements for executing it correctly. A computerized and well-maintained logistics system, heavy investments in automation, visibility, inbound and outbound logistics, and an adequate transport fleet are all necessary. Proper tracking is important for overall function as well. There are also some potential risks associated with the additional freight handling and labor costs associated with moving and shipping the stock, but these are mostly neutralized by the reductions in costs associated with warehouse storage and handling.
Who Benefits Most from Cross-Docking?
Almost any type of company reaps the benefits in a system where shipments are more quickly processed and holding times are minimal, but certain industries are more likely to receive the maximum benefits of utilizing cross-docking in their supply chains.
Retailers, consumer goods, and automotive parts companies benefit from shorter shipment times and the ability to compete with big names known for their rapid turnaround times from order placement to arrival in the consumer’s hands. However, chemical companies along with the food and beverage industry also are primary beneficiaries in a system that requires little to no storage and moves the product from the manufacturer to consumer in record time.
Overall, cross-docking is highly cost effective for any business with high-volume shipments and considerable transportation needs. Switching from the traditional distribution center model can prove cost-beneficial as well for companies looking to increase inventory turns and reduce material handling.
To find out how Redwood Logistics can help you optimize and maximize your cross-docking efforts, contact our team today to schedule your free consultation.