What is Cross Docking in Supply Chain Management?

Speed and productivity are two essential factors for growth in supply chains. Making cross-docking just one strategy implemented for you to achieve this competitive advantage. When appropriately implemented, cross-docking can improve efficiency and handling times.

What is cross-docking? 

Cross-docking is a logistics procedure in which products from a supplier or manufacturing plant are distributed directly to an outbound carrier, such as a customer or retail chain. Essentially, it removes the storage link in the supply chain. Cross-docking occurs in a distribution docking terminal, consisting of dock doors on two sides (inbound and outbound). It’s a practice that keeps supply chains moving effectively. Instead of a standard distribution center, cross-docking facilities are more of a “sorting center,” where goods quickly pass through since there is minimal space for storage.

Cross-docking warehouses have far less storage space than a distribution center. First, inbound shipments go to a receiving dock. Then, the products go directly to outbound destinations on forklifts, conveyor belts, pallet trucks, or other means. They are then sorted and consolidated before making their way to outbound shipping. Usually, the goods spend less than 24 hours within a docking terminal.

When is cross-docking used?

Moving from traditional distribution centers to cross-docking facilities would enable a company to increase inventory turns and reduce material handling and distribution costs. Effective cross-docking can also reduce costs by eliminating the need for warehouse space and labor. It reduces costs because of less packaging and storage area needed. This method seems to be a universal upgrade for the supply chain. However, some industries significantly benefit from this method. These industries include:

• Perishable goods, foods, and beverages
• Inbound supplier components and raw materials
• Already packed and sorted products, parcels

Industries that use cross-docking

Cross-docking provides many benefits to supply chains across the country. However, some industries get the competitive advantage of cross-docking more than others. For example:  

• Automotive  
• Chemicals  
• Consumer Goods  
• Food and Beverage  

What are the benefits and risks of cross-docking?

The process of cross-docking will not suit all warehousing needs. Therefore, it’s essential to understand the benefits and the risks that come with it.

The benefits

Many benefits come along with cross-docking; some are:    

• The amount of storage space saved. Although an area must be reserved in the facility allocated to the products, cross-docking frees up core storage space. The protected space, as a result, benefits inventory cost savings too.  
• It shortens delivery times and makes a more flexible supply chain by saving time dispatching goods. As a result, this increases customer satisfaction.
• The number of operations/ handling of loads is significantly reduced: unloading, quality control, order conditioning, and dispatch of goods are maintained. However, the middle operation tasks have been removed, which means less risk of damaging the goods.    

As a result, efficient cross-docking improves the overall profitability of the facilities that use this method due to the time it saves.  

The risks

Nothing is perfect, so anything with benefits usually always comes with risks.

• Implementing cross-docking to your warehouse facility may result in completely redesigning your warehouse to reserve space for a conditioning area to assist with cross-docking tasks. As a result, this strategy can be costly. 
• It requires effective integration of the entire supply chain and information systems like fleet and warehouse management software.
• It requires much time for planning and coordination.

Cross-docking methods

Cross-docking has three primary methods: continuous cross-docking, consolidation arrangement, and deconsolidation arrangement.

Continuous cross-docking

Continuous cross-docking is considered the most straightforward and fastest method. In continuous cross-docking, products and materials continuously move to a central site. These products are transferred immediately from an inbound truck to an outbound truck. This method has minimal wait times. However, trucks arriving at the terminal at different times will incur a waiting time.

Consolidation arrangements

In the consolidation arrangement method, several smaller products or freight loads combine into one significant load in the cross-docking facility. This way, incoming freight is combined with goods stored at the terminal to form full truckload shipments. This method is beneficial because it’s not always profitable to ship out the individual parcels from the cross-docking facility.  

All consolidation loads arranged must be temporarily stored at a warehouse until the truckload is full. Then, a load must be full to be shipped out. Despite the delay in shipping, this method has reduced shipping costs for companies.  

Deconsolidation arrangements

Deconsolidation arrangements are the opposite of consolidation arrangement, which breaks down large product loads into several smaller loads for easy transportation. These small loads usually go directly to a customer. This arrangement is the one that’s traditionally used in direct-to-consumer fulfillment.

Cross-docking services and working with a 3PL

Trucking companies like cross-docking because trucks have fuller loads and exact destinations for each shipment, saving transportation costs. This way, a shipper can adapt quickly to new selling channels and market conditions; this shipping method reduces the overall time it takes to reach each customer.    

Although this practice delivers significant financial and operational advantages, companies must implement proper tracking and compliance to achieve adequate performance. By partnering with PLS Logistics Services, we offer data-driven supply chain practices to help ensure control and visibility of shipments from supplier to end customer. ‍  

Get more information on our website about how PLS can help your company with customized logistics solutions and supply chain design.