What is Cross Docking in Supply Chain Management?

In supply chain management, there is importance stressed in speed and productivity. For a company to grow, efficiency is needed in its processes. With manufacturers or suppliers, being able to efficiently deliver their products to different customers and retailers can help them save on costs while maximizing their profits. Cross-docking is a strategy that can be applied by these companies to gain an advantage over their competition. Even though it is a complicated strategy, if it is properly done, a company can clearly see its benefits even in the short-term. This article will discuss more on cross-docking within a supply chain and the benefits it will give any organization planning on implementing it.

What is Cross-Docking?

Cross-docking is a procedure done in relation to logistics. This type of procedure involves minimal handling. Cargos from manufacturers or suppliers are directly distributed to their customers or retailers. There is no need for the items included in the cargo to be held over for storage. In summary, cross-docking is done by unloading cargo from a trailer and loading it to another trailer which will be headed to a specified customer or retailer. The cargo is brought by truck from the manufacturer or supplier, on to a distribution docking terminal. The distribution terminal has three main parts. These parts include the following:

Inbound area

o   The trucks arrive and go directly to the inbound area. This is where the distribution center receives the cargos.

Screening and sorting area

o   This area is crucial as the items are thoroughly checked. The cargos are then grouped based on which of the cargos would be delivered to the same destinations. Once everything is sorted out, the grouped cargos are ready to be loaded to the trailers that are bound to pre-assigned destinations. Movement from these areas may include the use of conveyor belts, pallet trucks, forklifts, or any other transportation equipment that can fit inside the distribution docking terminal.

Outbound area

o   This is where all the grouped cargos are loaded into their assigned trailers. Once finished, the trucks will then go to their assigned destinations.

Outbound area

Different Applications of Cross-Docking

Warehouse management is very important for both manufacturers and freight services. Being able to run a warehouse efficiently is crucial for companies to avoid losing or damaging freight. This also happens when a company is using a cross-docking strategy. Companies must first understand which type of cross-docking they need to use that would make them benefit the most. A type of cross-docking strategy will depend on the type of products being shipped. You may refer to the following list for some of the common types of cross-docking:

Retail cross-docking

o   This is the most common application of cross-docking that is being utilized.

o   This involves the distribution docking terminal receiving cargos from various suppliers. Items are sorted and grouped based on the retailers that would receive specific products.

Manufacturing cross-docking

o   This is used when the items that arrive at the distribution terminal will be assembled based on the specific goods and materials that are needed to be sent to a manufacturing site.

o   The items prepared for each manufacturing site will be enough to fulfill a specific production order.

Distributor cross-docking

o   Businesses that offer their customers a consolidation of different goods use this type of cross-docking strategy.

o   Different kinds of products coming from multiple vendors arrive at the distribution terminal. These products are then grouped based on the requirements for each customer. The grouped products are then palletized and sent to the specific customer.

Types of Businesses That Will Benefit From Cross-Docking

Not all items are suitable to be transported using a cross-docking strategy. Depending on the type of products being produced, not all of these will reap the benefits of cross-docking. Below are some of the businesses known to gain an advantage when using a cross-docking strategy:

Food and beverage industry

o   By moving items through supply chains, restaurants and other companies involved in the food and beverage industry can avoid spoilage of their inventory. With cross-docking, these companies do not have to invest much on their inventory management systems. There will be fewer items included in the remaining inventory that companies will need to worry about on a daily basis.

Automotive industry

o   Automotive manufacturers do not find it cost-efficient to stock up on cars that might not get purchased before newer models arrive on the market. These manufacturers rely on receiving inventory based on the orders from their customers.

Pharmaceutical and chemical industries

o   Medicines and chemicals are known to have expensive requirements for these items to be kept in storage. With cross-docking, these expenses are removed from the equation as the items are transported to the customers at the soonest possible time. 

chemicals-industries cross docking

Reasons Why It Is Best to Avail of Cross-Docking Services From Third-Party Logistics Companies

Manufacturers and suppliers may implement their own cross-docking strategy. However, the procedure may take up resources and time, which they can use to focus on producing items that they can sell to customers. Business owners must realize that with the advantages cross-docking can give for its business, availing of such service from a reputable third-party logistics company will be more beneficial to them. Here are some of the important reasons that make it better for manufacturers and suppliers to avail of cross-docking services from third-party logistics companies rather than implementing it themselves:

It takes a lot of time to plan and manage to successfully implement cross-docking

o   Since these manufacturers and suppliers must focus on making their businesses grow, they have less time to worry about the distribution of their products. It may take some time before they can successfully create a cross-docking system for their companies. But if they give the hassle of implementing the distribution system to a third-party logistics company, they can focus all their time and resources on improving their products and accumulating more customers. They will just need to inform the carrier service of the details of the customers and items that would need to be delivered, and the carrier service will be the one to worry on how they can move the cargo efficiently.

There is a need to invest in multiple transportation vehicles and trailers.

o   It is not cost-efficient if a company implements cross-docking while producing only a few items and having only a few customers. To become cost-efficient, a trailer has to be filled up so that a company can benefit from the costs that would be incurred when delivering to a specific location. For these businesses, unless required by the type of cargo that needs to be shipped, they may need to use less than truckload (LTL) shipping services from third-party carrier companies. This is crucial as these carrier services can group cargos from different customers and send them to specific destinations without any hassle to the customers. By availing the services from these third-party logistics companies, there will be no need for the business to purchase multiple trucks and trailers just to transport their products to their customers.

There is very little room for error when following a cross-docking strategy

o   Making mistakes in sorting within the distribution docking terminals is very crucial in cross-docking. By implementing your own cross-docking procedure, when your staff inside the terminal makes mistakes during the sorting process, it could give a negative effect to your customers. When your retailers receive wrong items or incorrect quantities, they may feel cheated or it might be a cause for them to cut their relationship with your company. You cannot blame anyone else, other than the staff who made the mistakes. But if you are availing of the shipping services from a third-party logistics company, you can have a fall-back position. Most of the time, your cargos are insured by carrier services. It makes it easier for you to explain to your retailers that the problems occurred while the cargo was already under the handling of the carrier service.

Leaving Cross-Docking to Experienced Carrier Services is More Cost-Efficient

After seeing the positive effects cross-docking can give to a business, owners may feel that they must implement one to help their businesses grow. Even though this is a good way to help the growth of the business, owners must still consider the costs this strategy may incur to their businesses. Unless the business has already grown enough to support the investment needed to be made in purchasing multiple trucks and trailers while building a distribution docking terminal, then it is best to leave the distribution of their products to a carrier service that is currently following a cross-docking strategy. Reputable carrier services are known to be implementing this strategy to make the delivery process more efficient. 

You may get in contact with Ontario Container Transport if you have products with time constraints that are needed to be shipped at the soonest possible time. You may get in touch with us by calling 416 (905) 695 1501.

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