Cross Docking: Why You Should Consider It and What to Look Out For
Last updated on October 24th, 2024 at 05:40 am
Retail supply chains are created to maximize efficiency, speed, and cost-savings while guaranteeing products arrive at the final destination in a timely manner.
Labor is a key component of logistics costs, typically making up a significant portion of the total cost.
Thankfully, you can minimize labor costs by eliminating the need to store products—or skip having inventory stored at an interim facility entirely. What is cross-docking? Cross-docking is an efficient logistics system that expedites the fulfillment, distribution, and inventory replenishment processes.
Thanks to the advancement of automated inventory systems and other supply chain technology, cross-docking has become an easier logistics strategy for ecommerce businesses.
Keep reading to learn the basics of cross-docking, including what is cross-docking, how it works, and cross-docking advantages. We’ll also talk about determining the best cross-docking solution for your company.
What Is Cross-Docking?
Cross-docking is an advanced supply chain approach that eliminates or reduces the need for inventory storage. This involves directly transferring finished goods from suppliers and manufacturers to retailers and customers quickly, without unloading the truck—sometimes what is cross-docking going straight from one truck to another. When compared, cross-docking vs dropshipping shows that cross-docking focuses on speeding up product movement, while dropshipping is more about supplier partnerships with no inventory.
Using a distributed inventory model facilitates quicker restocking, lowers middle- and last-mile shipping costs by keeping stock closer to the customer, and ultimately delivers better customer service. This strategy often leads to cross-dock replenishment, ensuring that inventory levels stay optimal.
In most cases, delivery vehicles from suppliers unload their cargo in an inbound dock, where it is sorted and consolidated at the cross-docking terminal. Then, it is quickly loaded into an outgoing vehicle headed to customers or retailers in an outbound dock. This speeds up the receiving process and reduces the workload at the dock, allowing for faster inventory distribution.
What is cross-docking in this context? Cross-docking is an effective way to expedite the retail fulfillment of wholesale orders, eliminating the need for warehousing—both long-term and short-term.
Cross-docking is a valuable logistics solution that can be used for many reasons, including:
- Changes in Demand: Varying demand levels can cause stored products to decline in value if they remain in stock for longer than necessary. Cross-docking services enable you to source and ship goods as needed, thus eliminating the need for prolonged storage periods.
- Shipping Time-Sensitive Products: Certain items should be shipped promptly to avoid the risk of them deteriorating if kept for too long. Cross-docking makes it possible to ship goods quickly without storing them for an extended period.
- UsingMultiple Suppliers: Cross-docking enables you to receive, sort, join conveniently, and dispatch deliveries from multiple suppliers quickly and efficiently. Cross-docking vs Dropshipping allows you to compare different logistics systems. Both streamline delivery, but cross-docking enhances speed through immediate product transfers, while dropshipping bypasses warehousing entirely.
- Overweight Cargo: Using cross-docking services to efficiently and safely unload and shift your goods if your transport vehicles are overweight can help you adhere to established guidelines.
Now, let’s look at the advantages and disadvantages of utilizing cross-docking services.
Benefits of Cross-Docking
Cross-docking is a great choice for businesses that want to streamline their supply chain, save money on order fulfillment, and reduce the time it takes for goods to reach distribution centers and customers.
Cross-docking offers a number of advantages to ecommerce businesses.
Faster Shipping and Receiving Times
By reducing or eliminating manual labor for storing products, goods arrive at the desired destination much faster. Breaking down larger batches into smaller shipments and loading them onto freight going in the same direction increases shipping efficiency.
In addition, cross dock replenishment processes are simpler, as there is no need to scan inventory into a WMS for the purpose of managing its movement; it is only necessary to track incoming and outgoing products.
Reduced Costs and Time Savings
A substantial part of inventory costs is attributed to the cost of goods sold (COGS). A business not only needs to acquire the product but also needs to cover the cost of first-mile and last-mile shipping and storage.
What is cross-docking when it comes to reducing these costs? By eliminating the need for an expensive ecommerce warehouse, allowing businesses to deliver their products to their customers cost-effectively. Cross-docking helps streamline inventory management, and allows for faster restocking with just-in-time inventory.
Rather than tracking inventory flow through the entire ecommerce supply chain, bulk inventory tracking is used. This approach reduces labor and saves time while ensuring inventory shipments’ integrity for greater inventory storage efficiency.
Reduced Labor Costs
Managing a warehouse on your own is challenging. Several workers are required to move the items from the containers to storage and to ensure safety. Managers must ensure that warehouse operations are running smoothly and that there is sufficient storage capacity for incoming shipments.
Cross-docking reduces the number of personnel required for speedy transaction fulfillment while making sure customers’ costs and profits are met.
Central Hub for Handling Products
Utilizing the cross-dock warehouse for last-mile delivery from a single location can help optimize your supply chain. Your distribution center basically serves as a sorting station.
At the cross-docking center, merchandise is sorted and allocated to multiple carriers depending on its ultimate destination.
B2B fulfillment optimized by a central hub can eliminate the need to store and pick individual items, making it an ideal order management solution.
Reduced Material Handling
Cross-docking operations reduce material handling, decreasing the need to monitor movement, store products, and manage multiple SKUs. Cross-docking allows you to keep product inventories turning over quickly.
Reduced handling often helps maintain the quality of certain products in the supply chain. It is especially pertinent for items that spoil quickly, such as food and beverage.
Some items like makeup, pharmaceuticals, and vitamins and supplements have a limited shelf-life. Simplifying your supply chain means that these products will reach their customers or other businesses more quickly.
Cross-docking is a great way to ensure that high-quality products aren’t damaged while they are stored before being picked, packed, and sent out.
Increased Customer Satisfaction
By utilizing cross-dock services, you no longer need to store goods, which results in faster and more efficient shipping to customers. This can enhance your customer service efforts as products are delivered faster and on schedule.
Better for the Environment
It is said that this approach better follows supply chain sustainability protocols since it ensures every vehicle is maximally utilized for all shipments from the warehouse—instead of only a select few.
Therefore, cross-docking would require fewer trucks and vans. Plus, running costs for items like electricity and heating are minimized in the warehouse.
Complies with Future Technologies
Cross-docking is a great way to incorporate new technology into the logistics industry. For example, some companies are starting to use autonomous trucks. You will soon save money on labor expenses when shipping items throughout the country.
It is possible that in the near future, the entire shipping process can be automated. If you have already relegated warehouses and storage to a minimum, you are well on your way. You won’t need to make serious modifications when the coming decade brings about revolutionary technology shifts.
Drawbacks of Cross-Docking
Cross-docking is a cost-effective and customer service-oriented logistics strategy. However, there are some downsides to cross-docking such as:
Need for Reliable Suppliers
One of the cross-docking disadvantages is the need for reliable suppliers. Accurate and prompt deliveries from suppliers are imperative for successful cross-docking, as this helps ensure the swift shipment of goods to customers. Comparing cross-docking vs dropshipping in this scenario highlights how supplier reliability is critical for both models.
Need for Sufficient Transport Carriers
Another of the cross-docking disadvantages is the need for sufficient transport carriers. Cross-dock facilities depend upon their transport carriers to ship goods promptly without any storage.
Therefore, an adequate number of transportation providers is key to maintaining the efficiency and effectiveness of a cross-docking strategy.
Complex Planning and Coordination
Cross-docking requires meticulous planning and coordination with suppliers, including analyzing supply and demand, shipment times, and more.
If due care is not taken in both the planning and implementation stages, the efficacy and dependability of the system may suffer.
Higher Initial Costs
Constructing a cross-docking terminal would require a significant financial investment upfront.
You would need a significant amount of financial resources to build dock terminals and purchase a substantial number of transport trucks to support your business. Securing and managing an efficient transport system for your goods can be expensive. Fortunately, it’s possible to incorporate elements of cross-docking without a complete supply-chain overhaul.
Who Benefits From Cross-Docking?
Cross-docking is a common logistics strategy for businesses with steady, dependable customer demand and constant stock rotations. However, any kind of business can take advantage of this process if it is aligned with its supply chain strategy and infrastructure.
A cross-docking supply chain model is advantageous for the following types of businesses.
Retailers Using Multiple Suppliers
Avoiding lengthy storage processes makes it simple to manage goods coming in from multiple suppliers or distribution centers in other areas when goods are traveling directly from one location to another.
Cross-docking helps you manage and minimize transportation and warehousing costs by quickly and efficiently receiving, sorting, and combining loads from different vendors.
Retailers Selling Time-Sensitive Products
Do you sell high-demand, trending products or perishable items that have a shorter shelf-life?
If so, you should consider cross-docking. Cross-docking enables suppliers to send goods directly to another business, reducing the time it takes for the product to reach its final consumer.
Cross-docking involves taking a shipment of product when it’s delivered and immediately sending it off on another delivery route through the use of a forklift, conveyor belt, or pallet truck. This reduces the risk of expiring perishable items and provides you with a longer period to make sales.
Is It Time to Implement a Cross-Docking Strategy?
Cross-docking can help speed-up distribution, lower warehousing expenses, and reduce product hazards. You must, however, account for the pros and cons associated with this strategy. Cross-docking might be a great way to increase your business’s profits, provided that you can manage its drawbacks.
Before committing to cross-docking, it’s important to evaluate your business’s needs and goals.
If you want to lower your shipping times, costs, and product-related damages, talk with an expert about how Flxpoint can help.
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